I don’t know Cho Yun-yong. But I’m ever so jealous of her. And I bet every other DPRK watcher is too.
A South Korean journalist based in Japan, Ms. Cho somehow got her hands on Pyongyang gold. Not literally, but meaning one of the many official documents that any normal country would publish – but which North Korea prefers to keep secret.
In May 2016 at the Seventh WPK Congress (the first full Party Congress for 36 years, you’ll recall), Kim Jong Un announced a “five-year strategy for the state economic development from 2016 to 2020.” Naturally, that got attention, although some headlines were misleading.
“N. Korea leader lays out 5-year vision to boost economy at party congress”, reported Seoul’s Korea Herald. Actually, he didn’t lay out a thing. He just mentioned it, and – this being North Korea – told everyone it was “imperative” to carry it through. Whatever ‘it’ might be.
What then is Kim’s new five-year plan? Not a plan, for starters. North Korea used to have Five Year Plans, back in the day. Or Three, or Six, or Seven, at various times. Those were official and public documents, which set output targets – until non-fulfillment made this embarrassing.
SAY STRATEGY, NOT PLAN
Maybe that’s why North Korea didn’t actually call this new one a “plan,” although quite a few foreign media headlines did. Not to split hairs, but for whatever reason, DPRK media always refer to it as the “five-year strategy for national economic development.” No P word there.
And refer to it they do. Putting that clunky phrase into a KCNA Watch search yields no fewer than 627 entries in three years. No, I haven’t read them all. But those I’ve seen are uniformly unenlightening, in that special North Korean way.
Like the Leader himself, infuriatingly, they never ever tell you what the 5YS4NED actually is. Only that it is being fulfilled, or – slight contradiction, surely – everyone must strive to fulfill it. Whatever it is.
What then is Kim’s new five-year plan? Not a plan, for starters
But now we know. Or rather Cho Yun-yong does, lucky her. She has 157 pages of documents, which only she has read – and Yonemura Koichi of the Japanese daily Mainichi Shimbun, which last month published a tantalizingly brief account, as did Seoul’s Hankyoreh. These were picked up on NKEconWatch. And that’s it, as far as I know.
Understandably, so I hear, Ms Cho is keeping the documents to herself until she gets a book out – at which point they may be published, or shared. I can hardly wait.
Meanwhile, even the tip of the iceberg that we have is revealing. For it shows how unrealistic and wrong-headed what passes for economic strategy in North Korea remains. Kim Jong Un may be young and educated abroad.
But he, or his advisers, seem to have learned nothing from his father’s and grandfather’s mistakes – those, of course, can’t be admitted, which in itself is a big problem – nor from the dire straits the DPRK economy is in, due to those terrible errors.
Let’s start with GDP growth. Kim’s strategy set a tough target: 8% annually. Few countries manage that, except those bringing natural resources like oil or gas reserves onstream.
South Korea famously did this of course, over quite a long period (1962-89), thanks to wise policies and a favorable global environment. But that was highly exceptional.
Two-thirds into the 2016-20 period, is the 8% goal being achieved?
We could never know for sure, as the DPRK publishes no regular national income statistics; they stopped in the 1960s. To fill the gap, the ROK Bank of Korea issues annual estimates. Their methodology has its critics, but this is all we have.
For the first two years of the strategy period, BOK reckons the Northern economy grew 3.9% in 2016: less than half Kim’s target rate. But then in 2017 it lost nearly all of that, shrinking by 3.5%. (Figures for 2018 won’t be out until July.)
THREE WAYS FORWARD
So 8% is pie in the sky. How did Pyongyang’s planners think they were going to get that? The documents cite three ways: technological development, diversifying trade, and “introduction of a new economic management method” – which is code for reform. You still can’t utter the R-word in North Korea, which is another big problem in itself.
They’re not wrong about that trio as such. North Korea urgently needs all three. Let’s look at each in turn, starting with the appliance of science.
The DPRK publishes no regular national income statistics
Pyongyang has been harping on about science and technology (S&T) forever. Of course, they need it, but there are three problems. Even before sanctions, isolated and cash-strapped North Korea was cut off from the best of global science and couldn’t afford to buy a whole lot. Nor was most of the Soviet technology which built the DPRK exactly world-beating, to be honest – a point we’ll return to later in this article.
Ah, but they have Juche! Yes, more’s the pity. One of the many disappointments of Kim Jong Un on the economic front is that he keeps playing that dusty old cracked record. His latest big speech, to the SPA on April 12, banged on and on about self-reliance.
But this is balderdash. Always has been, always will be. It may be resourceful to improvise substitutes for stuff you don’t have, but it’s always second-best. Reinventing the wheel is not a C21 strategy, especially if it’s a square wheel. No way will that deliver 8% GDP growth.
S&T’s third problem takes us into Marxist theory. Karl Marx famously claimed that societies move forward when their productive forces (science and technology) outgrow the existing productive relations (society and politics). Thus did capitalism burst forth out of feudalism.
In a rich irony, with capitalism and socialism, Marx had it backward. In China and Vietnam, communist parties have kept power by easing the state’s formerly stifling economic grip and letting market forces flourish. Mao’s China was drab and poor. Today’s is a superpower.
Which brings us to reform. As you’ll know from NK News’s unparalleled in-depth coverage of this vital topic, compared to China and Vietnam North Korea remains halting and hesitant. At least Kim Jong Un has stopped trying to stop it – but you still can’t mention the R-word.
In a meticulous survey of DPRK reforms over time, NK News’s Fyodor Tertitskiy concluded that “Pyongyang remains a long way away from serious change”. Interesting stuff is going on at the grassroots, as charted by Peter Ward (e.g. here). But as to the trend, Andrei Lankov warns that Kim’s latest political reshuffle suggests he is changing course – spelling trouble for reform.
TRADE MORE – BUT WHO?
That brings us to the strategy’s third arm: expanding and diversifying trade. As summarised by the Hankyoreh, the documents lament that “We’ve been unable to move away from our dependence on China,” which comprised 71.6% of the DPRK’s trade in 2014 (it’s more like 90% now). Russia made up 4.2% and Germany 0.8%.
So they proposed trading more, and more widely. That makes sense. North Korea’s amount of trade remains minuscule, even after having tripled in six years as of 2014 thanks to China.
So there is plenty of scope, in principle, both to grow the volume and diversify partners. But there are at least three snags. One is UN and other sanctions. These weren’t yet so tight when the strategy was drawn up as they are now, but were already starting to be an obstacle.
Secondly, even before sanctions the DPRK had a problem of its own making. People forget now, but from the 1970s Pyongyang systematically defaulted on loans from Western banks and government export credits, used to finance imports and investments. Diversifying trade partners might not be easy, with so much money owed and a bad reputation built.
Thirdly, which partners? The documents suggest southeast Asia and the Middle East. Well, maybe. But their main hope lay closer to home. That could make sense too, given location.
The sad old proverb about Korea being a shrimp among whales has been turned inside out. Today the DPRK, poor as it is, has the good luck to have three of the global economy’s top powerhouses as close neighbors. Besides China, which is already in there, developing trade with and investment from Japan and South Korea could boost the North’s economy hugely.
BACK TO THE FUTURE
Yet, guess what? The documents mention neither the ROK nor Japan. Instead, they pin all their hopes on yesterday’s big daddy, even though Russia has the least dynamic economy of any of the DPRK’s neighbors. How perverse is that?
The strategy set a target to raise DPRK-Russia trade to $1 billion annually by 2020. They’ve still got a year to go, but on this we have figures – and the trend is exactly the opposite.
A bit of background. Though the USSR had dominated North Korea’s trade back in the day, in the post-Soviet era that almost stopped dead – because Moscow too had had enough of Pyongyang failing to pay. It took 20 years to reach a deal writing off $11 billion in debt.
So nowadays there is nothing much doing. As Andrey Kovsh showed here in rich detail last month, only twice this decade has DPRK-Russia trade topped $100 million dollars. Add tighter sanctions, and last year’s figure was the tiniest ever: a paltry $34 million, almost all Russian exports. Nor did the Vladivostok summit produce any new agreements to boost this.
The strategy set a target to raise DPRK-Russia trade to $1 billion annually by 2020
What on earth were Pyongyang’s planners smoking? The strategy called for special economic zones on the East Sea (great idea) for Russian companies (whaaaat?). Russian technology would revamp steel-making at Kim Chaek Iron and mining at Musan. And guess who’ll fund new hydro-electric plants? In your dreams, comrade. Been there, done that, never got paid.
Here’s a true story. In the late 1980s, I toured the main plant at POSCO, South Korea’s leading steelmaker. Our party included visitors from what was still the USSR, which didn’t yet have relations with the ROK. When the Russians saw Posco’s state-of-the-art facilities, their jaws literally dropped. Come question time, one of them asked: “Please come and build us one!”
Of course, Russia will have a role to play, given its long and deep experience in the DPRK. But honestly. Overall, of all the nearby candidate countries to modernize and invest in North Korea, and to counter-balance China, given a free choice then, who you gonna call?
That would be Japan, and South Korea. Yet neither country is even mentioned in the strategy documents. No doubt that is for political reasons. With Tokyo the abduction issue still looms large. In Seoul at that point Moon Jae-in was not yet in the Blue House, and Park Geun-hye was putting the wind up the North by blathering about unification as a “bonanza.”
So you could understand Pyongyang being cautious. But the DPRK’s economic plight is dire and deep, requiring radical remedies. Maybe advocating outreach to South Korea and Japan would have risked a one-way ticket to the gulag?
Such terror is another way in which North Korea’s system is sub-optimal, meaning lousy. Thinking outside the box can prove fatal.
One day, hopefully, we can all read the full documents. Until then, I have a hunch why Kim Jong Un wanted them kept secret. He was afraid we’d all roar with laughter. This he calls a growth strategy? As John McEnroe famously said: You cannot be serious.
Edited by Oliver Hotham
Featured image: KCNA
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