North Korean Leader Announces 5-Year Plan for Economy

PYONGYANG, North Korea (Los Angeles Times/TNS) -

North Korean leader Kim Jong Un announced the nation’s first five-year economic plan in decades, saying the country must modernize but giving no indication that he was planning market-style reforms to jump-start the moribund state-dominated economy.

Kim gave an overview of his priorities Saturday, the second day of the Worker’s Party Congress, the highest level political gathering in the isolated, one-party state. It is the first such meeting in 36 years.

Besides emphasizing the economy, Kim said that “as a responsible nuclear weapons state, our republic will not use a nuclear weapon unless its sovereignty is encroached upon by any aggressive hostile forces with nukes, as (we have) already declared,” according to a summary of his remarks in English provided by the official Korean Central News Agency. He said North Korea would “faithfully fulfill its obligation for nonproliferation and strive for the global denuclearization.”

Delivering an hours-long speech to about 5,000 delegates and alternates at the April 25 House of Culture in the capital, Pyongyang, Kim emphasized the need to solve the problem of providing electric power. The nation has long suffered shortages, and even nowadays in Pyongyang –– the most well-off city in the country –– many residents have power only for three or four hours in the morning, and three or four hours in the evening.

North Korea has significant coal deposits, but Kim said the nation must rely more on renewable sources like hydroelectric, geothermal and solar power. Solar-powered streetlights can be seen around Pyongyang, and solar panels hang from the balconies of apartments throughout the city.

Kim mentioned the need to develop the metal and railway industries, and spoke of his ambitions to export raw materials like magnesite and graphite around the world. But he did not explain how the country could do that under sanctions imposed in March by the United Nations after the nation’s recent hydrogen bomb and missile tests.

Kim gave repeated nods to the long-standing North Korean “Juche” ideology of self-reliance in all things. But at the same time, he suggested that he wanted his country to engage more in the international economy. Foreign trade, he said “should be widely developed, and with credibility.”

After collapsing in the 1990s, North Korea’s economy has rebounded somewhat. South Korea’s central bank estimates North Korea’s gross domestic product grew about 1.3 percent in 2012, 1.1 percent in 2013 and 1 percent in 2014.

Five-year plans were typical pillars of many socialist countries in the past, and nations including China still draft them. Although five-year plans may be a sign of progress for North Korea, some outside experts said Kim’s announcement doesn’t necessarily portend bold changes.

“Some experts are predicting bold economic reform, as they have been similarly predicting for decades, but they are likely to be disappointed,” said Bruce Klingner, a senior research fellow on North Asia at the Heritage Foundation in Washington. “The Kim regime has periodically allowed some economic changes, but these were never as extensive in scope or duration as predicted. And the regime usually walked them back either as economic conditions improved or it feared losing control over its minions.”

Kim also said that North Korea would “improve and normalize the relations” with those countries that respect its sovereignty “and are friendly towards it, though they had been hostile toward it in the past.”

North Korea has not published economic statistics since the 1960s, making precise calculation of its gross domestic product impossible. But the nation of 24 million is undoubtedly one of the world’s poorest countries. South Korea’s central bank estimated North Korea’s gross national income at $29 billion in 2014. That’s about 1 percent the size of California’s economy.

North Korea has few trading partners; the largest ones are China and South Korea. Last year, they accounted for about 90 percent of North Korea’s trade. But in February, following Kim’s test of a hydrogen bomb and a rocket launch, government authorities in Seoul decided to close the Kaesong industrial complex.

The facility, six miles north of the demilitarized zone that has separated North and South Korea since the 1950s, opened in 2004 and produced socks, watches and other goods. It was intended as a step toward economic cooperation and reconciliation.

Over its decade-plus history, the park is estimated to have earned North Korea about $525 million, according to South Korean government authorities. The park was built with South Korean investment but used tens of thousands of North Korean workers.

“It appears that such funds have not been used to pave the way to peace, as the international community had hoped, but rather to upgrade its nuclear weapons and long-range missiles,” the South’s reunification minister, Hong Yong-pyo, said at the time.

Stephan Haggard of the Petersen Institute for International Economics estimated in February that Kaesong accounted for about a third of all North Korean trade.

What remains to be seen is whether China will pick up the slack now that Kaesong has been shuttered.

From January to November 2015, China-North Korea trade volume totaled $4.9 billion, the South Korean state-run Korea Development Institute estimated. That was down 14.8 percent from the comparable period in 2014 and the first double-digit year-over-year drop since 2000.

But a Chinese customs official said China’s exports to North Korea rose about 15 percent in the first three months of 2016, compared with 2015, and Chinese imports rose nearly 11 percent.