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Background

The ‘Regional Development 20×10’ policy, which was first announced at the Supreme People’s Assembly in January 2024, is currently being promoted as Chairman Kim Jong Un’s flagship public welfare policy. However, the concept of constructing local industrial factories evenly by region to establish a local self-reliance system aligns with a long-standing policy trajectory that has persisted since the beginning of the North Korean regime.

In February 2024, after the ‘Regional Development 20×10’ policy was announced, the groundbreaking ceremony for the first local industrial factory took place in Seongcheon County, South Pyongan Province. At this event, Kim Jong Un mentioned the Changseong Joint Conference of 1962. At that time, President Kim Il Sung presented a local self-reliance system based on the county (Gun) as the basic unit as a fundamental policy. The fact that the subject of Chairman Kim Jong Il’s graduation thesis at Kim Il Sung University was "The Position and Role of the County in Socialist Construction" also demonstrates how much North Korea has emphasized the construction of a self-reliant production system at the local level across generations.

This is also confirmed by actual data on industrial placement. According to the spatial distribution data 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 local industry—showed a downward trend from 0.36 in the 1950s to 0.31 in 1980.[1] Considering that a Gini coefficient of 0 indicates that industrial facilities are evenly distributed across all regions, while a coefficient of 1 indicates concentration in specific regions, one can confirm how strictly the principle of balanced industrial placement has been adhered to in North Korea.

This article analyzes why North Korea has adhered to this regional self-reliance system and the background behind why this policy has re-emerged as a key policy at this current juncture. Furthermore, it seeks to examine the economic consequences of the ‘Regional Development 20×10’ policy being implemented in a situation where the marketization of the North Korean economy has progressed significantly, unlike in the past. Finally, along with the future outlook of this policy, implications for the South Korean government are summarized.

The Formation of North Korea’s Regional Self-Reliance System and the ‘Regional Development 20×10’ Policy

In North Korea, the expression "one two-hundredth of the whole country" is a common metonym used to describe a county. Indeed, North Korea’s administrative divisions reach approximately 200 when counting all cities, counties, and districts under the provinces (do). The ‘Regional Development 20×10’ policy is also a plan to construct modern local industrial factories in 20 cities and counties each year over the next decade. This can be interpreted as a vision to essentially modernize the nation’s cities and counties sequentially.

The most important rationale for dividing the entirety of North Korea into approximately 200 cells and ensuring that each unit possesses a self-reliant economic system lies in the purpose of war planning. Kim Il Sung once stated, "If we build local industrial factories in every corner of the country, even if the central industries in the cities are destroyed during wartime, we can sufficiently solve subsistence issues of food and clothing. This becomes a great strength for national defense."[2] In other words, the fundamental objective of the regional self-reliance system is to enable the 200-plus cell units dispersed across the nation to survive economically and sustain combat operations despite the destruction of some regions. This perception shows that the collective trauma left by the Korean War acted as a crucial catalyst in shaping North Korea’s subsequent regional self-reliance system and industrial placement policy.

The deepening economic hardship caused by the collapse of the socialist bloc in the 1990s served as another momentum to strengthen the regional self-reliance system. In a situation where the centrally planned economy could not function normally, local economies were effectively forced to meet basic survival needs on their own at the local level rather than relying on central support.[3] In this context, Kim Jong Il emphasized the importance of establishing a self-sufficient system at the county level and stated the following: "We must heighten the role of the county and actively struggle to solve the people's living problems by the counties themselves on the principle of self-reliance. The county is the regional stronghold and basic unit of socialist construction responsible for one two-hundredth of the country."[4] Since then, as the North Korean authorities emphasized the line of self-reliance in response to economic hardships, the tendency to revert to a regional self-reliance system appeared more distinctly.

The most important reason for the re-emergence of a regional self-reliance system—such as the ‘Regional Development 20×10’ policy—since Kim Jong Un took power is the deepening gap between urban and rural areas. Since the beginning of the Kim Jong Un regime, North Korea has continuously emphasized comprehensive socialist development and the improvement of the people's lives. However, actual policy implementation exacerbated the urban-rural gap as major construction projects—such as Changjon Street, Unha Scientists Street, and the construction of 50,000 homes in Pyongyang—were concentrated in the capital, Pyongyang. As a result, the relative deprivation and sense of alienation among local residents also accumulated. On top of this, as the prolongation of sanctions against North Korea and border closure measures due to COVID-19 overlapped, the shortage of goods intensified, and the underdevelopment of the provinces became structurally entrenched.[5] At the 19th Enlarged Meeting of the Political Bureau of the 8th Central Committee of the Workers' Party of Korea held in January 2024, Kim Jong Un himself, mentioned that "the inability to properly provide even basic daily necessities to local residents is a serious political problem" and defined bridging the gap between the center and the provinces as a "political imperative that must be fulfilled".

Thus, North Korea’s regional self-reliance system appears to have been continuously strengthened as factors such as defense logic, the emphasis on self-reliance due to economic hardship, and the deepening of inter-regional gaps have overlapped.

The Structural Economic Inefficiency of the ‘Regional Development 20×10 Policy’

1) Absence of Economies of Scale and Comparative Advantage

North Korean authorities have emphasized that the regional self-reliance system is an economically efficient policy in that it reduces unnecessary transportation costs by locating production bases close to raw material sources and consumption areas, and utilizes idle labor existing in the provinces. However, examining the production details of the 20 local industrial factories promoted in the first year, most adopt a production structure focused on similar consumer goods such as food, daily necessities, and clothing in small-scale light industry factories with standardized sizes. Although regional characteristics are presumably considered, differentiation is limited to certain food products such as fisheries, fruit processing, and sauces (jang). Overall, it is highly likely that each region will produce goods that meet similar demand patterns. This is no different from placing industrial facilities of essentially the same nature in all 200 cities and counties across the country. Such industrial placement disregards core economic principles of efficiency such as economies of scale and division of labor based on comparative advantage and is inherently and structurally inefficient. For example, rather than building identical soy sauce factories in every county unit, it is much more efficient to create large-scale factories at the provincial level to lower fixed costs per unit and improve the logistics system to distribute nationally.

2) Deepening Distortions under Marketization

The problem is that this inefficiency is likely to appear more significantly now than it did during the past era of the regional self-reliance system. This is because the marketization of the North Korean economy has progressed considerably compared to the past. Currently, there are over 400 general markets in North Korea, and the number of market participants is estimated to exceed 1.1 million.[6] With the expansion of markets and the improvement of transportation and communication conditions, regional gaps in market prices and foreign exchange rates have also been significantly reduced.[7]

However, as the 'State Distribution Reinforcement Policy' has been pushed since the 2020s, such market-based efficiency is gradually weakening. In the case of grain distribution, grain sales within markets have been banned since the installation of state-run 'Grain Sales Stations.' Even for light industrial products, market-based sales are likely to be suppressed, while distribution through state-run stores is enforced under the guise of normalizing local industrial operations. In a situation where a majority of residents already maintain their livelihood through market activities, if market functions contract, it could lead to a decrease in resident income. Furthermore, if the labor force is artificially moved from the relatively high-productivity market sector to state-run local industrial factories, it could lead to a decline in the productivity of the entire economy. Indeed, recent media reports related to North Korea indicate that crackdowns on so-called '8.3 workers'—who have been engaging in individual market activities while only formally belonging to enterprises—are being strengthened.[8]

3) Widening Regional Disparities through Selective Support

Furthermore, the ‘Regional Development 20×10’ policy implies a possibility of conflicting with the alleviation of inter-regional gaps, which was presented as its original goal. This is because while resources are concentrated on new factory construction in the cities and counties selected as policy targets, existing factories in those regions or enterprises in non-target regions may be relatively marginalized. According to a text analysis study of the Rodong Sinmun conducted by Lee Jeong-kyun and Kim Beom-hwan, the frequency of references related to the production and investment activities of existing enterprises in the 20 regions where local industrial factories were built as of 2024 generally decreased, with this decline being particularly pronounced in the light industry sector.[9] Already, more than 20 local industrial factories were created in each county in North Korea during the process of the regional self-reliance system. In this situation, if resources are preferentially allocated to new factory construction under the ‘Regional Development 20×10’ policy, there exists a possibility that the activities of existing factories will shrink, and the imbalance of the industrial structure within the region will deepen.

This problem is also intertwined with the local fiscal structure. Even if identical factories are built, fundamental differences in endowed resources and geographic conditions inevitably exist by region. Therefore, to alleviate inter-regional gaps while maintaining a regional self-reliance system, efforts to resolve inequality through state finances must be undertaken simultaneously. However, in North Korea, there is a strong tendency to perceive national fiscal support for backward regions as contrary to the principle of self-reliance.[10] In fact, Article 10 of the 「Local Budget Law」 enacted in 2012 stipulates that "payments to be remitted to the upper level must be paid first from local budget revenue, and then necessary fiscal expenditures must be guaranteed." This institutionalizes a structure that prioritizes fiscal remittances to the center over the strengthening of local fiscal capacity. Looking at the changes in the proportion of central and local budget revenues in the national budget, the share of central budget revenue was 83.9% and the share of local budget revenue was 16.1% in 2011, whereas in 2024, the central share decreased to 73.7% and the local share conversely, rose to 26.3%.[11] This indicates that the fiscal burden borne by localities—raised and remitted to the central budget—has expanded. In a situation where overall local fiscal capacity is increasingly constrained, the concentration of new investment and resources in only selected regions may leave non-selected areas facing relatively tighter fiscal conditions. As a result, the “Regional Development 20×10” policy is more likely to widen, rather than narrow, the gap between beneficiary and non-beneficiary regions.

Outlook and Implications

Despite its structural limitations —including the absence of economies of scale and comparative advantage, intensified distortions amid advancing marketization, and the potential widening of regional disparities due to selective support— the ‘Regional Development 20×10’ policy is unlikely to undergo fundamental changes in policy stance within a short period. Ahead of the 9th Party Congress scheduled to be held this year, North Korea confirmed the 20 cities and counties targeted for the regional development policy at the last Plenary Meeting of the 8th Central Committee of the Party held in December 2025. This suggests that this policy will be promoted as a major national priority for the foreseeable future.

However, apart from the political will of the North Korean authorities, there exist various constraints in continuously promoting the ‘Regional Development 20×10’ policy. Above all, the stable operation of the newly constructed local factories remains uncertain. According to a survey by the Ministry of Unification, 47.2% of respondents indicated that factory utilization rates were below 60% during 2016–2020, representing a 17 percentage-point increase compared to the previous five-year period (30.3%).[12] This suggests that even existing factories have struggled to operate normally due to shortages of raw materials and electricity. Under such conditions, it will be difficult for newly built local factories to achieve stable operations. Recent media reports further indicate that among the 20 local factory construction sites designated in 2024, only five showed increased nighttime luminosity in 2025, while the remaining fifteen exhibited either similar or dimmer levels compared to the previous year.[13]

External conditions also constitute an important variable. Following the lifting of COVID-19 border restrictions, North Korea–China trade has recovered rapidly. In particular, consumer goods imports from China reached USD 950 million in 2025, exceeding pre-pandemic levels.[14] As the inflow of low-cost Chinese consumer goods expands, the newly constructed local factories are likely to face significant challenges in maintaining competitiveness in terms of both price and quality. According to a survey of North Korean defectors by the Ministry of Unification, based on the pre-COVID-19 pandemic period (2016–2020), 78.5% of clothing, 76.7% of shoes, and 67.9% of soy sauce were identified to be of Chinese origin.[15]

If the ‘Regional Development 20×10’ policy fails to narrow the inter-regional gaps presented as its initial goal, there is a possibility that dissatisfaction in North Korean rural society will amplify. Therefore, the stability of local and rural society requires continuous observation as an important indicator for gauging the future stability of North Korean society.

In this regard, China’s experience provides an important comparative case. China likewise established a regional self-reliance system when the principle of self-reliance was emphasized due to the security crisis caused by the Sino-Soviet split and the influence of the Cultural Revolution in the 1960s and 70s.[16] However, as Deng Xiaoping’s reform and opening-up policy was promoted, China’s regional development strategy shifted to a policy based on comparative advantage. North Korea’s strengthening of the regional self-reliance system can be understood as a response to the perception of external security threats rather than a simple economic policy. This implies that if the perception of security threats is mitigated, the room for North Korea to make more economically rational choices may also expand. In this context, the alleviation of tensions and the building of military trust between the two Koreas can have the indirect effect of widening the space for North Korea’s economic policy choices, beyond the simple political and military dimension. Furthermore, in the long term, drawing on China’s experience with reform and opening, the South Korean government should work with the international community to help create conditions under which North Korea can pursue regional development policies based on economic rationality.

[1] Ryu, Hak-su (2019), “Characteristics of North Korea's Industrial Placement Structure and Measures for Inter-Korean Economic Cooperation,” KDI Review of the North Korean Economy, Korea Development Institute (KDI).

[2] Kim, Il Sung (1982), “Let Us Strengthen the Role of the County and Further Develop Local Industry and Rural Economy to Significantly Improve the People's Living Standards,” Kim Il Sung Works 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 (KINU).

[4] Kim, Jong Il (1998), “Let Us Enhance the Role of the County to Bring About a Turn in the People's Living Standards,” Kim Jong Il Selected Works Vol. 13, Workers' Party of Korea Publishing House.

[5] Lee, Jang-kyun and Kim, Beom-hwan (2025), “Current Status and Implications of North Korea's ‘Regional Development 20×10 Policy’,” KIEP Basic Material 25-04, Korea Institute for International Economic Policy (KIEP).

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

[7] Kim, Sang-duk, Kim, Tae-hwa, and Yang, Seung-ryong (2020), “Testing the Efficiency of the North Korean Rice Market,” Journal of Rural Development, 43(3), 51-64.

[8] DailyNK (February 13, 2025), “‘8.3 Workers’ Dwindling... Enterprises with Growing Fiscal Burdens Sigh.”

[9] Lee, Jang-kyun and Kim, Beom-hwan, op. cit.

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

[11] Hong, Ihk-pyo (2011), “Analysis of the 2011 Economic Policy Direction and National Budget Presented at the 4th Session of the 12th Supreme People's Assembly of North Korea,” KIEP World Economy Today 11(12), Korea Institute for International Economic Policy (KIEP); SPN (January 24, 2025), “North Korea, 2024 Budget Settlement and 2025 Key Budget Plans”

[12] Ministry of Unification (2024), Report on the Perception of North Korean Economic and Social Realities.

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

[14] Choi, Jang-ho, and Choi, Yoo-jung. (2026). “Analysis of North Korea–China and North Korea–Russia Trade in 2025.” KDI North Korean Economic Review. 28(1) , p 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 (KIEP).

■ Seung-ho JUNG is a Professor of International Business Economics at Incheon National University.

■ Translated and edited by Inhwan OH, EAI Senior Research Fellow; Sangjun LEE, EAI Research Associate     For inquiries: 02 2277 1683 (ext. 211) | leesj@eai.or.kr