[Global NK Commentary] Economic Limitations of the ‘Provincial Development 20x10 Policy’

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1. Background

First announced at the Supreme People's Assembly in January 2024, the ‘Provincial Development 20x10’ is currently being promoted as a flagship livelihood policy of Chairman Kim Jong Un. However, the idea of establishing a regional self-reliance system by evenly constructing provincial industrial factories in each region 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 groundbreaking ceremony for the first provincial industrial factory was held in Seongcheon County, South Phyongan Province. At this event, Kim Jong Un referred to the Changseong Joint Conference held in 1962. At that time, Chairman Kim Il Sung presented the regional self-reliance system with the county (郡) 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 a self-reliant production system at the provincial level for 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 the core of 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, it can be confirmed how thoroughly the principle of even distribution of industrial facilities 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 to re-emerge as a core policy at the present time. It also seeks to examine the economic implications of the ‘Provincial Development 20x10’ policy, which is being pursued in a situation where 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 fact, the administrative divisions of North Korea, including cities, counties, and districts under the provinces (道), amount to approximately 200 in total. 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 important background for dividing the entire North Korean territory into about 200 cells and establishing an independent economic system in each unit is the purpose of war preparedness. Kim Il Sung stated, “If provincial industrial factories are built in every nook and cranny of the country, we can solve the problem of food and clothing even if the central industry in the cities is destroyed (in case of war). 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 cell units dispersed throughout the country can economically survive and continue to fight 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 policy thereafter.

The deepening economic crisis due to 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 virtually forced to solve survival problems 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 so that all counties actively strive to solve the people's livelihood problems on their own 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 line of self-reliance has been emphasized in response to the economic crisis by the North Korean authorities, the tendency to return to a regional self-reliance system has become more pronounced.

The most important reason for the re-emergence of a regional self-reliance system, such as the ‘Provincial Development 20x10’ policy, since Kim Jong Un came to 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 in reality, policy implementation has led to an expansion of the urban-rural gap, with major construction projects such as Changjeon 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 the provinces 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, that “the failure to properly 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 overlapping factors of defense logic, emphasis on the self-reliance line due to economic difficulties, and deepening inter-regional disparities.

3. 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 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 sauces; overall, it is highly likely that they will produce items for which regional demand is similar. This is no different from establishing industrial facilities of essentially the same nature in approximately 200 cities and counties across the country. Such 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 the same soy sauce factory in every county, it would be much more efficient to establish a large-scale factory at the provincial level, reduce fixed costs per unit, improve the logistics system, and distribute it nationwide.

2) Worsening Side Effects Due to Marketization Progress

The problem is that these inefficiencies are likely to be more pronounced 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 engaged in market-related activities is known to exceed 1.1 million.[6] With the expansion of markets and improvements in transportation and communication, the regional disparities in prices and exchange rates have also been significantly reduced.[7] However, with the implementation 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,’ and for light industry products, sales through markets are likely to be suppressed, with distribution centered on state-run stores being enforced, under the pretext of ensuring the normal operation of provincial industrial factories. In a situation where many residents already make a living through market activities, 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 regional disparities. Cities and counties selected as policy targets receive concentrated resource allocation along with the construction of new factories, while existing factories in those regions or enterprises in non-target regions may be relatively neglected. According to text analysis research conducted by Lee Jeong-gyun and Kim Beom-hwan on the ‘Rodong Sinmun,’ the frequency of mentions related to the production and investment activities of existing enterprises in the 20 regions where provincial industrial factories have been built decreased overall as of 2024, 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. 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 the region.

This issue is also intertwined with the provincial fiscal structure. Even when building the same factory, there are fundamental differences in the natural resources and geographical conditions between regions. Therefore, to maintain the regional self-reliance system while mitigating regional disparities, efforts to resolve inequality through state finance must be undertaken. However, in North Korea, state financial support for underdeveloped regions tends to be perceived as contrary to the principle of self-reliance.[10] In fact, Article 10 of the ‘Law on Provincial Budgets,’ enacted in 2012, stipulates that “after paying the contributions due to the upper level from provincial budget revenue, necessary financial expenditures shall be guaranteed.” This institutionalizes a structure that prioritizes the obligation to pay contributions to the central government over the expansion of provincial finance. 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 funds independently and pay them 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 mitigate it.

4. Prospects and Implications

While the ‘Provincial Development 20x10’ policy has structural limitations such as the lack of economies of scale and comparative advantage, worsening side effects due to marketization progress, and widening regional disparities due to selective support, 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 of the Workers' Party of Korea 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 built provincial factories is uncertain. According to a survey by the Ministry of Unification, the factory operating rate was below 60% for 47.2% of respondents between 2016 and 2020, an increase of 17 percentage points compared to the previous five years (30.3%).[12] This indicates that even existing factories are facing difficulties in normal operation 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 had illuminated night lighting in 2025, while the remaining 15 areas were 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 been rapidly recovering, and in particular, imports of consumer goods from China in 2025 exceeded the pre-COVID-19 levels, reaching $950 million.[14] With the increased inflow 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 achieve its stated goal of mitigating regional disparities, there is a possibility of increased discontent in North Korean rural society. Therefore, the stability of provincial and rural areas requires continuous observation as an important indicator for gauging the stability of North Korean society in the future.

In this regard, China's experience provides an important comparative case. In China, a regional self-reliance system was also established during the 1960s and 1970s due to security concerns arising from the Sino-Soviet split and the emphasis on self-reliance under the influence of the Cultural Revolution.[16] However, with the promotion of Deng Xiaoping's reform and opening-up policy, 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, the scope for North Korea to make more economically rational choices may also expand. In this context, de-escalation of inter-Korean tensions and building military trust can have indirect effects beyond the simple political and military dimensions, by broadening the policy choice space for the North Korean economy. Furthermore, in the long term, as in China's experience of reform and opening up, it is necessary for our government, together with the international community, to create an external environment that enables North Korea to seek regional development policies based on economic rationality. ■

[1] Рю Хак Су (2019), «Особенности структуры размещения промышленности Северной Кореи и пути сотрудничества между Севером и Югом»,Обзор экономики Северной Кореи KDI», Институт开发韩国。

[2] Ким Ир Сен (1982), «Усилим роль армии, еще больше разовьем местную промышленность и сельское хозяйство, чтобы значительно повысить уровень жизни народа»Ким Ир Сен 저작집 16, Издательство Трудовой партии Кореи.

[3] Ким Бён Ро (1999), «Система региональной самодостаточности Северной Кореи», Исследовательский институт по унификации.

[4] Ким Чен Ир (1998), «Повысим роль армии и добьемся прорыва в уровне жизни народа»Ким Чен Ир 선집 13. Издательство Трудовой партии Кореи.

[5] Ли Чан Гюн, Ким Бом Хван (2025), «Ход реализации политики Северной Кореи «Развитие регионов 20×10» и его последствия», KIEP 기초자료25-04, Институт внешнеэкономической политики.

[6] Хон Мин, Ча Мун Сок, Чон Ын И, Ким Хёк (2016), «Информация о рынках по всей Северной Корее: с акцентом на состояние официальных рынков», KINU 연구총서 16-24, Исследовательский институт по унификации.

[7] Ким Сан Док, Ким Тхэ Хва, Ян Сын Рён. (2020). «Проверка эффективности рынка риса в Северной Корее». Сельская экономика, 43(3), 51-64.

[8] DailyNK (2025.02.13), «Рабочих «8·3» становится все меньше… Предприятия, испытывающие финансовые трудности, тоже вздыхают».

[9] Ли Чон Гюн, Ким Бом Хван, упомянутая работа.

[10] Упомянутая работа Ким Бён Ро.

[11] Хон Ик Пё (2011), «Анализ экономической политики на 2011 год и государственного бюджета, представленный на 4-м заседании 12-го Верховного народного собрания Северной Кореи», KIEP: Мировая экономика сегодня 11(12) Институт внешнеэкономической политики; SPN, (2025.01.24), «Северная Корея: итоги 2024 года и основные статьи бюджета на 2025 год (сводка)».

[12] Министерство объединения. 2024. Отчет о ситуации в экономике и обществе Северной Кореи.

[13] 중앙일보 (2026.02.03), «Если исчезнет Ким Чен Ын, погаснет и свет. Реальность «фабрик-призраков» во многих регионах Северной Кореи»

[14] Чхве Чан Хо, Чхве Ю Чон (2026). «Анализ торговли между Северной Кореей и Китаем, а также Северной Кореей и Россией в 2025 году», Обзор экономики Северной Кореи KDI, 28(1), стр. 48–61.

[15] Упомянутая работа Министерства объединения

[16] Пак Воль Ра, 1992, «Текущее состояние и проблемы децентрализации китайской экономики», Институт внешнеэкономической политики.

■ Чон Сын Хо_Профессор факультета международной торговли и логистики Северо-Восточной Азии Университета Инчхон.

■ Ответственный за выпуск и редактор: Ли Сан Джун_Научный сотрудник EAI | Контакты: 02 2277 1683 (доб. 211) | leesj@eai.or.kr