North Korea Gives Control of State-Run Companies to Local Government Officials

2021-03-15
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North Korea Gives Control of State-Run Companies to Local Government Officials An employee of the Rangnang Disabled Soldiers' Essential Plastic Goods Factory checks the quality of plastic bags for washing powder product in Pyongyang, on Monday, March 1, 2021.
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North Korea has ordered local officials to take a more active role in managing state-run companies, but company managers complain that the increased oversight will make production goals harder to reach, sources in the country told RFA.

The directive, given by North Korean leader Kim Jong Un during a seminar for chief secretaries of city and county-level party committees, is claimed by the authorities to be an attempt to revitalize the economy which has been devastated by the coronavirus pandemic and a yearlong Sino-Korean border closure.

RFA reported in January that state-run enterprises were directed to be more self-sufficient to shake off what authorities called the “import disease.” The factories are expected to meet production goals without imported raw materials, but now managers of these factories must also deal with local officials watching their every move.

“Officials of enterprises are criticizing the Central Party for doubling down on bad practices that effectively monopolize their control of the economy,” a factory official in the country’s northwestern province of North Pyongan told RFA’s Korean Service March 8.

“The officials said the authorities held the first-ever short course to try to revive the economy, which has been devastated by the coronavirus, but the measures they outlined in the course are self-righteous and full of errors, and they do nothing other than increase the control of the party leadership,” said the source, who requested anonymity for security reasons.

According to the source, those running the enterprises complain that the increased party oversight ties their hands and feet, making them unable to actually serve local economies. They say it is absurd for authorities to say the power grab is an attempt to revive the economy.

“The city and county level officials don’t know the basics of the economy. If they are asked to guide economic projects, their meddling will not only ruin business operations but also administrative work,” said the source.

“The result will effectively neutralize the role of the company officials, who are held responsible for business operations. This will seriously impact the company’s profitability and aggravate economic hardship,” the source said.

Another factory official, also from North Pyongan, told RFA the same day, that assigning company control to local officials was well meaning, with the intention to develop city and county-level economies.

“It forces all economic management and operations to proceed only under the leadership of the party, which faithfully executes the central committee’s directives,” said the second source, who requested anonymity to speak freely.

“The most important thing during this current period of serious economic hardship is to eliminate reckless and unnecessary interference of party officials in economic projects. What they should do is bolster the authority of enterprise managers who are experts in economic matters. This would secure autonomy in business operation so that they can carry out the production goals set forth by the state,” the second source said.

Too much control by party secretaries would force company managers to adhere too closely to the party’s dogma under the authorities’ supervision, meaning they would lack the power to properly run the company according to the second source.

“Eventually conflict and tension between the party secretary and the company manager would arise and cause the company to fall short of production goals,” the second source said.

“If that happens, the party secretary will manipulate the assessment data to pin all the blame on the company manager, and only the manager will be punished unfairly.”

East Asian economy expert and Georgetown University Professor William Brown told RFA that the directive essentially tells the local officials to get more results with less input.

“I expect it's all about resources and freedoms,” he said.

“Kim here is telling local party secretaries to step up their development work but he never indicates the localities are being given any new resources from the central government, nor does it indicate they are being given any more freedoms to do things in a better or more efficient way.  This would push these secretaries to squeeze factories for the resources. What else can they do?” Brown said.

Brown said that factory managers are frustrated at having been told to somehow increase production, with local government interference diverting resources and labor away from the business to unrelated projects.

“In general, Kim seems to be stirring everyone up to produce more with less.”

Reported by Hyemin Son and Hee Jung Yang for RFA’s Korean Service. Translated by Leejin Jun. Written in English by Eugene Whong.

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