Short CE Mid-Year Update

Two high-tension quarters have passed this year. For anyone reading the headlines, it would be easy to forget that activities supporting access to economics, entrepreneurship and legal knowledge are still going on, and that for all the attention-grabbing headlines, individual North Koreans continue to innovate and develop their own ideas for new businesses they would like to start up. Some of these businesses might someday change the entrepreneurial and business landscape in the country. In the last 2 quarters, our programs have directly reached close to 100 North Koreans with a focus on business skills training for female managers and entrepreneurs through our Women in Business initiative. We have also covered fiscal and monetary topics focused on tackling inflation. Programs have taken place both in country and overseas.

Some program statistics for the ~90 participants overall for in-country and overseas programs in the first half of this year:

~55% female participation for in-country Women in Business program

~73% of participants between 20-40 years old

~14.2% selectivity ratio (1 out of 7) for overseas component

~ 2 workshops and incubation programs overseas and 2 workshops in-country

Land Reform Op-Ed in Rodong Sinmun

Given how we have been occasionally bitched at by North Korean elements for releasing information ahead of its time, this post will instead focus on copying and pasting something from the party newspaper Rodong Sinmun. But its an interesting allegory on land reform, something that foreshadows something that has been in the works for awhile, while stopping short of being an outright policy proclamation.

It Happened before Land Reform

One February day 1946, President Kim Il Sung visited a peasant house in the outskirts of Pyongyang.

Sitting with the peasants who happened to be there, he talked frankly, getting himself well acquainted with their living conditions. Not aware of who they were talking to, the villagers told him whatever they could think up then and there. Listening carefully to the villagers, the President asked whether they had heard anything about the three-to-seven system of tenancy. The host, somewhat bewildered, looked about his folk, and said, "I've heard of it, but I don't…" he equivocated.

"How much tenant fee did you pay the landlord last year?" asked the President. "You say you paid 50 percent of your harvest as a tenant fee. You know you had to pay 30 percent. Go and take back the amount exceeding the 30 percent."

The peasants looked a bit surprised because it would be more than they could have the courage to do, they thought it was the last thing they could ever do to bring back the remainder in their tenant fee from the landlord.

Smiling softly, the President said the three-to-seven system was what the state had enforced for the peasants and so there was no reason why they should hesitate to get the remainder back. What the President said seemed not to be understood to the peasants. They suggested that the state should take the excess back for them. The President asked whether a peasant association had been organized in the village or not. There was no reply as the peasants all kept mum. As a matter of fact, a peasant association was there, but it failed to do its bit and the peasants turned their back on it. Some peasants even withdrew from the association for fear that they should be deprived of their tenanted land. The President told them to rally the peasants in the association and fight bravely to get 70 percent of their harvest.

Thanks to the great care and leadership of the President the peasants gradually grew into true masters of land and the masters of the people's power.

Successful SEZs

With the (temporary?) closure of Kaesong Industrial Complex, the future of special economic zones (SEZ) in North Korea looks grim. In China, where one-stop shops that help investors navigate processes increasingly replace SEZs, what role can SEZs play in North Korea? If North Korea reinvigorates its SEZ policy in the medium term, what does it need to do to make progress? Some ideas:

Execution While the strategic rationale and planning of SEZs is important, studies of SEZs by the World Bank indicate that a lot boils down to the execution of the SEZ concept. Well-executed SEZs produce results, and such zones often require local zone administrators that have the autonomy and the political support to cut through bureaucratic red tape.

Integration Traditionally, SEZs in North Korea have been located far from the key urban centers. The isolation cuts them off from domestic economic activity. However, SEZs that have generated significant externalities for the national economy often benefit from and transfer their advantages through integrating their activities with the regional economy.

Contextualization Overseas investors, for right or wrong reasons, worry about North Korea’s economic and political trajectory. Many are hesitant to commit significant capital to a challenging market. As such, a short-term approach could be to focus SEZs on supporting domestic entrepreneurs. A liberal and credible zone approach could target domestic North Korean entrepreneurs, enabling them to set up companies domestically, rather than offshore, and help develop a set of rules governing the next-generation of domestic companies. These rules can then be rolled out more extensively if successful.