SOVIET ARTICLE ON RESTORATION OF NORTH KOREAN ECONOMY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP80-00809A000700180371-9
• Release Decision: RIPPUB
• Original Classification: U
• Document Page Count: 8
• Document Creation Date: December 22, 2016
• Document Release Date: September 6, 2011
• Sequence Number: 371
• Publication Date: May 27, 1954
• Content Type: REPORT

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SO'lIET hRTICLE ON r ~ , ~
H..SzO'~1TION OF 110.'tTH KOREAN gCONOh>Y
Vo nos Ekonomiki, No 1
MoaCOU, Jan 195
Since their liberation in 1945 by the Soviet Army
Korea, with the help of the Soviet Union and under the leade.s
?~Y, have successfull? , the people of North
/ developed their own industr ~ hip of the Lgbor,
The social and economic chaa es y' ?~?iculture, and culture,
of the long period of Japanese imperlalismrth Y.orea helped to erase
lay the foundation for a , destroy the remnants of feudalism,s
and raise the gradual development of an independent national economy,
material and cultural level of Korean workers.
Bave one million hectares of land to 725,OOp farmers who had
The land refora
The nationalization of industr? little or no land.
which took place in 1946, formed the~beginningrofJaoneW economicudevelopment on
the basis of nations: economic planning. :1s a result of the fulfillment of the
national economic plans for 1947 and 1948, the factori "
rail transport, which had been destroyed by Japanese occupation forces, were
restored and industrial production was e`' Plants' mines, and
industrial production. 1 6 considerabl-
steel was 11 ( ~ 100) was 263.1 in 1 ~ _ncrcaced? The level oP
5,000 tons; pig iron 91}$? In 194$, the output of
meters.6'1 biilic.^. hilowait- ' l~e~e~ ??n`~ coal, 4.3 million tons; electric
hours; , 3g2,000 tons;
and textiles, 7 million
The Korean people have also been successful in rai.'
and methods "lag the level of agri_
culture. Advanced agrotechnical methods, based on the agricultural experience
of the USSR, were introduced in N;;rth Korea.
yields increased. The gross harvest of
seeded the 1 As a result, harvest
939 harvest (xhich had been grain crops in North Korea in 194$ ex-
harvest of 1 4 the best year b?
~ by 2G Percent. ) ,' 10.4 percent
and the
On the basis of economic achievements, the Supreme Feo~le's
Democratic People's 3epublic of Korea established a 2-year national economic
Plan in 1949 (for 1949_19j0) + ?+?sembly of the
industrial and agricultural productions P ovided fora considerable increase in
Assembly, which toot, dace i '=he Fifth Session o:
total volume of ? 1950, decided to ir.crcase the hlanefor~ler1e People's
volume. Eross production ir. 1950 was to be 14 ~ ~ 9~0. The
5.. ez?cent of the 1949
the liberationl~herethe republic had 15 higher educational institutions (before
Korea) with 10 000 s ~~ not a single higher educational insti
seconds ' tudents, and about 60 tel:hnikums. The n:i?nbcrlof to North
rY schools in 1950 eras 23 times greater than in 194
students in tekhnikums was 56 times tudents 1n
greater. 5, and the number of
trodueee government of the Democratic People's ?eP,zblia op K,rea
decided to in-
decisiongcouldlnot belfull Prz~ary educatio.*,, beginnin
Y carried out because of g in 1950; However, this
During the first few she '-.men=can invasion.
stroyed sore than 6 months of the war, the American intezventionists de-
of cities 10x000 buildings, including factories and
other ~ including Pyongyang, Hungnam, Hanhun Plants,
industrial centers 8, Ch'on `~ number
Party, man , were destroyed. Under the g,13n, Song,jin, and many
Y of the important industrial enter ris supervision of the
gions.
to safer northern re P es of the country were evacuated
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One of the main economic problems during the car was the training of corkers
for industry, The lack of trained industrial vorkers was Y.eenly felt in the Demo-
cratic People's Republic of Korea in the first fev yens after its formation. By
the end of the var, only 4 percent of the total number of workers in industrial
enterprises oP the Democratic People's 1?epublic of Korea had more than 10 years'
experience, and over 50 percent of the vorkers had less than one year's experience.
!71th the active aid of the Soviet Union, the People's Republic of China, and
other socialist countries, sll branches of industry, transport, and agriculture ~+'
the Democratic People's Republic of Korea were developed, The volume of gross
industrial production in 1952 increased 19 percent over 1951, transport freight
turnover increased 13 percent during the same period, and commodity turnover of
retail trade in 1952 increased 1;2 percent over 1951,
As n result of the great achievements in industry and agriculture, the govern-
r..ent and the Labor Farty in PJorth Korea were able to improve the vorkers' living
standard, ilorrs of sup, lies to corkers and employees acre raised considerablJ,
During the wttr, there were three reductions of prices on food product, and consumer
goods. PJeedy peasants acre relieved of paying taxes-in-kind a.:d of repaying state
loans. Free medical aid was provided for the population.
The great achievements of the Korean people during the car were possible
through the leadership of the Labor "arty. bout 1;50,COp Koreans ,joined the Labor
Party during the car period. Party members noc hold the most responsible positions
in industry.
.1t the Sixth Plenum of the Ccatral Committee of the Libor :`arty in August
1953, Kim Z1-song outlined the main taskc of peaceful development in the Democratic
People's Republic of Korea, The cork of restoration is to be divided into two
stages, During the first stage, which will take about one year, preparations will
be made for restoration of all branches of industry, During this period, the re-
quired volume of restoration work is to be detemined, technical plans for new
construction are to be prepared, labor forces are to be mobilized, etc. Restora-
tion work on a number of projects is to begin during the same period. .4t the same
time, the government will prepare a 3_year plan for the restoration of the national
economy,
The second stage will cover a period of fulfillment of the 3-year plan. Zn
the course of the plan fulfillment, all branches of industry are to be completely
restored and it is anticipated that the prewar production level is to be reached
in all fields of national economy.
The mining and metallurgical industries are to be restored as quickly as
possible, In a period of 1 or 2 years, all the ore and coal mines, which were
formerly in operation, should be completely restored. ;; temporary mining industry
is to be organized to such nn extent oust not only will domestic requirements be
met, but also n sufficient quantity of ore will be available for export, In the
metallurgical industry, the prewar production level is to be reached by 1956. In
the course of restoration, the large metallurgical enterprises in the republic
will undergo radical reconstruction, i.e., the capacity of blast furnaces and
steel-smelting furnaces will be increased and the plants will be furnished with
new equipment. The restoration of chemical plants is to be done in such a way
that the production of chemicni fertilizers for agriculture will be possible in
about 2 or 3 years. For this purpose, the Hungnacn Chem'cal Combine (one of the
largest enterprises no' only in Koren but in all of :1sia), the chemical plant in
Nnmp'o, and others pre to be restored first.
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In ndditionctonrebuilding Sndustrf x111 under
o
"
g
considerable reconstruction.
branches
tcring the destroyed machine-building enterprises, neu
of machine building are to be ectablished and a number of nevr enter-
prises are to be built,
During a 3-year period, all electric pover stations are to be res
and the rlectrlcal industry is to be reconstructed, The
will be replaced b toed
y new equipment, old machine units
The large scope of construction wort. to be done in the course of restor-
ing damaged cities, to?,ms, and industrial enterprises will require a lar e
amount of construction materials. Reconstruction and new construction of
bricl: plants, cement plants and sa g
of Y,orea has already be ~+m111s in the Democratic ?
increased steadily, In~his re~uction of construction net eople's aepubL'c
nn important Pect eat erials will be
part, , crprises of local industry will play
The Tabor Party and the Eovernment of the Democratic P p 'e .^e~ublic
of Y,orea are giving serious attention to the res
all branches of the li eo le i
ght and food industries, withathenaim ofei~proving the
workers' living standard. All enterprises of the food induct
restored within a 3-year neriod. In addition, some neu branches of the food
industry are to be I'Y are to be
dustry, established, for example, a sugar and confectione
r}? in-
The fulfillment of the extensive restoration program and the speedy ad-
Justment to normal, peaceful living conditions in North Korea depends to a
great extent on a well-organized transport system, During the xar
way and highway systems acre seriously damaged, Since the war
port has been resumed on all , the rail-
work is in progress at t main railway lines, great dear' regular trans-
his time, A ' of restoration
In connection with the extensive plans for restoration and industrial
development, the Democratic People's Republic of Korea has
with regaI?d to the mobilization and trainin
kept in mind that a serious problems
armed forces and thatadurin~ber of skilledorkerrOCOntinue toTremair,linbthe
xas scattered throughout r~alhareas,a large portion of the urban
Population
blem,~e government is planning s number of measures to solve
First of all, the large turnover of workers must be the labor
siderable reduction in prO-
which would releas `'hc number of government office woi?Y.ers?edals'~ con-
e a large contingent of xorkers for em ? Planned,
During the war, Korean women engaged in a strop P1?y:zent in industry.
government is now recruiting women for xork in ~ndusttical activit
prises of the light and food industries. Y The
ry, especially in enter-
One of the urgent problems in the mobilization of labor forces is the
renewal of measurec, interrupted by the war, to employ the "h'.%a,`o:~" peasants
in industry, this would be an important souz?~r for replenishin
Following the land reform in 1946, part of the "hwa~on"peasants were resettled
from mountain areas to the g the labor force,
these peasants, in accordanceiwithathe~riwishesalwasssent~to workein industry
and given eve group of
r'Y oPPortunity to master technical skills.
labor merheaizationnsndfofeacessary reconstruction work raises the
meat supplied b more efficient utilization of maciLinesrandeequip_
y other democratic countries.
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and develo "'"""'~?''` zasxs facing the Korean neople in the restoration
pment of industry. However, it is not only a question of reconstruct-
ing old enterprises and building nev ones. The govarnmeat and the party are
also striving for a complete li~,uidation of tho colonial structure of Korean
industry .;;g of its technical backwardness; industrial plants are to be dis-
tributed more practically, so that they can be as close as possible to sources
of raw material and can be better integrated into the economic life of a certain
region. For this purpose, a large number of industrial plants are to be moved
from coastal cities to inland regions, or are to be newly built in inland lo-
cations.
The war did considerable damage to Korean agriculture; many irrigation
systems were destroyed by bombing, and the number of livestocY. was greatly de-
creased, The government of the Democratic People's Republic of Korea has set
itself the task of reaching the prewar level of agricultural production, es_
pecially in animal husbandry, in the shortest possible period (approximately 1
or 2 years), In addition to restoring the whole system of existing irrigation
installations, new ones are to be built. A great amount of work is nlnnned for
the cultivation of new farm land (plowing of virgin soil); the number of machine-
renting stations in the republic is to be increased and these stations will ser-
vice primarily state farms,
The government and party are giving much attention to the develop-eat of
animal husbandry, especially sheep raising, which was very poorly developed. In
this respect, the Korean peasants arc receiving much help from the Mongolian
People's Republic, which contributed pore than 100,000 head of livestock during
the war, The government has made plans for n further development of sheep rais-
ing; the principal sheep-farming regions are to be in Chagang_do~ p~yongan-pukto,
and Hamgyong_pukto, i..e., the high mountain areas of Piorth Korea, which have good
pastures.
One important problem of peaceful reconstruction is tare restoration of cities
and towns, Nearly all cities of Tlorth Korea were damaged by the war. On 30 July
1953, the Cabinet of bfinisters of the republic issued n decision on the recon-
struction of Pyongyang; the general reconstruction plan to:? this city provides
for living space Por one million people and the work is to be done in 10-15 years.
The great amount of work to be done in restoring and developing the national
economy requires the training of large numbers of skilled wor'rers. In addition
to the 15 existing higher educational institutions, the government of the Demo-
cratic People's iepublic of Korea has opened two new institutes, i.e., the Insti-
tute of Economics and the Institute of Rational Economy; two additional insti-
tutes,the Institute of Forestry Engineering and the Institute of Fishing Industry,
will be opened soon.
During the 1953-195 school year, about 3,000 students were aamitted to
higher educational institutions. At the beginning of this school year, 4,000
schools were in operation with a total enrollment of 1.5 million student;.
In describing the tasks of restoring the rational econo:ay of the Democratic
People's Republic of Korea, one should not overlook the problem of est;:blishing
normal living conditions in the newly liberated regions. ,according to the terms
of the armistice, a number of regions south of the 38th Parallel were turned over
to the Democratic People's Republic of Korea (Knesong, Kaep'ung, Pyangmung, Nnm-
Yonbaek, and Ong~in). The population of these areas reaches hundreds of thou-
sands. The party and government have taken steps to raise the material and cul-
tural level of these people and to?introduce a democratic way of life.
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the 3_ye~. ~r """"? ''""? tine Korean people, having withstood the tests of
and having achieved victory over the aggressor:, will success-
fully solve the problems of restoring and developing their national econo~y.
In this difficult task the Korean people will be aided by other democratic and
socialist countries, headed by the Soviet Union. A concrete expression of
the increasing eid and support of the Soviet people was the decision of the
USER government, immediately after the war, to nseign a gift of one billion
rubles for the purpose of restoring the war-damaged econoryy of the Pemo,..atic
People's Republic of Korea.
During the talks between the Soviet goverment nrd the Kcrann delegation,
which took place in Moscow 11-19 September 1953, special attention uns given
to problems of economic aid by the USSR to the Korenn people. An agreement
his rpurposewwerebtotbe usedbforitherreconstructgnion of the Sup'ungUelectric
power plant on the Yalu River; for the restoration and construction of plants
of ferrous and nonferrous metallurgy, including such large enterprises as the
metallurgical plants in Ch'ong,~in and Kimchaek, and the nonferrous metals .plant
in Nampo; for plants of the chemical and cement industries, including the
the econstructioneofpenterprises of thenaextileean3yfoodaindustunghori; and for
large textile combine, a sill{ spinning and weaving facto ~'' including a
and fish canneries. =7', a meat combine,
Soviet aid in the reconstruction and construction of industrial errter-
ofiequipmeatcaadimateriels, rrte~chnicalpaidoinethey Soviet organizations, delivery
toration, and the ;~rnishing of licenses and technicalado umentstfortthe organiza-
tion of production, as cell as training native Korean workers.
In the course of the Soviet-Korean talks, an agreement was reached on delivery
of equipment and mnterials Prom the Soviet Union for the restoration of the railway
and communications systems and delivery of agricultural machines, tools, ferti-
lizers, breeding livestocY., horses, fishing vessels, machines, equipment and ma-
terials for the restoration of housing and municipal services, hospitals, and
schools. Provisions were also made for the delivery of consumer goods from the
Soviet Union to the people of north Korea.
immediateiaasksginvol~edainethenrestorationio? the nationolleconomyrof~the Demo-
cratic People's Republic of Korea, the Soviet Union has postponed the payment
dates on all former credits granted by the Soviet Union to the Democratic People',^
Republic of Korea, and has allowed new, more favorable terms for payment settle-
ments.
Following the example of the Soviet Union, all people's democratic countries
hMre decided to .give aid to the Korean people. ^he govern eat oP the People's
Republic of China decided to give as a gift to the government of the Democratic
People's Republic of Korea nil goods delivered and all exnenditures made in the
course of rendering aid to Korea during the period 25 June 1950-31 n~cemtcr 1953.
For the purpose of additional aid to Korea, the People's Republic of China
decided to donate 8 trillion yuan during a period of 4 years; (1954-1957), for
use in restoring the national economy. For this amount the People's Republic of
China will. deliver to Korea various goods and equipment required for industry
and agriculture and for improving the living conditions of the Korean people.
The deliveries will include coal, yarn, cotton, grain, construction materials,
RepublicaofoChinauwi~nhelp tooresto~eothe rnilwnovernment ofTt}re People's
will supply locomotives and railway cars. Y system of P,orth Koren and
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The situation in South Korea prevents an entirely diff
econoapr of South K
erent picture. The
orea is in n state of complete ruin. According to extremely
low estimates of the so-called State Bank of South Korea [i.e., Bank of Korea],
the total amount of war daaages suffered by South Korea reaches the astronomical
figure of 18,129,000~000~~ South Korean hwan. The damage to indust
mated at 7,67~,000,Op0~000 hwan. The following data are
strophic decline of industrial z'Y is esti-
production in South Korea duringothehwarata~
1952, the output of the textile industry, the most developed indust
Korea, dropped 63 percent; the aetallurgical industry, 85 percent; and the food
industry, 70 ercent. rY of South
alone the P During the war, according to incomplete data, in Seoul
Japan the equlpmentofromnl0oofftheelareestoyed 785 enterprises and exported to
g plants and factories.
and threeethermoelectricJttotionsouth Y,orea had four hydroelectric power stations
station is in operation; the t ''t Present,-only the Seoul thermoelectric
or put out of operation, s x remaining power stations were either destroyed
There are over one pillion unemployed in South Y,orea and the number of par-
tially unemployed is 14 million.
Agriculture in South Korea, which was formerly the granary of the country,
is completely disorganized, The rice harvest in 195 was 5 ::illlon sok [1 sok =
160 kilograms] below the prewar harvest. As n result of a sharp reduction of
so:m areas and n reduction of harvest ytPld
cri,^is. In 1952, South Korea had a ~ ~?uth F;orea is having n serious food
tho minimum subsistence level, shortage of one million ton: of
grain below
The "land reform" carried out in 1951 did nothing to approve the situation.
According to this reform, about 25 percent of the worst land was distributed
among the peasants, who had to pay n huge sum Tor it to the landowners, both iii
kind and in money. The pca~cnta of South Korea are oppressed by n heavy tax
burden. in 1952, 10 billion hwan of military tax alone were collected from the
People in Cholla-nnn:do province. An average family in South Korea is forced to
PaY nn annual tax of P,5p,000 hti,?an. Tax collections in :;ouch Korea are usunl],y
carried out in the form of a punitive expedition. The collectors are accompanied
by armed ~':tnchments. The huge taxee, land payments, and state requisitions con-
tribute to the general ruin of the pennants.
The economic ruin in ;;ouch Korea is also evident in an unprecedented infla_
tion. The quantity of banY.notes in circulation in 1952 increased by 32k tir..es,
cosnared xith 191+5? The following fact proves hoi: rapidly the South Korean hwan
!ms become depreciated: early in 1952, ore dollar could be sold on the black
msrket for 15,000 hwan, and in July 1952 for 20,000 hwan.
The population of South Korea is starving, Market prices for food
increased 1,503 percent during the war. For example, one mal [about 15 kilo-
grams] pf Products
groats costs 160,OOp_170,000 hwam. at the same tine, the wage index
dropped 33.3 percent. i:~ren port workers, i:hose wages are higher than some of
the other categories of workers, receive ,i wage which is only 20 percent of e
meager living wage, Starvation and serious epidepic d_seases cause tens of
thousands of deaths yearly. The number of persons suffering from tuberculosis
in South Koren exceeds one million.
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According to Seoul radio broadcasts, over 4 r:illion people in South Y,orea
are living on grass and tree rinds, and are close to starvation. Over 1.5
mi113on hameleas'children xander around the roads oP South Korea.
A severe military occupation regime has been established in South Korea;
the entire power is in the hands of the Acerican cozaaand and its subordinate
"KCAC" [UItCACK (UI'f Civil Assistance Command, Korea)],
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