North Korea's Kim Largely Ignores Economy at 7th Party Congress

A commentary by Andrei Lankov
2016-05-17
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North Korean leader Kim Jong Un attending a photo session with the participants in the Seventh Congress of the Workers' Party of Korea, in undated picture released from North Korea's official Korean Central News Agency (KCNA), May 13, 2016.
North Korean leader Kim Jong Un attending a photo session with the participants in the Seventh Congress of the Workers' Party of Korea, in undated picture released from North Korea's official Korean Central News Agency (KCNA), May 13, 2016.
AFP

The 7th Congress of the Korean Workers’ Party concluded in Pyongyang in early May. Well, actually, it was a remarkably inconclusive gathering. While some observers in the few months ahead of the Congress anticipated major moves and important statements made by the North Korean elite, they were proven wrong. Contrary to their optimistic expectations, the North Korean leader Kim Jong Un did not commit himself to economic reform. Nor did he suggest any kind of major structural or policy changes for the country.

Generally speaking, the North Korean economy was a rather marginal issue at the Congress. Most statements and speeches were about the glorious past and brilliant future of the Korean Workers’ Party and greatness of the Kim family. Congressional documents as well devoted significant energies to boasting about the nuclear might of the North Korean state.

Nonetheless, in his official report Kim Jong Un did say something about the economy, and his remarks can be described as marginally encouraging. He mentioned the need to relinquish what he described as “our style economic management policy.” While this term is remarkably imprecise, in recent years it has been applied to a policy of modest reforms. So, this reference may suggest further changes, albeit careful and slow, away from the state-directed economy.

Of course, Kim’s speech contained direct condemnations of economic reform, which he associates with China, and framed this as surrender to American imperialism. However, given the situation of North Korea, where the elite needs absolute control of the population at all times, it would be naive to think that Kim Jong Un would say anything else.

There are things, though, that are rather troubling, planting doubts about the future of the North Korean economy.

First, the economy was grossly neglected in Kim Jong Un’s report. While he said nothing particularly irrational or dangerous about his ideas on economic management, the lack of interest is troublesome in itself. After all, at the end of the day, the economy determines the chances of the regime’s survival.

Second, Kim’s report to the 7th Congress makes clear that his country has not the slightest intention to look for outside assistance and/or investment. If anything, Kim found pride in his country’s isolation, stating explicitly that “no one is helping” North Korea.

Such an attitude, no matter how appealing to national pride, is damaging to the long-term prospects of the North Korean economy. In order to grow, it will need significant infusions of outside investment. However, the North Korean government once again demonstrated little interest in attracting foreign money.

It’s especially troublesome that Kim Jong Un’s speech contained a thinly veiled critique of China, the only country that has both the resources and political will to invest in his country. In his speech, Kim accused China of surrendering to American imperialism. Needless to say, such remarks are both untrue and highly annoying to Beijing. Such pronouncements make it even less likely that the Chinese leadership will seriously consider improving relations with North Korea – exactly at a time when the North badly needs foreign, especially Chinese, investment.

Given the very poor track record of North Korea’s investment management, such remarks virtually ensure no sane foreign company or individual would consider investment in the country. Unfortunately, without such funds, a major economic breakthrough is all but impossible. As their experience over the last ten to fifteen years has taught us, modest and slow economic growth is still possible in an isolated and heavily regulated economy. However, in order to catch up to its rich neighbors, North Korea has to grow fast – and this is only possible with foreign investment.

With North Korea’s economic prospects in mind, one can see the 7th Congress as a relatively controversial event. On one hand the North Korean leadership showed little determination to revert back to a fully state-run economy, and even hinted that minor and incremental changes would continue. On the other, policymakers demonstrated a highly unrealistic assessment of the economy as well as a lack of interest in what seems to be a major obstacle on the road to economic and material prosperity.

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Anonymous Reader

Investing in the North Korea economy would be a huge risk for foreign investors.

May 20, 2016 10:40 PM

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