North Korea's Workers' Party takes economic control

2013-07-12

Kim Jong Un (C) attends a meeting of the Central Committee of the Workers' Party in Pyongyang, March 31, 2013. AFP PHOTO / KCNA VIA KNS

North Korea's ruling Workers' Party is to have tighter control of the impoverished country's economic and financial policies in a bid to drive young dictator Kim Jong Un's much-touted reforms, North Korean sources say.

The party has created a centralized department with branches throughout the nation to formulate and oversee policies ranging from appointment of top economic officials to approval of companies and implementation of foreign exchange controls, a source from Jagang province, near the border with China, told RFA's Korean Service.

The Party's Department of Economy was set up last month.

"From last June, each [Party] committee in the provinces and cities established a [a branch of the] Department of Economy," the source said on condition of anonymity.

"It will further strengthen the control and management of the Party," he said.

The move by the Workers' Party Central Committee was part of a shakeup within the Party and led to several branches of existing departments being transferred to the Department of Economy, he said.

A source in Yanggang province, also along the Chinese border, told RFA that the newly-formed department would wield as much power as the Department of Organization Management, which oversees the entire Workers' Party.

"From now on, all officials in charge of economic matters have to be approved by the Department of Economy, while all companies also require approval from the department when they are established, shut down, or merged," the Yanggang source said.

The Department of Economy also has the power to punish and appoint officials in charge of economic matters, he said, adding that he expects it to become "the strongest department in the Party."

Even if the North Korean military, judicial agencies, and the Cabinet – or executive branch of the government – seek to establish new units for earning foreign currency or production, they are required to obtain permission in advance from the department, he said.

Jockeying for power

At present, observers believe the cabinet under Prime Minister Park Bong Ju is nominally in charge of the country's economic policy.

North Korea's lackluster economy is constrained by international sanctions against Pyongyang's illicit nuclear programs.

Kim Jong Un, who took power in December 2011 following his father Kim Jong Il's death from a heart attack, reappointed Park in April this year in what was widely seen as a move to substantially reform the North's lagging economy.

He was first prime minister in 2003 but was booted from his position four years later after being blamed for high inflation after clashes with the Workers' Party and military over coal policy and misappropriation of state funds.

The Workers' Party is technically in control of North Korea's cabinet, but it was believed that the younger Kim gave Park free range in dictating fiscal strategy as part of a bid to prove his legitimacy as the country's new leader by shoring up the economy, observers said.

Reestablishing control

"Establishing the Department of Economy is related to the so-called 'reformed economic management system," the source in Yanggang province said, referring to a new policy announced in June last year which grants individuals greater authority in the distribution of goods.

"It means the Party never wants to lose its control over the economy, even though the 'reformed system' takes place everywhere," he added.

The source said that the lack of central control had led to situations in which bogus companies and organizations were running businesses and generating foreign currency revenue without reporting them, creating a need for the Party to more efficiently oversee these groups.

For example, he said, several companies and restaurants which were established under the guise of being welfare organizations to feed and clothe the poor are really generating foreign currency for the North Korean Cabinet.

But he noted that even as the Department of Economy sought to rein in these businesses, it would inevitably generate conflict within the Party as it grew in power, leading different factions to jockey for control.

"[Some of] the functions of [the Party's] Department of the Executives and Department of Organization Management were already taken away by the Department of Economy, and also the Department of Administration has seen interference from the department as well," the source said.

"In the future, the scope of Department of Economy's activity will surely conflict with other departments of the Workers' Party."

Reported by Sung Hui Moon for RFA's Korean Service. Translated by Goeun Yu. Written in English by Joshua Lipes.

Link to original story on RFA website