Indeed, a modern system existed in North Korea; it formed part of the planned economy and formed the basis for a unified national fiscal system. However, at the latest since the 1990s in North Korea, each party-state organ has acquired a portion of its budget through privileged commercial activities benefiting from the extent of their prerogatives and political influence. This paper is an excerpted and abridged version of Chapter 3 "Fiscal Fragmentation and Economic Change in North Korea" in Park Hyeong Jung and Choi Sahyun, Fiscal Segmentation and a Variety of Taxes in North Korea.
From 1985 to 1994, in addition to the suryong economy, the main powerful special organs of the Party State entered into the business of acquiring foreign currency. The main point of this period is that, in addition to the suryong economy and the main party-state organs, the foreign currency acquisition activities of the party-state organs for extra-budgetary revenue were generalized and became the backbone of North Korea's party-state activities. budgetary system of authorities.
빲#FXGPVQH
5WT[QPI'EQPQO[CPF VJG'ZRCPUKQPQHVJG/CTMGV
FXGPV QH 5WT[QPI ' EQPQO[ CPF VJG 'ZRCPUKQPQHVJG/CTMGV
In 1977, around the time the farmers' market expanded, the Party Center engaged in full monopoly foreign exchange earnings. Under the pretext of procuring such funds, the Party Center established an organization that took over the foreign currency income. One was, through Office 39, the allocation of various tasks to earn foreign currency for the Party's Primary Committee.
In the 1970s, the foreign exchange earning agencies of the Party Center had a monopoly on the collection and export of resources. This meant that there was a large difference between the domestic price and the international price of exported goods and the foreign exchange earning agencies of the Party Center took this difference.9). One of the main export items monopolized by the foreign exchange earning agencies of the Party Center was pine mushrooms.
ˎWhen pine mushrooms are in season, Party Center's foreign exchange earning agencies open local offices to purchase mushrooms in various cities and counties that have produced them. In this way, the foreign exchange-earning activities of the Party Center greatly contributed to the expansion of market activities in North Korea. From the beginning, foreign exchange earnings constituted a significantly large part of all national economic activity.
Since the late 1970s, the number of foreign exchange earning agencies ˀG those other than Party Center ˀ has increased. As a result, an independent segment has emerged in the North Korean economy consisting of the foreign exchange activities of powerful party-state agencies and distinct from the planned economy. Second, the increase in foreign exchange revenues was inversely proportional to the size of the state budget and the national planned economy.
In the 1980s, more and more party-state bodies participated in foreign exchange activities. This, in turn, increased the participation of party-state agencies in the activity of acquiring foreign exchange, as the purpose of personal property was added to the original purpose of production.
빲5WTIGKP(QTGKIP
WTTGPE['CTPKPI#EVKXKVKGUQH/CLQT 2CTV[UVCVG#IGPEKGU
5WTIGKP(QTGKIP%WTTGPE['CTPKPI
EVKXKVKGUQH/CLQT2CTV[UVCVG#IGPEKGU
29. role and weight of suryong agencies, major party-state agencies and agents of the private economy after the mid-1980s. This meant that the income of the planned economy declined sharply, and the host role of the planned economy for foreign exchange earning parasitic agencies was rapidly eroding. During this period, the military, League of Socialist Working Youth and other privileged agencies, not to mention the Central Committee, all stepped in to earn foreign exchange under various pretexts.
From then on, there was a nationwide 'struggle to produce gifts to commemorate April 15' under the direction of the Central Committee. Since 1972, Kim Il, who assumed important posts such as the Deputy Prime Minister and the First Prime Minister of the State Administration Council, has always been a reliable guardian of Kim Jong-il. In 1984 and 1986 in particular, Kim Jong-il instructed the Ministry of the People's Armed Forces to be fiscally self-sufficient.16).
In this period, it is important to note the cross-border trade between North Koreans and the ethnic Koreans in China. The generalization of foreign exchange earning activities of the party-state agencies in the early 1990s. It was the opening of the 13th Pyongyang Festival in 1989 that dealt the final blow to the collapse of the already struggling North Korean economy.
The League of Socialist Working Youth, led by the Central Committee, prepared for the event and in the meantime the basis of the state-planned economy was seriously undermined. The system allowed all provinces (local administrative units) and cabinet departments responsible for production to establish trading companies, not just the Ministry of Foreign Trade.28). After such measures were taken, almost all institutions of the party, government and military established their own trading companies and began to earn foreign exchange.
In the early 1990s, almost all institutions of the Party, the government, and the military founded trading companies or engaged in commercial activities to earn foreign exchange on their own in any way possible. Also refer to Moonsoo Yang, North Korea's Trade System and its Reality, University of North Korean Studies, Seoul, 2008, pp. in Korean) regarding the rise of the Party and the military in the establishment of the trading company.
2QNKE[CPFVJG'ZRCPUKQPQHVJG /CTMGV
From the 1990s, both the substance and the form of the North Korean economy were threatened due to the strong political consequences of the dissolution of the Soviet Union and the death of Kim Il-sung. To make matters worse, economic sanctions were imposed on the state due to the launch of the Rodong Missile and the nuclear issue, completely destroying the contents of the planned economy. This allowed agencies related to the military and their trading companies to benefit the most from the expansion of the market and trading activities ˀGde thus played a decisive role in the expansion of North Korea's market.36).
See Park, "Commercial Engagements of Party-State Agencies and Market Expansion in the 1990s." At the same time, the National Defense Committee ordered all state enterprises that were part of the planned economy to, in addition to the funds they had to hand over as part of official state planning. The reform, the rapidly increasing rate of inflation caused the natural use of foreign currency in North Korea while avoiding the use of domestic currency.
In addition, trading companies under large party state agencies, those with a lot of foreign currency can manipulate the opening and closing of the customs at the border. Agents of the private economy grew rapidly during this period, as large party-state agencies contributed to the rapid growth of markets. The prosperity of 'market economy' (jangmadang economy) and 'personal enrichment of the upper class' was what drove these changes.
In the midst of the influx of Chinese goods, North Korean raw materials were systematically collected and exported to China. Geographically, the market economy connected different parts of the country and connected the domestic and international spheres. Also, although this was ostensibly the period of 'songun politics', it was in fact an unjust redistribution of state property caused by an unprecedented collapse of food rations and failure of supplies, leading to the accumulation of wealth. by the upper class.
Earning foreign exchange, the core of the elites' economic activities, is essentially dependent on both the planned economy and the economy. In the 2000s, in addition to exports of North Korean goods, foreign aid flowed in abundantly, meaning the elites had an additional source of income.
5WOOCT[CPF%QPENWUKQP
But over time, the fiscal system disintegrated into four stages and four sections, run by different main entities: suryong agencies, specialized agencies (proletarian dictatorship), party agencies, and private economy agents. The first phase of disintegration was characterized by the arrangement of a special budget by Kim Il-sung to maintain his political power under the socialist planned economy. In the 1950s, Kim Il-sung mobilized the masses and in the 1960s, he used political tools focused on guiding activities in the country to set aside financial resources for himself.
The concentration of power on Kim Il-sung in the 1960s and the process of Kim Jong-il's succession since the mid-1970s provided the backdrop to the birth of the Suryong economy. Earning foreign currency under the party economy has seriously damaged the planned economy and contributed to the expansion of the market. This is because the party economy has used the resources and efforts of the planned economy without permission in gathering resources for exports.
During the third phase, the main party-state agencies that earned foreign exchange rapidly expanded to emerge as an independent sector, separate from the suryong economy. In the 1980s, amid the worsening economic crisis, key party-state agencies began to bring in foreign currency in earnest. Also, the Law on Joint Enterprises came into effect and the Ten Major Perspective Goals for Building a Socialist Economy were announced in the mid-1980s, justifying the practice of more key party-state agencies to earn foreign currency.
In particular, the extent of the economic crisis in the late 1980s and into the 1990s ironically allowed trading companies to earn foreign currency. Therefore, when auxiliary organizations and their officials provide finance for themselves using their trading privileges granted by the suryong or the state, the central authority finds it difficult to understand and control how it is. In other words, at each stage of the hierarchical order, the subordinate, or agent, benefits more by hiding and distorting information; that way, he could offer fewer bribes or pay less taxes.
