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Peter Ward is a writer and researcher focusing on the North Korean economy, as well as a PhD candidate at the University of Vienna.
For those of us who want North Koreans to live happier, longer, and more fulfilling lives, Pak Pong Ju – at least based on what we know – may be one of our greatest hopes.
Pak is now 78 years old. He is one of six members of the Presidium of the Central Committee of the Worker’s Party of Korea (WPK), the apex of power in the Party.
He is also the country’s premier and is credited with leading a process of quiet reform inside North Korea today. Those changes were first drawn up during his first term as premier from 2003 to 2007, and it is that program of radical reform that I will focus on.
The legend of Pak’s previous experience in industry, as presented in a film presumed to be about him, was the subject of part one. But what of the reality?
For those of us who want North Koreans to live happier, longer, and more fulfilling lives, Pak Pong Ju may be one of our greatest hopes
The man did indeed begin his ascent toward high office as a candidate member of the Central Committee in 1980, and he then became the Chief Party Secretary of one of the country’s major chemical combines.
He served as head of a succession of central industrial ministries, also finding time to serve on Kim Il Sung’s Funeral Committee and get elected to the Supreme People’s Assembly. (See NK Leadership Watch and 박봉주’s profile on 북한정보포털 for full details).
Pak held a succession of industry-related posts in the WPK and state before becoming premier in 2003. Though he is commonly associated with the July 1 Economic Management Improvement Measures, which began in 2002, it was actually Hong Song Nam who was premier at the time of those first tentative steps in the direction of reform. Pak was his deputy and replaced Hong upon becoming premier.
Beyond what North Korean media says, most of what we know about Pak’s first premiership and the events that surround it comes from South Korea’s National Intelligence Service (NIS) and from North Korean refugees.
Many reports in South Korean media about what is going on inside the North Korean government come from this agency. While some of these reports have proven unreliable – an unavoidable fact of life with government intelligence – they are often the best and only sources we have.
Pak Pong Ju, upon becoming premier, set to work with a team of economic technocrats devising a plan to radically embrace a market-based set of reforms
Han Gi-bom (한기범), who headed the NIS’s North Korea division and was first deputy director of the organization under the Park Geun-hye administration, is a career intelligence official who did the world a great service by completing a Ph.D dissertation in 2009 on the bureaucratic turf wars over reform within the North Korean government.
In so doing, he selectively released parts of a massive tranche of fascinating interview testimony and internal North Korean documents that catalog a tentative and ultimately abortive process of reform led by Pak Pong Ju, which was met with a backlash from conservatives in the Party.
IN THE DIRECTION OF REFORMS
In dry, parsimonious prose, Han informs us of how Pak Pong Ju, upon becoming premier, set to work with a team of economic technocrats devising a plan to radically embrace a market-based set of reforms.
The regime had concluded that the July 2002 reforms had turned out largely to be a failure. Raising state procurement prices and wages had failed to revive moribund state enterprises and had led to rampant inflation.
But Premier Pak was no lone crusader. He was a Party man and obviously hadn’t risen to the top through a life of dissidence and anti-government agitation.
In fact, the country was already heading in the direction of tentative reforms. Instructions from Kim Jong Il to encourage the spread of farmers markets ‘to aid in socialist economic management’ preceded Pak’s rise to the premiership by six months.
The cabinet proceeded to interpret those words as explicit instructions to legalize and regulate a wide range of economic activities, which they did in May 2003. This led to the creation and spread of general markets and seems to have been one of the drivers of growth for the North Korean economy over the past 15 years.
Yet it is what came next that was truly radical, and it may explain why North Korea growth in the last four years has thus far proven resilient in the face of growing isolation and tightening sanctions.
As premier, Pak and his team sought to find solutions to the massive economic problems the country faced
PAK’S ECONOMIC SOLUTIONS
The office of premier is, on paper, a powerful office. In reality, of course, who holds the premiership and the nature of their relations with the ruling Kim family makes a great difference with respect to the relative power that the premier actually exercises over policy.
Nonetheless, the premier is the head of the civilian economy, that is, the parts of the economy that are not controlled by the military or used to fund the royal economy of the Kims.
As premier, Pak and his team sought to find solutions to the massive economic problems the country faced: chronic food shortages and hunger, low economic growth, a state sector that was operating well below capacity, and a dynamic, growing group of successful market operators and entrepreneurs whose funds existed in “legal limbo” outside the bounds of the state.
Their solutions were simple and pragmatic.
First, they experimented with a household responsibility system in agriculture. This scheme would give farmers tillage rights to their own land, thus resolving massive incentive problems that existed in the agricultural sector.
Pak and his team were given permission to experiment with such a reform in a trial of 30 farms. This proved so controversial that the trial was eventually terminated, the plans to roll out the scheme nationwide shelved until being implemented by Pak after Kim Jong Un appointed him premier for a second time.
Second, state-owned enterprises were given the right to run their own farms in order to feed their workers. Such practices were widespread and had helped some factory managers feed their workers during the famine of the 1990s. They had also allowed some shrewd entrepreneurs to make a tidy income.
Pak and his team’s solutions were simple and pragmatic
Pak’s cabinet moved to legalize and regulate the practice, thus helping to further improve the food situation. This reform seems to have been left largely intact amid the backlash against reform post-2005.
Third, Pak’s team proposed the radical expansion of autonomy granted to state enterprises under the July 1, 2002 Economic Measures.
Enterprises would only be required to fulfill government production plans when produce was deemed “strategic.” Otherwise, they were free to produce what they could for sale to other enterprises and directly on the open market. This would mean the end of central planning and central control of resource allocation.
Fourth, enterprises were to be given more autonomy over personnel management. They were permitted not only to employ and pay the workers they need according to wage rates they set themselves, but they were even given the right to let workers for whom they had no work engage in other kinds of business activity.
It is not clear whether this particular reform has been implemented under Kim Jong Un, but it is perhaps the most radical as it represents the de facto creation of a market for labor in a country where all labor had hitherto been managed by the state.
Kim Jong Un’s North Korea has embraced many of the reforms that Pak first proposed back in 2004
Fifth, enterprises would be allowed to seek investment directly from market operators and private individuals.
These were indeed radical proposals, and have now been implemented in the amended 2014 Enterprise Act. No provisions on how profits are to be shared, how the state will arbitrate disputes between private investors and state managers, or other practical details have yet been published.
However, the lack of such information should not detract from what this means: North Korean state-owned enterprises can now legally accept private investment and are largely free to use such funds as they please.
Finally, Pak’s team suggested that enterprises be allowed to not only take on private investment and sell their products on the open market but also accept foreign investment as well as sell their products overseas. The profits generated would, after the payment of taxes on assets, be left to enterprise management to use as they pleased.
DEFEAT AND RETURN TO POWER
Pak Pong Ju and his team lost out in a power struggle with the Party’s high-level economic officials, chief among them, Pak Nam Gi, a name that many will be familiar with.
Senior Party officialdom started to sideline Pak Pong Ju from 2005. Kim Jong Il made plain his disapproval of excessive marketization and shelved radical reforms. What came next was an upswing in anti-market measures that climaxed in the disastrous currency reform of late 2009.
Han’s Ph.D was written before the currency reform, but it was with serendipitous insight that he pointed to Pak Nam Gi as the chief thorn in Pak Pong Ju’s side. One can only wonder just how much the NIS actually knows about what has happened in North Korea over the past two decades.
Kim Jong Un has done in the economic sphere what his father and grandfather would not: embrace an agenda of actual market reforms
At any rate, Pak Nam Gi was ultimately held responsible for the disaster of the 2009 Currency Reform and subsequently executed.
Under his watch, Kim Jong Un’s North Korea has embraced many of the reforms that Pak first proposed back in 2004.
Fortunately for the North Korean people, Kim Jong Un has done in the economic sphere what his father and grandfather would not: embrace an agenda of actual market reforms, very tentative compared to China, but real enough.
Whether Kim will maintain such a policy, and whether Pak will be the one who continues to create the policy architecture for Kim’s approach, remains to be seen. However, we should hope for the sake of the North Korean people that Kim Jong Un does not withdraw his support for Pak Pong Ju.
Edited by Bryan Betts