[Asia Economy Reporter Yoo In-ho] Regarding North Korea's recent strengthening of control over unofficial economic sectors such as jangmadang (black markets), an analysis suggests that this is not a restoration of the socialist economy but rather an adjustment aimed at orderly marketization.
Lee Jong-gyu, Senior Research Fellow at the Korea Development Institute (KDI), stated this at a recent online seminar jointly hosted by the Korea Institute for National Unification and the Export-Import Bank of Korea to commemorate the 30th anniversary of the establishment of the Inter-Korean Cooperation Fund.
Lee said, "So far, the unofficial sector has acted as a growth engine for the North Korean economy since Kim Jong-un, General Secretary of the Workers' Party, took power, and it has handled many parts of the economy instead of the official sector. If the control policy is prolonged, the growth engine could be removed, which is likely to be a misstep for the North Korean authorities."
He explained that the unofficial sector has played roles in efficient distribution of goods in the market, formation of the labor market, and improvement of labor productivity.
Since a significant portion of local government budgets comes from jangse (market taxes) collected at jangmadang, continuing control measures under the pretext of expanding fiscal revenue could instead worsen the fiscal situation.
He added, "Since the authorities are aware of this, it is expected that they will not continue to enforce excessive control measures. It also seems that they intend to use this as an opportunity to normalize sectors that have been operating abnormally rather than completely controlling the market."
He cited as one basis for this the fact that North Korea is emphasizing the 'Socialist Enterprise Responsibility Management System,' implemented as one of the economic reform measures early in Kim Jong-un's rule, as well as responsible individual economic activities.
Furthermore, he predicted that the participation of the younger generation, who have not experienced the planned economy system, in policymaking could become a variable in the North Korean economy.
He explained that after the 8th Workers' Party Congress earlier this year, 23% of the Central Committee members and 46.8% of candidate members are economic experts, and noted signs of change such as the appointment of young, practical-minded economic officials.
Professor Lee Jong-woon of Hanshin University, who moderated the discussion, also analyzed North Korea's recent response as "an intention to allow the market while simultaneously increasing the role of the state-managed state-owned economic sector," and stated, "This is not a move to restore the planned economy system."
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