Discover more from Asia Sentinel
North Korea's Unreported Economic Figures
The North Korean economy is very much bigger than it appears when estimates are derived from the scant official statistics available from Pyongyang, according to a just-published report by the Samsung Economic Research Institute. But that’s not saying much.
The official South Korean agency Statistics Korea recently put the North’s gross domestic product at a paltry one fortieth that of the South’s US$1.5 trillion annual GDP. With a population almost exactly half that of the South, that puts its per-capita income at one twentieth the size of the South’s.
But, says SERI, a large and probably increasing part of the North’s economy is outside the official framework, in the market economy which is allowed, by necessity and not design, to co-exist alongside the official economy. The informal economy may account for 30 percent or more of actual economic activity and a much higher proportion in regions adjoining China where opportunities for trade are so much greater.
The SERI analysis divides the North’s economy into various sectors, the most important of which is the military economy including defense and key related industries such as steel. This strategic sector remains highly planned, is provided allocations and isn’t subject to market forces of any kind. Military exports are especially promoted. The key driver is the National Planning Commission which controls major enterprises such as Kimchaek Iron and Steel and Chollima Steelworks.
The ruling Workers Party itself has economic interests which provide funds for the party and government machinery. These include the special economic zones.
Other “non-strategic” industries are part of the state system but are excluded from formal resources allocations and must make their own market or barter deals with suppliers and customers. This sector is also taxed to finance the military. Almost still subject to planning is the “people’s economy” which is concerned with allocations of basic goods to the populace. However many of those goods, notably food, come from outside the state sector.
The SERI report says that top priority in food distribution goes to 5 percent of the population with important jobs and particularly in the Pyongyang region. Next are 7 percent comprising the military and their families,the next 20 percent working for important factories and state farms, and finally 29 percent of ordinary workers. Farmers themselves fall outside the system altogether and are assumed to be self-sufficient.
Other South Korean estimates suggest that at least 25 percent of agricultural production comes from private plots and at least 30 percent of all food consumed is intermediated in the market place.
The line between state and private, planned and market is not easily drawn in some cases as enterprises which are part of the state system need the market to operate. State ideology and necessity sit uncomfortably and policy is erratic. Attempts to suppress some of the market climaxed in 2009 with a currency supposed currency reform aimed at eliminating the wealth of the “Donju” – those who had acquired capital through trading. It largely failed and has been abandoned. Meanwhile opportunities for making money either from foreign trade or from intermediating the shortages of everything which are a constant in the North’s economy continue.
The SERI report does not speculate on the future of the “Donju” but students of Burma might see the possibility of parallels developing. There the once despised “capitalists” became useful to and eventually friends of the ruling military, thus sparking the beginnings of the complete replacement of a failed socialism with a highly corrupted form of state and crony capitalism. Much may depend both on Kim Jong-un’s view of the world and the rate at which the old guard of generals around him is replaced by younger ones with aspirations to make money.
Subscribe to Asia Sentinel. It keeps us breathing and gives you stuff you didn’t know, like the size of North Korea’s tiny economy. Click here