The Big Stories in North Korea That the Media Missed 2
NORTH KOREA PARTY CONGRESS

It was the once-in-a-generation event that captivated the world’s media.

But what exactly did the world learn about North Korea during the recent ‘momentous’ Seventh Workers’ Party Congress in Pyongyang?

According to the dozens of western journalists invited in, it amounted to a quaint back-slapping exercise while anointing the Supreme Leader to new positions of power that add to his already substantial range of titles.

For most journalists, their visit amounted to the role of ‘bit player’ in North Korea’s tightly-choreographed stage production. Their access was tightly controlled and they saw few easily digestible details that could be condensed into a pithy three-minute segment on the evening news programs. Predictably, the reporters happily focused on aesthetics and the inane. The BBC managed to send two teams, though one was slated to leave the day that the Congress kicked off. Veteran correspondent Rupert Wingfield-Hayes was in the first team to arrive. He managed to break free from his chaperones and asked a young girl demonstrating Taekwondo what she thought of the USA. His reporting aggrieved the authorities to the point that he was barred from boarding his flight back to China until he signed a grovelling apology.

So did anything of substance emanate from this rare Congress? What was it all about? Why now? What next?

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Off The Wall?

With respect to the first question, we would argue that the answer is: quite a lot.

Of course, one of the first official announcements was to “hail the great success” of the country’s January nuclear test and February satellite launch.

Then came the focus on economic realignment. One media report summed up: “The government has lost some control of the economy, and in recent years a black market has prevented further humanitarian crises on the scale of the 1994-1998 famine.”

So, based on this analysis, black markets have quietly proliferated under the nose of the most invasive regime on the planet? Sorry, but that doesn’t quite add up.

Our rather contrarian assessment is that these black markets have actually been tacitly sanctioned by the thoroughly invasive and pervasive North Korean regime.

Why Now?

So now to the real question: Why would the Kim regime permit a sudden economic shift to market forces?

It is a question with a fairly simple answer. Food, consumables, electronics and other essentials have been traded for a considerable time in North Korea, just as in any other country.

The key issue isn’t why the black market exists now – it has been around for a long time. The most interesting development is that black market trading is now being officially acknowledged at the highest levels.

Rebalancing Acts

But it’s not just the economy that’s being re-assessed. We are also noticing a marked shift in the political balance – and in our opinion, this is the most important point of all.

One recent appointment or – more accurately, reappointment – to the Central Committee of the Workers’ Party and Central Military Commission bordered on the miraculous. After all, army general Ri Yong Gil had been widely reported, based on South Korean ‘intelligence’, to have been executed.

Aside from this astounding reincarnation, there were some other less supernatural but nevertheless interesting personnel changes in the Central Military Commission and the Political Bureau that point to a reduced military influence in Pyongyang. This subtle weakening of the military influence is being replaced with more party members and civilian government representation.

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Out went the Chief of the Strategic Force of the Korean Peoples’ Army – his position no longer exists. Also pushed out: the Chief of the Military Security Command. Such positions have been replaced by party and civilian government appointees. As examples, North Korean Premier Pak Pong Ju has been appointed to the Central Military Commission to represent the civilian administration alongside the established figure of Kim Yong Nam, President of the Presidium of the Supreme People’s Assembly of North Korea.

This is all about levelling the playing field – increasing the influence of the civil administration, i.e. the actual government, and the Party – so as to support future reforms and reduce the overall influence of the military.

Attaining this equilibrium has been a key initiative of the leadership over the past four years. Now, the Congress has officially approved and sanctioned it as a policy cornerstone. This is a momentous change that is unprecedented in three generations of the Kim regime. 

What Happens Next?

The announcement of a five-year economic development plan is an indication of further changes ahead.

The government has quietly been testing the market with regard to ‘private enterprises’ for a number of years. These are genuine and real – owned and financed by individuals, staffed by people who are paid salaries – and they’re growing in number.

The salaries provided by these ‘private enterprises’ are significantly higher than the meager stipend paid by the government. They offer a disposable income to people to spend on goods other than the essentials, stimulating a consumer-driven market.

The concept is contributing to the growth of a working class, and a middle class.

NORTH KOREA PARTY CONGRESS

Economic growth in North Korea is notoriously hard to measure as reliable economic data is nearly impossible to come by. Estimates of growth rates range between 1-3%, though the true pace is likely to be higher, at perhaps 4-6%.

The evidence is there, visually at least. We note that the Pyongyang skyline has quite a few more cranes laboring on construction projects than the solitary one that the BBC managed to find.

Expect state institutions to face further reform, including the National Defence Commission, one of the more powerful military stacked bodies. Military-dominated industries also face a shakeup in the coming five years.

The grand plan is part of the “Byungjin” policy — or “simultaneous pursuit” — announced in 2013 to grow the economy, improve living standards, and develop nuclear weapons in tandem.

This is underpinned by a “country first” policy that will eventually replace the policy of “Songun” or “military first.”

Beneath North Korea’s double shroud of secrecy – where the tight control of Pyongyang’s Kim regime is augmented by a persistent campaign of misinformation by Western (and particularly South Korean) intelligence – there are very real changes occurring.

Keep watching beyond the muddied media reports. The pace of change in Pyongyang is certain to accelerate between now and 2020.

The author of this report is Phill Hynes of ISS Risk, a frontier and emerging markets political risk management company covering North, South and Southeast Asia from its headquarters in Hong Kong.

 

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