[Global NK Commentary] The Economic Limitations of the 'Provincial Development 20x10 Policy'

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1. Background

The 'Provincial Development 20x10' policy, first announced at the Supreme People's Assembly in January 2024, is currently being promoted as Chairman Kim Jong Un's flagship livelihood policy. However, the idea of establishing a regional self-reliance system by constructing provincial industrial factories uniformly across regions can be considered a policy direction that has persisted since the inception of the North Korean regime.

In February 2024, after the announcement of the 'Provincial Development 20x10' policy, the first provincial industrial factory broke ground in Seongcheon County, South Pyongan Province. At the ceremony, Kim Jong Un referenced the Seongcheon Joint Conference of 1962. At that time, Chairman Kim Il Sung presented the regional self-reliance system with counties as the basic unit as the fundamental policy. The fact that Chairman Kim Jong Il's graduation thesis from Kim Il Sung University was on 'The Position and Role of the County in Socialist Construction' also demonstrates how much North Korea has valued the construction of self-reliant production systems at the provincial level across generations.

This is also confirmed by actual industrial distribution data. According to data on the spatial distribution of North Korea's industrial sector, analyzed by Ryu Hak-su using the Gini coefficient concept, the Gini coefficient for light industry factories, which are central to provincial industry, showed a tendency to decrease from 0.36 in the 1950s to 0.31 in 1980.[1] Considering that a Gini coefficient of 0 indicates an even distribution of industrial facilities across all regions, and 1 indicates concentration in specific regions, this confirms how thoroughly the principle of even industrial facility distribution has been adhered to in North Korea.

This article aims to analyze why North Korea has adhered to the regional self-reliance system in this manner, and what the background is for this policy re-emerging as a core policy at the present time. It will also examine the economic implications of the 'Provincial Development 20x10' policy, which is being pursued in a situation where the marketization of the North Korean economy has progressed considerably, unlike in the past. Finally, it will summarize the future prospects of this policy and its implications for our government.

2. Formation of North Korea's Regional Self-Reliance System and the 'Provincial Development 20x10' Policy

When introducing counties in North Korea, the expression '1/200th of the country' is often used. In reality, North Korea's administrative districts, including cities, counties, and districts under provinces, total approximately 200. The 'Provincial Development 20x10' policy, which plans to build modern provincial industrial factories over 10 years for 20 cities and counties each year, can be interpreted as a plan to sequentially modernize virtually all cities and counties in the country.

The most significant background for dividing the entire North Korean territory into approximately 200 cells and establishing self-reliant economic systems in each unit is the objective of war preparedness. Kim Il Sung stated, 'If provincial industrial factories are built in every corner of the country, we can solve the problem of food and clothing even if the central industry in the cities is destroyed during wartime. This is a great strength for national defense.'[2] In other words, the basic purpose of the regional self-reliance system is to ensure that the approximately 200 dispersed cell units can economically survive and continue the war despite the destruction of some areas. This perception shows that the war trauma left by the Korean War served as an important starting point in shaping North Korea's regional self-reliance system and industrial distribution policies thereafter.

The deepening economic hardship caused by the collapse of the socialist bloc in the 1990s became another opportunity to strengthen the regional self-reliance system. In a situation where the central planned economy could not function normally, provincial economies were effectively forced to solve their survival problems independently at the local level rather than relying on central support.[3] In this context, Kim Jong Il emphasized the importance of building a self-sufficient system at the county level, stating, 'We must enhance the role of the county and actively strive to solve the people's livelihood problems independently on the principle of self-reliance. The county is a regional base and a basic unit of socialist construction, responsible for 1/200th of the country.'[4] Since then, as the North Korean authorities emphasized the line of self-reliance in response to economic difficulties, the tendency to return to a regional self-reliance system became more pronounced.

The most significant reason for the re-emergence of the regional self-reliance system, such as the 'Provincial Development 20x10' policy, since Kim Jong Un took power is the deepening gap between urban and rural areas. Since the Kim Jong Un regime, North Korea has continuously emphasized comprehensive development and improvement of people's livelihoods, but actual policy implementation has led to an expansion of the urban-rural gap, with major construction projects such as Changjon Street, Unha Science Street, and the Pyongyang 100,000-household housing construction concentrated in the capital, Pyongyang. As a result, relative deprivation and alienation among provincial residents have also accumulated. Furthermore, the prolonged sanctions against North Korea and the border closures due to COVID-19 exacerbated material shortages, and the backwardness of provincial areas became structurally entrenched.[5] Kim Jong Un himself stated at the expanded Political Bureau meeting of the 8th Central Committee of the Workers' Party of Korea held in January 2024, 'The failure to adequately supply even basic daily necessities to provincial residents is a serious political problem,' defining the resolution of the gap between the central and provincial areas as 'a political struggle task that must be carried out.' Thus, North Korea's regional self-reliance system can be seen as having been continuously strengthened by the convergence of factors such as national defense logic, emphasis on the self-reliance line due to economic hardship, and deepening inter-regional disparities.

3. The Structural Inefficiency of the 'Provincial Development 20x10' Policy

1) Absence of Economies of Scale and Comparative Advantage

The North Korean authorities have emphasized the regional self-reliance system as an economically efficient policy, arguing that it reduces unnecessary transportation costs by locating production bases close to raw material sources and consumption areas, and utilizes idle labor in the provinces.

However, examining the production content of the 20 provincial industrial factories implemented in the first year, most of them are small-scale light industry factories with standardized sizes, producing similar consumer goods such as food products, daily necessities, and clothing. Although regional characteristics are considered, differentiation is limited to some food products like fisheries, fruit cultivation, and fermented pastes. Overall, it is highly likely that they will produce items for which local demand is similar. This is no different from placing industrial facilities of essentially the same nature in approximately 200 cities and counties nationwide. This industrial distribution ignores both 'economies of scale' and 'division of labor based on comparative advantage,' which are presented as core principles of efficiency in economics, and is therefore structurally inefficient. For example, rather than building identical soy sauce factories in every county, it would be far more efficient to establish large-scale factories at the provincial level, reduce fixed costs per unit, improve the logistics system, and distribute nationwide.

2) Worsening Side Effects Due to Marketization Progress

The problem is that these inefficiencies are likely to manifest more significantly now than during the previous period of regional self-reliance. This is because the marketization of the North Korean economy has progressed considerably compared to the past. North Korea currently has over 400 general markets, and the number of people involved in market-related activities is known to exceed 1.1 million.[6] With the expansion of markets and improvements in transportation and communication conditions, the regional disparities in prices and exchange rates have also significantly narrowed.[7] However, with the promotion of the 'Strengthening State Distribution Policy' in the 2020s, these market-based efficiencies are gradually weakening. In the case of grain distribution, sales in the market have been prohibited since the establishment of state-run 'grain sales offices.' For light industry products, sales through markets are likely to be suppressed, and distribution centered on state-run stores is likely to be enforced, under the pretext of ensuring the normal operation of provincial industrial factories. In a situation where a large number of residents already rely on market activities for their livelihood, the shrinking of market functions could lead to a decrease in residents' income. Furthermore, if labor is artificially shifted from the relatively more productive market sector to state-run provincial industrial factories, it could lead to a decline in the productivity of the overall economy. Indeed, recent media reports related to North Korea indicate that crackdowns on so-called 'August 3rd workers,' who were formally affiliated with enterprises but engaged in private market activities, are intensifying.[8]

3) Widening Regional Disparities Due to Selective Support

Furthermore, the 'Provincial Development 20x10' policy carries the potential to conflict with its stated goal of reducing inter-regional disparities. This is because selected cities and counties receive concentrated resource allocation along with the construction of new factories, while existing factories in those regions or enterprises in non-selected regions may be relatively neglected. According to text analysis research conducted by Lee Jeong-gyun and Kim Beom-hwan on the 'Rodong Sinmun,' mentions related to the production and investment activities of existing enterprises in the 20 regions where provincial industrial factories were built in 2024 generally decreased, with a particularly significant decrease in the light industry sector.[9] There are already over 20 provincial industrial factories in each county as part of the regional self-reliance system initiative. In this situation, if resources are preferentially allocated to the construction of new factories under the 'Provincial Development 20x10' policy, there is a possibility of reduced activity in existing factories and a worsening imbalance in the industrial structure within regions.

This issue is also intertwined with the provincial fiscal structure. Even when constructing the same type of factory, there are fundamental differences in the natural resources and geographical conditions between regions. Therefore, to maintain the regional self-reliance system while mitigating inter-regional disparities, efforts to resolve inequality through state finance must be undertaken concurrently. However, in North Korea, national financial support for underdeveloped regions is often perceived as contrary to the principle of self-reliance.[10] In fact, Article 10 of the 'Provincial Budget Law' enacted in 2012 stipulates, 'After paying the contributions due to higher levels from provincial budget revenue, necessary financial expenditures must be guaranteed.' This institutionalizes a structure that prioritizes the obligation to pay central government contributions over the expansion of provincial finances. Examining the changes in the proportion of central and provincial budget revenues in the state budget, the proportion of central budget revenue was 83.9% and the proportion of provincial budget revenue was 16.1% in 2011. By 2024, the central proportion decreased to 73.7%, while the provincial proportion increased to 26.3%.[11] This means that the financial burden on provinces to raise and pay contributions to the central government is increasing. In a situation where provincial financial capacity is generally limited, if new investments and resources are concentrated only in some selected regions, non-selected regions will face even greater financial constraints. Consequently, the 'Provincial Development 20x10' policy is more likely to widen the gap between recipient and non-recipient regions rather than alleviate it.

4. Prospects and Implications

The 'Provincial Development 20x10' policy has structural limitations, including the lack of economies of scale and comparative advantage, worsening side effects due to marketization progress, and widening regional disparities due to selective support. However, it is unlikely that the policy direction will change in the short term. Ahead of the 9th Party Congress scheduled for this year, North Korea confirmed the 20 cities and counties targeted for the provincial development policy at the last plenary meeting of the 8th Central Committee held in December 2025. This suggests that the policy will be pursued as a major state policy for a considerable period.

However, regardless of the North Korean authorities' policy intentions, there are several constraints to the continuous implementation of the 'Provincial Development 20x10' policy. Above all, the stable operation of newly constructed provincial factories is uncertain. According to a survey by the Ministry of Unification, the factory operation rate was below 60% for 47.2% of respondents between 2016-2020, an increase of 17 percentage points compared to the previous five years (30.3%).[12] This indicates that even existing factories are struggling to operate normally due to shortages of raw materials and electricity. Under these conditions, it is unlikely that new provincial factories will operate stably. In fact, according to a recent media report, among the 20 provincial factory construction sites in 2024, only 5 areas showed illuminated night-time lighting in 2025, while the remaining 15 areas remained similar to or even darker than before.[13]

External conditions are also a variable. Since the lifting of COVID-19 border closures, North Korea-China trade has rapidly recovered, and in particular, imports of consumer goods from China in 2025 exceeded the pre-COVID-19 level at $950 million.[14] With the increased influx of low-priced Chinese consumer goods, newly built provincial factories are likely to lose competitiveness in terms of price and quality. According to a survey of North Korean defectors by the Ministry of Unification, during the period 2016-2020, prior to the COVID-19 pandemic, Chinese products accounted for 78.5% of clothing, 76.7% of shoes, and 67.9% of soy sauce.[15]

If the 'Provincial Development 20x10' policy fails to alleviate inter-regional disparities as initially intended, there is a possibility of increased discontent in North Korean rural society. Therefore, the stability of provincial and rural areas will continue to be an important indicator for assessing the stability of North Korean society and requires ongoing observation.

In this regard, China's experience offers an important comparative case. China also established a regional self-reliance system during the 1960s-70s, emphasizing the principle of self-reliance due to security crises from the Sino-Soviet split and the impact of the Cultural Revolution.[16] However, with the promotion of Deng Xiaoping's reform and opening-up policies, China's regional development strategy shifted to a regional development policy based on comparative advantage.

The strengthening of North Korea's regional self-reliance system can be understood not merely as an economic policy, but as a response to perceptions of external security threats. This implies that if perceptions of security threats are eased, there will be greater room for North Korea to make more economically rational choices. In this context, de-escalation of inter-Korean tensions and building military trust can have an indirect effect of expanding the policy choice space for the North Korean economy, beyond mere political and military dimensions. Furthermore, in the long term, similar to China's experience with reform and opening up, our government needs to work with the international community to create an external environment that allows North Korea to pursue regional development policies based on economic rationality. ■

[1] Ryu, Hak-soo (2019), “Characteristics of North Korea’s Industrial Location Structure and Measures for Inter-Korean Economic Cooperation,” KDI North Korean Economic Review, Korea Development Institute.

[2] Kim, Il-sung (1982), “Let Us Strengthen the Role of the Military and Further Develop Local Industry and Rural Economy to Significantly Improve the People’s Living Standards” Works of Kim Il-sung, Vol. 16, Workers' Party of Korea Publishing House.

[3] Kim, Byung-ro (1999), “North Korea’s Regional Self-Reliance System,” Korea Institute for National Unification.

[4] Kim, Jong-il (1998), “Let Us Bring About a Turning Point in the People’s Living Standards by Enhancing the Role of the Military.” Selected Works of Kim Jong-il, Vol. 13. Workers' Party of Korea Publishing House.

[5] Lee, Jang-gyun, and Kim, Bum-hwan (2025), “Status and Implications of North Korea’s ‘Local Development 20×10 Policy’,” KIEP Basic Data 25-04, Korea Institute for International Economic Policy.

[6] Hong, Min, Cha, Moon-seok, Jeong, Eun-yi, and Kim, Hyuk (2016), “Information on North Korea’s National Markets: Focusing on the Status of Official Markets,” KINU Research Series 16-24, Korea Institute for National Unification.

[7] Kim, Sang-deok, Kim, Tae-hwa, and Yang, Seung-ryong. (2020). “An Examination of the Efficiency of North Korea’s Rice Market.” Journal of Rural Economics, 43(3), 51-64.

[8] DailyNK (February 13, 2025), “The Number of ‘August 3rd Workers’ is Gradually Decreasing… Enterprises Facing Increased Financial Burden Also Sigh.”

[9] Lee, Jeong-gyun, Kim, Bum-hwan, op. cit.

[10] Kim, Byung-ro, op. cit.

[11] Hong, Ik-pyo (2011), “Analysis of the 2011 Economic Policy Direction and State Budget as Revealed in the 4th Session of the 12th Supreme People’s Assembly of North Korea,” KIEP Today’s World Economy, 11(12) Korea Institute for International Economic Policy; SPN, (January 24, 2025), “North Korea’s 2024 Settlement and Key Budget Items for 2025 (Comprehensive).”

[12] Ministry of Unification. 2024. Report on Perceptions of North Korea’s Economic and Social Conditions.

[13] JoongAng Ilbo (February 3, 2026), “When Kim Jong-un Disappears, the Lights Go Out. The Reality of ‘Ghost Factories’ in Various Parts of North Korea’s Provinces.”

[14] Choi, Jang-ho, and Choi, Yu-jeong (2026). “Analysis of North Korea-China and North Korea-Russia Trade in 2025,” KDI North Korean Economic Review, 28(1), pp. 48-61.

[15] Ministry of Unification, op. cit.

[16] Park, Wol-la, 1992, “Current Status and Problems of Decentralization in the Chinese Economy,” Korea Institute for International Economic Policy.

■ Jeong, Seung-ho_Professor, Department of Northeast Asian International Trade and Logistics, Incheon National University.

■ Editor: Lee, Sang-jun_EAI Researcher | Inquiries: +82-2-2277-1683 (ext. 211) | leesj@eai.or.kr