A new economic system that grants more autonomy to collective farms and state-run factories will be implemented in the fall, according to directives being distributed by the N. Korean regime.
The new system would also allow farmers to keep 30% of harvests for personal use or sale, in an apparent effort at both encouraging private initiative and to make up for what amounts to an end to state-sponsored distribution of food, fuel and other essentials.
The N. Korean government laid out the new system yesterday at lectures held at farms and factories, according to Radio Free Asia and sources familiar with the reclusive regime.
The regime will “allow people to run factories or companies autonomously and set prices of their products by themselves,” said RFA, citing various sources.
The new system “distributes materials only for some people engaged in special sectors such as government, military, education or medicine, which will actually abolish the public distribution system,” added the RFA report.
Beginning in the fall the state will take only 70% of harvests and let farmers own the rest.
Under the current system farmers are entitled to keep production that exceeds quotas set by the government. But the quotas were set so much higher than realistic production capabilities of N. Korean agriculture that the right to keep surpluses was meaningless.
These measures are being promulgated under the title “June 28 economic measures decreed by Kim Jong-un to launch an economic management system in our own style.”
Pyongyang has already set up a special department for new economic management that has raised the wages of workers and allowed more management autonomy at businesses, reported S. Korea’s National Intelligence Service at a National Assembly meeting on July 27.
Pyongyang will test the new system for the next three months and adapt it incrementally as it manages to educate the population about its features and assesses its reaction.
The new measures, if fully implemented, would greatly expand the market’s role in shaping and growing the North’s economy. It would also lead to a level of free enterprise that has previously been deemed illegal but would be crucial to stimulating private initiative and risk-taking.
Skeptics point out that economic liberalizations have been undertaken in the past under Kim’s father. In July of 2002 the regime had decreed wage increases and more autonomy for farmers only to reverse itself in 2005 when it became nervous about the proliferation of small businesses. In 2009 Kim Jung-un himself was in charge of currency reforms that led to extreme inflation and had to be reversed, with the blame being placed on a high-level scapegoat.
Even the phasing out of food rationing isn’t meaningful, argues one source, because food rations had already ceased for most of the population due to severe and chronic food shortages.
But recent events suggest Kim Jong-un is determined to improve his nation’s economy by instituting economic reforms. One reason is that in light of US-led economic sanctions, N. Korea’s sole sourcefor the large amount of economic aid and investments it needs to survive is Beijing. China’s leaders have made clear that Pyongyang must open up its economy and allow it to be integrated with the rest of the world. Showing tangible steps toward that goal is likely a prerequisite for more aid from Beijing ahead of Kim’s upcoming first China trip as the regime’s new leader.