Economic Construction by Means of Legal Institutionalization under Kim Jong Un Regime of North Korea (2012

Abstract

This article argues that legal institutionalization under the Kim Jong Un regime has been designed to improve the performance legitimacy of his regime by accumulating and more competitively distributing social surplus. There are five areas of focus that can be brought to bear to evaluate economic construction during the Kim Jong Un period: (1) an emphasis on profit and emergence of de facto taxes, (2) control of bureaucratic corruption and non-tax burdens, (3) regional empowerment of economic viability, (4) legalized market activities in tandem with strengthened property and contract rights, and (5) interest in the environmental protection and sustainable development goals.

Keywords

Kim Jong Un North Korean economy performance legitimacy authoritarian regime legal institutionalization

Introduction

Since taking power in 2011, Chainman Kim Jong Un, the leader of the Democratic People’s Republic of Korea (North Korea or DPRK hereafter),¹ has proclaimed that he would focus on economic construction and an improved standard of living for the people. In his first public speech on April 15, 2012, Kim stated that “it is our party’s resolute determination to let our people not tighten their belts again and enjoy the wealth and prosperity of socialism as much as they like” (NCNK, 2012). In 2013, he proclaimed a Byungjin Line (simultaneous advancement) strategy of simultaneously carrying out a nuclear-armed forces build-up and economic development. In 2014, he adopted a new economic reform initiative, described as the “Economic Management System in Our Style,” which increased the management autonomy of enterprises to improve productivity. In April 2018, he initiated a strategic change from the Byungjin Line to a line of “concentrating all efforts on socialist economic construction” by pronouncing the accomplishment of the “great historic cause of building the state nuclear force” (Rodong Sinmun, 2018b).

Under Kim Jong Un regime, has North Korea actually moved toward a form of statecraft that prioritizes economic prosperity while guaranteeing a substantial improvement in the people’s livelihoods based on its proclaimed goal of full-fledged economic construction? One might raise an a priori question of whether he could ever be serious about enhancing the legal basis such as private property rights and contract rights which are required to buttress his new economic reform measures based on the increased use of the market mechanism. Furthermore, the North Korean economy has been facing serious challenges such as greatly diminished foreign trade and investment over the past few years due to escalated sanctions and challenges related to the COVID-19 pandemic. However, it remains relevant to consider the policy changes and legal institutionalization that support the reforms policies undertaken during Kim Jong Un’s rule and their impact on economic performance for the following reasons.

First, the enactment and revision of a series of laws and regulations since Kim Jong Un came to power suggest that he has more deference for the “rule of law.” The extensiveness of the subjects that are covered as well as the timeliness and frequency of the law enactments/amendments that reflect current realities are notable. In addition, public announcements regarding these new law changes via official state media have become almost commonplace during his reign. This indicates that the Kim Jong Un regime could use legal institutionalization as a tool to strengthen the state’s capacity to push forward with economic reform policies by establishing legitimized order and providing a sound basis for punishments in cases of noncompliance. Second, legal institutionalization of economic functions could be the key to driving the North Korean economy into a new phase pending improvements in the external conditions. Analyzing North Korean institutional efforts for economic development could bear some policy implications in preparing for possible economic cooperation.

This article mainly argues that legal institutionalization under the Kim Jong Un regime has been designed to improve the “performance legitimacy” of his regime by accumulating and more competitively distributing social surplus. By reshuffling legal institutions, North Korea could address substantial “gray areas” where legality or illegality in economic activities was determined arbitrarily based on bureaucratic discretion resulting in increased rent-seeking and corruption. This could in return bring about a more systemic accumulation of economic surplus by encouraging higher productivity of economic entities.

This article is divided into three primary parts. First, the characteristics of legal institutionalization under Kim Jong Un regime are discussed. Second, the theoretical background for pursuing legal institutionalization and improving the standard of living in authoritarian regimes is considered from the points of view of the authoritarian leader’s “time horizon” and “performance legitimacy.”² Third, the new economic policy measures implemented under Kim Jong Un’s rule are examined and their implications for economic development are assessed based on the criteria of accumulation and distribution of social surplus. The analysis is mainly based on evidence found in the official North Korean media and North Korean literature.

Legal institutionalization under Kim Jong Un’s rule

Institutions are “the humanly devised constraints that shape human interaction” and they “structure incentives in human exchange” (North, 1990: 3). Subsequently, institutionalization can be defined as a process “by which such rules or patterns become routinized or entrenched” and simultaneously “by which actors’ expectations are stabilized around these rules and practices” (Levitsky, 1998: 80). It has been argued that the evolution of a specific set of “inclusive” institutions with features, such as secure private property, an unbiased system of law, and enforcement of contract rights, and permission for the entry of new businesses, play an important role in economic development (Acemoglu and Robinson, 2012: 74–75).

The Supreme People’s Assembly (SPA) is North Korea’s legislative body based on its Socialist Constitution. It consists of 687 deputies (since the year 1990 on) serving 5-year terms and convenes once or twice a year. When the SPA is not in session, the Presidium of the SPA, made up of around 10 elites, “convenes to deliberate and adopt new laws, regulations, amendments, and supplements” (Article 116 of the Constitution). The Presidium of the SPA is by and large composed of individuals holding positions in the Workers’ Party of Korea (WPK), effectively placing the North Korean legislature under the control of the WPK (Cheong, 2014: 24). The socialist legal system in North Korea acts as a mechanism for implementing the policies of WPK.

Reorganization of the legal system by enacting and amending a series of laws in support of the WPK’s policy changes has been remarkable since just after Kim Jong Un took power (Cheong, 2014: 10; Yang, 2017). In a public speech given at the First Session of the 14th SPA on 12 April 2019, he emphasized that the legal system should be “perfected,” and that laws should be modified and supplemented in a timely manner (Rodong Sinmun, 2019b). He further revealed his conception of the law by stating that “the laws and regulations should be subdivided and specified on the basis of the requirements of the Party’s policies and reflect the prevailing realities” (Rodong Sinmun, 2019b). Referring to the achievements of the year 2021 at the 4th Plenary Meeting of 8th WPK Central Committee held in January 2022, he stated, “The work for perfecting the socialist legal system was further prioritized and the legal order was strengthened to bring substantial progress in guaranteeing the economic development and the stabilization of people’s living conditions” (Rodong Sinmun, 2022a).

Moreover, “law-observance spirit” has been emphasized under Kim Jong Un’s leadership. The official commendation of “Model Law-observance Unit” has been awarded and a new commendation named the “Model Law-observance County (City and District)” has been created since October 2021 (Rodong Sinmun, 2021c).

A long time horizon of authoritarian leadership in economic construction

The question of why authoritarian regimes could advance legal institutionalization and improve the quality of life for the average resident needs to be considered.³ This question can be theoretically addressed by considering “a long time horizon” and “performance legitimacy” of authoritarian leadership.

Clague et al. (1996) argued that the economic performance of an authoritarian regime cannot be correctly estimated without taking into account the expected duration of leaders’ rule, known as the “time horizon.” Since an authoritarian leader is “by definition the source of law and thus above the law,” their primary motivation for providing property and contract rights lies in the interest in the increased income and taxable capacity of their domain (Clague et al., 1996: 246). Therefore, an authoritarian leader’s “time horizon” greatly influences their policy initiatives regarding property and contract rights, which in turn affect economic growth. A secure authoritarian leader with a long time horizon is incentivized to respect and protect property and contract rights, as it will increase future tax income . By contrast, an authoritarian leader with short time horizon will not have as much incentive to pursue legal institutionalization in society and will aim to acquire maximum personal gain within a short period of time. Moreover, varying degrees of corruption existing among authoritarian regimes were examined empirically and it was argued that short-sighted or vulnerable authoritarian regimes are more prone to higher levels of corruption, that is, the low quality of bureaucracy (Chang and Golden, 2010; Jung, 2022b).

Table 1.

Time horizon of authoritarian leadership in economic construction.

	Short time-horizon dictator	Long time-horizon dictator
Similarity	Dictator’s prioritizing self-interest
Differences	Dictator’s plundering of the economy	Dictator’s promoting growth of the economy
	Low level of legal institutionalization of property and contract rights	High level of legal institutionalization of property and contract rights
	Low quality of bureaucracy (High level of corruption)	High quality of bureaucracy (Low level of corruption)

Source: Author based on Clague et al. (1996), Chang and Golden (2010) and Jung (2022b).

Projecting this logic onto North Korea, a youthful Kim Jong Un, who was handed control of the regime in his 20s as a third-generation successor in the “Kim dynasty,” likely had the expectation that he would rule for an extended period, resulting in a long time horizon. Moreover, attempting a full-scale economic reconstruction would require a subsequent reallocation of national resources to the economy from songun or military politics employed by his father (Jeon, 2006: 35–40). He had the benefit of inheriting an advanced nuclear weapons program when he was handed power, which could have further strengthened his sense of a secure hold on power and confidence in the stability of his regime.⁴ Furthermore, the successful test-firing of the ICBM Hwasong 15 in December 2017, which “reliably guarantees the security of the state and the safety of the people” (Rodong Sinmun, 2018b), could have enhanced his sense of regime security. As a result, and a bold initiative such as “concentrating all efforts on socialist economic construction” could have been proclaimed in April 2018.

Performance legitimacy and economic construction

It should not be assumed that an authoritarian regime persists through repression alone because repression becomes too costly in the long term. For an authoritarian leader to run their regime stably, it is necessary for them to properly incorporate co-optation and legitimacy as well (Gerschewski, 2013). For those with a long time horizon in particular, using legitimacy as a cost-saving strategy may yield greater benefits.

Legitimacy, according to M. Weber’s definition, is the reliable basis for all forms of authority, and rulers seek to arouse and foster belief in the legitimacy of their rule (Weber, 2019: 338–339).Weber suggested three sources of legitimacy that regimes could seek: “rational-legal” based on the procedural legality of specified political institutions, “traditional” based on the sanctification by long-established usage, and “charismatic” based on a belief in the exceptional qualities of the ruler (White, 1986: 462). Authoritarian regimes that lack democratic representation utilize a more complex mechanism to establish legitimacy, including socioeconomic performance, which Weber did not identify as a source of legitimacy. Holmes (1993: 17–18) identified various sources of legitimacy that communist regimes have utilized, such as Marxist ideology, socialist goals, popular revolution, the charisma of leaders, nationalism, and socioeconomic performance. For example, in their early stages, the process of legitimization was fairly straightforward for the Chinese Communist Party (CCP) and the Vietnamese Communist Party (VCP) because both drew from multiple sources of legitimacy such as Marxist ideology, socialist goals, popular revolution, and the charisma of their leaders. However, their traditional sources of legitimacy became tarnished by the changing generations of leadership. During internal and external crises in the 1970s–1980s, the CCP and VCP overcame periods of “legitimacy crisis” by establishing new foundations based on “performance legitimacy” generated by socioeconomic performance that was derived from economic reforms (Hiep, 2012; Zhu, 2011).

Performance legitimacy is particularly important in existing socialist countries as those regimes have utilized socio-economic welfare as the basis for “social compromise.” That is, these regimes often pledge to provide citizens with comprehensive and quality social welfare, such as free education and healthcare, employment, stable prices, modest but steadily rising living standards, and upward career mobility, to offset existing restrictions on civil liberties such as freedom of speech, rule of law, and democratic elections (Gerschewski, 2013; White, 1986). In addition, if democratization is to be considered as an outcome of the conflict between the classes over income (re)distribution (Acemoglu and Robinson, 2006), in order for the authoritarian regime to remain stable in the long term, it may become necessary to satisfy the minimum psychological needs of the general public by ensuring a more equitable distribution of the social surplus.

In North Korea, lacking the “charismatic” source of legitimacy of Kim Il Sung, his successors have attempted to evoke Weber’s “traditional” source of legitimacy and relied increasingly on “performance legitimacy.” In Kim Jong Un’s case, as early as during a meeting with party officials on the day of his father’s funeral ceremony on 28 December 2011, he expressed his thoughts on how the country should be run during a meeting with party officials, by specifically prioritizing improvements in economic management (Ward and Han, 2021: 110). This emphasis on economic construction was reiterated in his first public speech on 15 April 2012, on the occasion of Kim Il Sung’s Centennial , when he vowed to inherit the task of building an economically strong state and improving the people’s lives (NCNK, 2012).

Evaluation of economic construction during the Kim Jong Un regime

When assessing economic construction, two criteria can be applied: (1) accumulation of social surplus and (2) distribution of social surplus. Given the criteria of whether to accumulate social surplus or not, a political-economic system can be classified as either “predatory” or “accumulative.” A political-economic system can be classified as predatory when it collects taxes beyond an appropriate rate. Olson (2000: 6-11) argued that a “stationary bandit” with a long time horizon would likely deploy an optimal tax rate corresponding to the top of the Laffer curve, thus maximizing the total tax revenue (which is the outcome of the tax base multiplied by the optimal tax rate). Difficulty in accurately calculating the Laffer curve of each economy and judging whether a regime expropriates beyond the optimal tax rate leaves room for qualitative judgment. On the other hand, Olson (2000) also stressed that it is the quality of the country’s institutions that determine its economic prosperity. To establish a thriving market economy, it is necessary for a government to establish a series of institutions to encourage economic performance rather than hinder it, and such institutions in particular include property and contract rights (Clague et al., 1996). Therefore, taking note of existing institutions and their efficacy can be helpful in evaluating whether such a political-economic system is accumulating social surplus.

In terms of the distribution of social surplus, a political-economic system can be either “monopolistic” or “competitive.” Monopolistic conditions exist when the distribution of social surplus is concentrated within the elite minority. Conversely, competitive conditions exist when the distribution of social surplus is divided into the broader majority of the general public. When the distribution of social surplus is exclusive to the elite, only the elite will thrive at the expense of the general populace, and such distribution can lead to economic downturns or in extreme cases, collapse (Olson, 2000: 197). Implementing more inclusive participation in business could lead to a more competitive distribution of social surplus. It is assumed that accumulation of social surplus, rather than predation, and more competition in the distribution of social surplus would improve the performance legitimacy of the regime (Figure 1).

Figure 1.

Performance legitimacy with regards to accumulation and distribution of social surplus.

In the remainder of this article, I proceed to examine major institutional changes in economic areas implemented since Kim Jong Un’s ascension to power (2012–2021) and evaluate them based on the criteria of accumulation and distribution of social surplus. There are five areas of focus: (1) an emphasis on profit and emergence of de facto taxes, (2) control of bureaucratic corruption and “non-tax burdens,” (3) regional empowerment of economic viability, (4) strengthened property and contract rights in tandem with legalized market activities, and (5) interest in the environmental protection and sustainable development goals (SDGs).

Emphasis on profit and emergence of de facto taxes

The “Socialist System of Responsible Business Operation in Economic Management”—the concrete application of “Economic Management System in Our Style” to enterprises—entered the North Korean Constitution in 2019 and has substantially enhanced the management autonomy of enterprises and allowed an extension of market mechanisms to provide better incentives for increased productivity. With the exception of a few strategic areas of production, enterprises are now allowed to plan production by securing raw materials and setting transaction price on their own. The enterprises must first guarantee to make payment to the state from profits that are generated, and the remainder is invested back into the enterprise which includes improving conditions and welfare for employees. In such a system, payments to the state could be viewed as de facto taxes, and entrepreneurs in this system could be considered to operate much like their counterparts in a capitalist economy.

North Korea used to take pride in proclaiming to be the world’s only tax-free country.⁵ On the other hand, amid the growth of market mechanisms de facto taxes have been imposed and collected in the form of usage fees or payments since the 1990s. The North Korean authorities reacted to increased market activities in the economy by absorbing the resulting surpluses into state revenue through imposition of usage fees and payments (Yang, 2013: 58-59). For example, the “July 1st Economic Measures” which legalized the operation of general markets, were implemented in 2002, and usage fees for commercial transactions in the general market began to be collected from 2003. Land usage fees, which are levied on all businesses, military units, cooperative farms, and individuals who cultivate the land, were newly established in 2002. Real estate usage fees were established in 2006(Lim and Choi, 2021).

A point of interest is that North Korean authorities began releasing information on the calculation of estimated contribution of enterprises to state budget income in the annual budgetary report made by the Minister of Finance at the regular session of the SPA starting in 2018. This new practice could indicate that the profit-tax mechanism has taken root in North Korea with the adoption of “Socialist System of Responsible Business Operation in Economic Management.” According to the state’s budgetary report, the main sources of state revenue are “national corporate profits” (i.e. the income from the profits gained by enterprises) and “transaction income” (or transaction tax). According to the Rodong Sinmun (2017a, 2018a, 2019a, 2020b), the “national corporate profits” and the “transaction income” were estimated to account for 85.3% of the total budget income in 2018, 85.7% in 2019, 83.2% in 2020, and 83.4% in 2021, maintaining a level between 83.2% and 85.7%.

At the same time, the role of the Cabinet was emphasized to regulate overall economic affairs according to the “Cabinet responsibility system” or the “Cabinet-centered system” proposed by Chairman Kim Jong Un at the 7th Party Congress held in 2016 (KCNA, 2016). This emphasis on the Cabinet’s role in charge of implementing the reform measures continued at the 8th Party Congress held in 2021. The 8th Party Congress report stated that “the new five-year economic plan presupposes Cabinet, as the economic headquarter of the country, definitely improves its economic management, actively promotes the normalization of production and renovation [. . .] and orientates the external economic activities toward reinforcing the self-supporting economy” (KCNA, 2021).

The biggest challenge to the Cabinet’s bolstered role could be the members of the “privileged economy,” composed of powerful entities within the party, military, and special agencies. Particularly during the early years of his rule, Chairman Kim Jong Un took steps to elevate the role of the Cabinet relative to the power elite. In July 2012, Lee Young-ho, the Chief of Staff of the military was purged, and the reason was understood to be due to his negative stance on Chairman Kim Jong Un’s attempt to manage the military’s disorderly economic activities (Han, 2018: 126). Against this backdrop, in 2013, Chairman Kim tightened economic controls and advocated the Cabinet responsibility system.⁶ It is difficult to accurately fathom the influence of the existing “privileged economy” due to a lack of credible sources. However, placing restraints on segmented activities to extend profits to the powerful organs could suggest that the influence of the established power elite was eroded to a certain extent while consolidating power in Kim Jong Un himself.

A related institutional change is the amendment of the Trade Act of 2015, which significantly expanded the base of entities eligible to engage in trade transactions to “agencies, enterprises, and groups licensed by the central trade guiding agency.” Previously, trade had been restricted to “trade companies” that used to operate under the auspices of powerful state organs. As a result, the amended Trade Act of 2015 led to increased competition for profit within a major area of economic surplus accumulation.

In January 2022, the Trade Act was amended again and provision of “further tightening centralized and unified guidance and control over trade” was added (Rodong Sinmun, 2022b). This strongly implies the state’s changing policy direction toward stronger control over decentralized competition in the trade sector. Nonetheless, given that the subject of trade, which was enlarged by the 2015 revision, remained unchanged, the North Korean authorities’ intent could be to expand trade in a more controlled manner, ensuring that due portion of economic surplus generated from trade flows into state revenue.

Control of bureaucratic corruption and “non-tax burdens”

Bureaucratic corruption is a way of stealing the social surplus that is produced by enterprises and workers. To address this issue, Kim Jong Un regime has initiated an anti-corruption movement with the aim of both strengthening the internal control of its officials and ensuring that profits are properly channeled into state revenue (Jung, 2022a). The North Korean Criminal Act was revised in 2015 and has strengthened punishments for bribery. In cases of particularly large bribes, the sentences were increased to 5 years’ hard labor (compared to 3 years under the 2012 version). At the first plenary meeting of the 8th Central Committee of the WPK held in January 2021, Chairman Kim Jong Un emphasized that the newly regulated mission of the Party Central Auditing Commission is to “further tighten the Party disciplines, supervise and investigate all the violations of the disciplines, abuse of power, bureaucratic practices, irregularities, corruption, and high-handed and arbitrary practices” (Xinhua, 2021). In addition, the regime has been publicly announcing party cadres who are involved in corruption and have been dismissed. For example, the Politburo meeting held in February 2020 also dealt with the dismissal of senior party officials implicated in corruption (Rodong Sinmun, 2020a).

In tandem with anti-corruption measures, control over “non-tax burdens” has been reinforced as well. The Non-tax Burdens Prevention Act was established in July 2020 and revised in 2021. The “non-tax burdens” refers to the North Korean authorities’ demand on people as social tasks in the form of either providing labor or donating in-kind materials or cash. Mid-level officials could become involved in corruption and steal from the citizens based on this opportunity. Immediately after Kim Jong Un came to power, it was reported that various “non-tax burdens” that had been conventionally imposed were largely eliminated (Jung, 2012). Nevertheless, under the current economic difficulties, the practice of “non-tax burdens” appears to have lingered on. According to a North Korean defector’s testimony, sending his or her child to kindergarten in Hyesan, Yanggang Province, from 2016 to 2017 required him or her not only to prepare a daily packed lunch but also to pay running fees under various pretexts (Lee et al., 2020: 443). Similarly, North Korean defectors who entered South Korea in 2019 testified that all of the costs for repairing desks, painting walls, purchasing coal and computers as well as for repair work and reconstruction of the schools were paid by the parents of students (Lee et al., 2020: 353). Furthermore, students who could not meet these costs were required to pay for equivalent commodities such as scrap iron, paper, and rabbit fur (Lee et al., 2020: 353).

At the 8th Congress of the WPK held in 2021, the exact wording “non-tax burdens” appeared for the first time in a public address given by the North Korean leader. Chairman Kim Jong Un officially recognized “non-tax burdens” as a social phenomenon that needs to be moderated by emphasizing that “abuse of power, bureaucratism, corruption, non-tax burdens, and all criminal acts should be firmly suppressed” (Rodong Sinmun, 2021a).

Regional empowerment of economic viability

North Korea has been pursuing a series of policies to promote regional economic viability. First, 13 Economic Development Zones (EDZs) were established in November 2013, followed by 6 more in July 2014 under the direct control of the provincial government based on the EDZ Act enacted in May 2013 (KASS, 2015; Pyongyang Times, 2018). Each EDZ specializes in a specific economic activity such as manufacturing, agriculture, export and processing, tourism, and integration of advanced technology (KASS, 2015). Special Economic Zones can encourage investments, often by offering a more liberalized business climate, with lower taxes and tariffs, and less stringent regulations (Moberg, 2015). Compared to the Rason Economic Trade Zone established in the early 1990s, which was only open to foreign capital investment, the newly established EDZs allow domestic agencies and enterprises as well as foreign-invested enterprises to conduct business. This suggests that the EDZs established in each province were conceived to exert greater and more direct positive externalities with the potential to pull the rest of the local industries along a path toward increasing production and consumption capabilities (Kim, 2016: 49; Yang, 2014: 28). However, the actual performance of the EDZs project has fallen far short of the desired results due to the stifling sanctions on North Korea.

Second, in the area of finance, a regional commercial banking system is being developed. With repeated economic difficulties and the failed currency reform attempted in 2009, ordinary people have a deepened distrust in banks which has led to more people choosing private (informal) financing over maintaining savings in banks. Against this backdrop, North Korean authorities have been focused on developing financial institutions by revising the Central Bank Act and Commercial Bank Act in July 2015 and convened the 3rd National Finance Bank Cadres Conference in December 2015 for the first time in 25 years. The banking system has been reorganized by incorporating regional commercial banks and 12 regional commercial banks are operating as of 2016 based on the “Investment Guide” published by the Foreign Investment and Economic Cooperation Committee in 2016 (Kim and Moon, 2021: 13-14). According to North Korean literature, the regional commercial banks need to “balance their cash income and expenditures in order to contribute to the national cash balance across the country, currency issuance, and monetary control” (Nam, 2017).

Third, the importance of regionally based local light industry, which produces consumables directly connected to raising the standard of living, has been prioritized. Chairman Kim Jong Un convened the National Light Industrial Conference in March 2013, where he stressed that local industry should be developed to boost the production of everyday personal consumables. Also, he repeatedly asserted the need to improve product quality and expand varieties with locally available raw materials (KCNA, 2013). Japan’s pro-Pyongyang newspaper Choson Sinbo (2021a) observed that local industries were contributing greatly to increasing the production of consumer goods directly related to improving people’s lives by successfully mobilizing locally available raw materials and demonstrating increased productivity.

Forth, North Korean authorities formalized a new goal of promoting “balanced and simultaneous development across the country” aimed at developing cities and counties nationwide at the 8th Congress of the WPK held in January 2021 (Rodong Sinmun, 2021a). In March 2021, the “short course for chief secretaries of city and county Party committees” was held for the first time in the history of the WPK with the appearance of Chairman Kim Jong Un (Rodong Sinmun, 2021d). Subsequently, the Cities and Counties Development Act, consisting of 98 articles throughout five chapters, was enacted in September 2021. This Act claims to contribute to promoting socialist construction and improving living standards by driving self-supporting and diverse development in cities and counties. It stipulates the preparation and execution of economic development goals of cities and counties (chapter 2), development of local economy (Chapter 3), development of local culture (chapter 4), and the guidance and support of the central government for cities and counties (chapter 5). Based on these events, the Choson Sinbo (2021b) stated that the year 2021 marked a breakthrough in bolstering the status and role of cities and counties in North Korea.

The new focus on boosting local economic capabilities and fostering regionally balanced development is likely to help improve local productivity, leading to the accumulation of social surplus and more competitive distribution. It has been shown that local budgetary revenue already contributes to the total state budget income at increasing levels: 25.7~26.9% level between 2017 and 2021 compared to 21% in 2015 or 23.2% in 2016 (Rodong Sinmun, 2015, 2016, 2017a, 2018a, 2019a, 2020b, 2021b). The rise in ratio of local budgetary revenue relative to the total state budget income suggests that the local economies have been developed and the total local production has increased. However, there is also a possibility that the living standard of local populations could be negatively affected if regions are pressured to increase their contributions to the state budget income with reduced central support under unfavorable economic conditions.

Strengthened property and contract rights in tandem with legalized market activities

The North Korean authorities have vigorously sought inbound foreign investment by offering favorable terms of investment in the EDZs (Rodong Sinmun, 2013). Conferences were organized both within and outside of Pyongyang to explain the North Korean EDZ policies. This included the EDZ Expert Conference organized in Pyongyang in 2014 with invited economic and legal experts from various countries including Canada, China and India (Choson Sinbo, 2015; Pyongyang Times, 2014) and an international academic conference held at Yanbian University in China in 2019 (Choson Sinbo, 2019).

However, despite the potential for substantial profits, concerns regarding investment risk (e.g. the danger of expropriation) and the lack of formal institutions that offer legal protection (e.g. dispute settlement) were often cited as major causes that discourage foreign investors (Haggard et al., 2011; Jung and Rich, 2016). In response to these concerns, North Korean authorities have emphasized that they have instituted relevant legal measures. For example, at the international academic conference at Yanbian University in 2019, the North Korean delegation from the Joint Investment Development Bureau of the Ministry of External Economic Relations organized a side briefing session and stressed that the EDZs in North Korea are legally and institutionally prepared to provide a secure and stable business and investment environment (Choson Sinbo, 2019).

To realize the reform policy of “Socialist System of Responsible Business Operation in Economic Management,” the Enterprise Act, which was revised in 2014, states in Article 38 (financial management) that enterprises must actively raise and effectively utilize management funds.⁷ The Article 38 also stipulates that enterprises can make up for funding shortages by borrowing from banks or using idle funds of residents. This stipulation could be interpretated as acknowledging the existence of idle informal capital and granting permission to borrow from informal finance sources. Previously, expressions such as “the secrecy of the savings balance” and “not asking about ownership type” appeared in the Kwangmyong Encyclopedia 5, published in 2010, reflecting a new policy of ensuring confidentiality for savings in order to mobilize deposit funds (Chung, 2019: 147). To encourage the use of financial institutions for depositing money and receiving principal and interest, there needs to be a reasonable assumption that agreements will be carried out and that contracts will be protected by law in case of any breaches. The expansion of corporate autonomy in financial management demonstrates the increase in awareness of contract and property rights pertinent to the growth of the market mechanism in North Korea.

In this sense, the Property Execution Act newly established in December 2021 is a clear indication of the regime’s intent to move forward with a system that emphasizes stronger contract and property rights. This Act aims to “establish systems and order that can execute property-related rulings, judgments, and decisions to guarantee the civil rights and interests of institutions, enterprises, organizations, and citizens” (Rodong Sinmun, 2021d). It regulates specific matters related to property execution, such as investigation of property, maintenance of property execution order, compulsory execution, sale of executed property, execution of intellectual property, execution of real estate property, and management and transfer of collateralized real estate property (Kim, 2022). Accordingly, upon receipt of an application for property execution, the property execution agency shall review the matters prescribed in the Act and, if it approves the execution of the property, issue an execution statement with in 10 days (Kim, 2022).

Interest in the environmental protection and SDGs

North Korean authorities have shown increased interest actively in participating in international agreements for environmental protection and SDGs. North Korea has prioritized the protection of the natural environment and ecosystem “as a paramount task directly related to the people’s livelihood” (Ministry of Foreign Affairs, 2021). As a result, a series of laws in the environmental field have been put forth. The Renewable Energy Law established in 2013, with the goal of supplying 5 GW of solar and wind power facilities by 2044. The Law on Recycling Resources and the Law on Forestry were enacted in 2020, respectively. The National Environment Protection Law and the Forest Law were amended in 2021. Also, North Korea has submitted a voluntary national review (VNR) at the High-Level Political Forum held in July 2021 and pledged to actively participate in the implementation of the UN SDGs 2030 agenda (UN SDGs Website, 2022).

Kim Jong Un’s regime could be interested in environmental protection and SDGs for three primary reasons. Firstly, the current push to find new sources of growth domestically aligns with the international community’s priority of green growth. After the failed DPRK-U.S. summit in Hanoi in February 2019, North Korea has proposed a policy line of economic “self-reliance” and has emphasized the importance of local sourcing and recycling raw materials as a key component of this strategy. Additionally, North Korea has been promoting domestic energy-saving technologies including recycling technology and exploration of renewable energies while dealing with extended years of international economic sanctions. The norms of the international community could be used to rationalize the direction of the national economic development plan. For example, Rodong Sinmun (2017b) stated,

In recent years, many countries have strengthened national control to reduce fossil fuel consumption and CO₂ emissions, encouraged the use of natural energy sources such as sunlight, wind, and biological materials, and adopted coal-biomass combustion technology to increase the recycling effect of biological materials.

Secondly, environmental protection and SDGs could provide a platform for international cooperation and assistance such as capacity building and technology transfer. If this type of cooperation can be achieved, it would create opportunities for North Korea to receive international assistance. At the 5th meeting of the Parties to the Basel, Rotterdam, and Stockholm (BRS) Conventions of multilateral environmental agreements, held in Geneva in July 2021, the head of the North Korean delegation called for reinforcing “scientific and technological assistance for implementing these conventions” and for ending “double standards in delivering assistance to developing countries” (Ministry of Foreign Affairs, 2021).

Finally, the possibility that North Korea engages with SDGs for opportunistic financial reasons cannot be overlooked. For North Korea, the United Nations has been a thorn in its side by making an issue of its nuclear weapons programs and human rights record, while also providing humanitarian assistance in the form of food and medical supplies (The JoongAng Daily, 2021). North Korea may have made a strategic calculation to obtain more aid or economic support from the international community by signaling its willingness to follow the SDGs.

Statistics indicating improved standard of living during Kim Jong Un regime

Public health indicators (life expectancy, infant mortality) and nutritional indicators (infant development rate) have shown signs of improvement in the 2010s (Hong et al., 2018; Kim, 2021). Seven surveys conducted by UNICEF from 1998 to 2017, aimed at identifying maternal and child nutrition in North Korea, show that the nutritional level of children has continuously improved since the economic crisis in the late 1990s (Hong et al., 2018).

In an annual survey given to North Korean defectors from 2012 to 2020, conducted by the Institute for Peace and Unification Studies, regarding the public welfare level, responses indicated that the general public experienced improvements in diet and nutrition during the 2010s. When asked how many meals they had a day, a significant majority of the respondents replied that they had more than three meals a day. Moreover, when asked how frequently they consumed meat, the number of people who responded with “once or twice a week” has demonstrates a strong upward trend, more than doubling from 21% in 2012 to 46.6% in 2019 (Figures 2 and 3). Furthermore, the stable trend of diet and nutrition improvement continued even during the economic sanctions levied after 2017 (Kim et al., 2021: 40–41).

Figure 2.

Meals per day.

Figure 3.

Frequency of meat intake.

Additionally, the ability to purchase clothes more frequently indicates a notable increase in household income and standard of living. The number of respondents who answered that they bought one or two items of clothing seasonally has shown an upward trend, nearly doubling from 34.9% in 2012 to 62.1% in 2017 (Figure 4). This suggests that the economic policies during the Kim Jong Un period have positively contributed to the improvement of the standard of living for the general public.

Figure 4.

Frequency of buying clothes.

Conclusion

This article has examined the strategic changes and trends of legal institutionalization in support of economic policy under Kim Jong Un’s rule and has evaluated their impact on economic construction over the past decade. The broad-based legal institutionalization that has been established can be viewed as the signature of Kim Jong Un regime. This article argues that a series of new policy measures have been instituted to enhance the performance legitimacy of the regime as social surplus is accumulated, and distributed more competitively.

However, this article certainly does not attempt to argue that the level of legal institutionalization, including property rights and contract rights, satisfies international standards nor that reform efforts have been sufficient to drive substantial economic growth during the Kim Jong Un period. There can be little doubt that North Korea’s economic construction performance has not been optimal. The WPK’s “2016-2020 five-year strategy for national economic development” was not fulfilled, as Chairman Kim Jong Un himself admitted at the 8th Party Congress in January 2021 (Rodong Sinmun, 2021a). According to Chairman Kim, the biggest impediments to the accomplishment of the five-year strategy were the “most barbarous sanctions and blockade by the U.S. and other hostile forces,” severe natural disasters as well as COVID-19 (Rodong Sinmun, 2021a). With the collapse of the DPRK-U.S. summit in Hanoi in February 2019, it appears that the overall economic policy of North Korea has taken a serious detour from “concentrating all efforts on socialist economic construction” and reoriented toward tighter central economic management by means of “self-reliance” and “self-sufficiency.” The unfavorable economic conditions resulted in a new five-year “plan” instead of “strategy” at the 8th Party Congress.

Nevertheless, the nonfulfillment of the “2016-2020 five-year economic strategy” does not mean that the North Korean economy has not grown at all over the past decade nor does it dismiss the notion that these reforms have been growth-enhancing. It is possible that North Korea’s economic growth targets were over-ambitious from the outset, and thus unattainable in light of the deteriorating external conditions. Indeed, despite heavy decreases in trade volume, flow of foreign investment, and international aid, along with other economic difficulties wrought from prolonged international sanctions and the COVID-19 pandemic, the North Korean economic system has been surviving. This has been accomplished not only by squeezing out all possible growth potential but also by improving legal institutionalization aiming at increasing productivity. It is the assessment of this article that the legal institutionalization undertaken during Kim Jong Un period explains, at least in part, why the current regime in North Korea has not collapsed nor faced any significant legitimacy crisis.

Footnotes

Acknowledgements

An earlier version was presented at the conference held by Unikorea Foundation and Ewha Institute of Unification Studies.

Declaration of conflicting interests

The author(s) declared no potential conflicts of interest with respect to the research, authorship, and/or publication of this article.

Funding

The author(s) received no financial support for the research, authorship, and/or publication of this article.

ORCID iD

Suehyun Jung

Notes

Author biography

Suehyun Jung (suehyunjung@naver.com) is a nonstanding research fellow of the Simyeon Institute for North Korean Studies of Republic of Korea. Her research interests include the political economies of North Korea and China. She has recently published articles in Asian Survey and Asian Perspective among others.

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Economic Construction by Means of Legal Institutionalization under Kim Jong Un Regime of North Korea (2012–2021)

Abstract

Keywords

Introduction

Legal institutionalization under Kim Jong Un’s rule

A long time horizon of authoritarian leadership in economic construction

Performance legitimacy and economic construction

Evaluation of economic construction during the Kim Jong Un regime

Emphasis on profit and emergence of de facto taxes

Control of bureaucratic corruption and “non-tax burdens”

Regional empowerment of economic viability

Strengthened property and contract rights in tandem with legalized market activities

Interest in the environmental protection and SDGs

Statistics indicating improved standard of living during Kim Jong Un regime

Conclusion

Footnotes

Acknowledgements

Declaration of conflicting interests

Funding

ORCID iD

Notes

Author biography

References