Leadership Reshuffle Prioritises Stability Over Change

BMI View: North Korea's government reshuffle prioritises stability over personnel and foreign policy changes and economic reform, all of which would be risky at this time.

North Korean leader Kim Jong Un has prioritised political stability over sweeping change in the government reshuffle that took place on April 9. All state institutions, including the powerful National Defence Commission (NDC), cabinet, and judiciary, saw fresh appointments at the first session of the new Supreme People's Assembly (SPA, the rubber-stamp parliament), which was nominally elected on March 9. The SPA session was especially closely watched, because it was the first major political event following Kim's execution of his uncle Jang Song Thaek on treason and corruption charges last December. Jang had been North Korea's de facto number two man since the late 1990s, and his demise was the biggest political shock in the country for many years, if not decades. It also reflected a power struggle at the heart of the regime.

No Sweeping Purge After Jang's Death

Leadership Reshuffle Prioritises Stability Over Change

BMI View: North Korea's government reshuffle prioritises stability over personnel and foreign policy changes and economic reform, all of which would be risky at this time.

North Korean leader Kim Jong Un has prioritised political stability over sweeping change in the government reshuffle that took place on April 9. All state institutions, including the powerful National Defence Commission (NDC), cabinet, and judiciary, saw fresh appointments at the first session of the new Supreme People's Assembly (SPA, the rubber-stamp parliament), which was nominally elected on March 9. The SPA session was especially closely watched, because it was the first major political event following Kim's execution of his uncle Jang Song Thaek on treason and corruption charges last December. Jang had been North Korea's de facto number two man since the late 1990s, and his demise was the biggest political shock in the country for many years, if not decades. It also reflected a power struggle at the heart of the regime.

No Sweeping Purge After Jang's Death

Jang's execution fuelled speculation that there would be a massive purge of North Korean officials, but this has not happened. Although 55% of the SPA consisted of new faces, the highest decision-making bodies saw minimal changes, with several ageing old guard figures retaining their posts. For example, Kim Yong Nam, 86, was re-appointed President of the Presidium, which is equivalent to a ceremonial head of state. In addition, General O Kuk Ryol, 84, arguably the godfather of the North's powerful military establishment, stayed on as vice-chairman of the National Defence Commission. Also noteworthy was that Premier Pak Pong Ju, 75, retained his post, defying rumours that he would be sacked for the poor performance of the economy. By retaining many old guard figures in the government and the SPA, Kim Jong Un appears to be seeking to minimise political risks stemming from a possible backlash from disgruntled officials and from introducing young and inexperienced personnel in key posts.

Also noteworthy was that Vice-Marshal Choe Ryong Hae, 64, was appointed a vice-chairman of the National Defence Commission, filling a gap left by Jang Song Thaek. Choe heads the army General Political Bureau, which monitors all senior military personnel, and is now the clear de facto number two man in the regime. Following Jang's execution, there was heightened speculation that Choe too would be purged, and there were rumours of his arrest and detention, but his latest promotion refutes these claims. However, we cannot preclude Choe eventually being removed, if he were to become too powerful. His main counterweight appears to be Hwang Pyong So, a first deputy director of the Organisation Guidance Department - a body that monitors the ruling Workers' Party's personnel. (The practice of developing counterweights to senior officials in parallel organisations is used to keep them in check.) Finally, Kim Jong Un appears to have promoted his younger sister, Kim Yo Jong, 27, to an important position in recent months. The latter Kim has not received any government posts, nor was she elected to the SPA, but there is speculation that she has served as her brother's chief of staff since the first half of 2013. She made her first public appearance in March 2014.

Meanwhile, China's Global Times paper reported on April 9 that North Korea had staged a very rare military exercise in Pyongyang on March 15, designed to respond to an assassination attempt on Kim Jong Un. This suggests that Kim is becoming more concerned about his personal security.

Conservative Economic Policy To Remain Unchanged

The retention of Premier Pak Pong Ju suggests continuity of North Korea's economic policy of minimal and very cautious reforms. Although Pak is considered a reformer by Pyongyang's conservative standards, due to his role in tentative economic liberalisation in the early 2000s, his post, like other cabinet positions, is largely symbolic. North Korea also retained finance minister Choe Kwang Jin and central bank president Kim Chon Gyun, but these officials will have little power.

At the same time, finance minister Choe reported on North Korea's budget for FY2014-2015 (April-March), but as is customary, the regime provided no expenditure or revenue figures. North Korea is probably the only country in the world that does not release economic data, since this is considered a state secret. Instead, the budget report stated that public spending would rise by 6.5%, with the sports budget up 17.1%, education up 5.6%, basic and light industry up 5.2%, agriculture and fisheries up 5.1%, capital construction up 4.3%, science and technology up 3.6%, and healthcare up 2.2%. Some 15.9% of total state expenditure will be spent on national defence, a very slight decrease from 16.0% in FY2013-2014.

Nonetheless, these statistics are largely for domestic consumption and are completely unverifiable. The most credible economic figures for North Korea emanates from the South's central bank, which publishes its GDP estimates for the North every summer. Its estimate for real GDP expansion in 2012 was 1.3%, up from 0.8% in 2011 and a 0.5% contraction in 2010. BMI believes that the economy will struggle to grow faster than 1.0-1.5% for the foreseeable future, due to sanctions and a lack of reform.

Overall, despite repeated speculation that Kim Jong Un would implement sweeping economic reforms, there is no evidence to suggest that he intends to do so.

Hardline Military Policy To Be Retained

North Korea's military leadership appears to have stabilised this year following repeated reshuffles in 2012 and 2013, but in any case, we see no change to Pyongyang's commitment to nuclear weapons and a robust defence posture. As we noted recently, the Crimean crisis between Russia and Ukraine will have vindicated the North's pro-nuclear stance ( see March 28, 2014, ' Crimea Crisis To Boost Hardline Nuclear Stance'). We cannot preclude that the Kim regime may carry out more nuclear or missile tests, or provocations against the South in the disputed West Sea border region. That said, North Korea has been holding informal talks with Japan in early 2014, suggesting that Pyongyang is seeking to use Tokyo as a means to reduce its isolation somewhat. Furthermore, the appointment of Ri Su Yong, a former ambassador to Switzerland and the Netherlands, as foreign minister, could indicate that North Korea wishes to improve its relations with European countries.

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