Private sector overtakes state as North Korea's top economic actor under Kim -S.Korea

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North Korean leader Kim Jong Un attends a ceremony to inaugurate the start of construction on the first phase of a project to eventually build 50,000 new apartments, in Pyongyang, North Korea, in this photo released March 24, 2021 by North Korea's Korean Central News Agency (KCNA). KCNA via REUTERS

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SEOUL, Dec 16 (Reuters) - The private sector has overtaken state-led agents to become North Korea's biggest economic actor over the past decade, a sign of booming markets allowed by leader Kim Jong Un, South Korea's Unification Ministry said on Thursday.

The ministry, which handles North Korea affairs, released a report on political, economic and social changes during Kim's 10-year rule, based on data from South Korean and U.N. agencies as well as interviews with defectors.

While the isolated country suffered from coronavirus lockdowns and sanctions over its weapons programmes, private activity has grown from about 28% a decade ago to make up nearly 38% of the economy, the ministry said in the report.

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Government-led programmes, meanwhile, have shrunk to make up 29% of the economy from 37%, and around 9% was from entities that work in both state and private sectors, up from 7%.

The number of merchants has also soared some fourfold to hit an all-time high at about 1,368 in 2018, from 338 in 2011, before sharply dropping amid economic hardships and the pandemic.

"As marketisation continues, the proportion of private economy is on a long-term upward trend," the ministry said. "People's activities are shaping into a dual way, state and private economy."

North Korea does not answer questions from foreign reporters and its government and state media rarely give insights into economic conditions.

Kim became leader in late 2011, upon the death of his father, Kim Jong Il.

The new leader's approval of markets previously abhorred by his father had helped improved livelihoods for many North Koreans, with its gross domestic product (GDP) rising 3.9% in 2016 - the fastest in 17 years.

But initial progress was overshadowed by sanctions imposed over nuclear and long-range missile tests, a ministry official said, even as Kim vowed to build a self-reliant economy after declaring completion of "state nuclear force" in 2017.

"After all, in order to achieve sustainable economic growth and substantively boost people's livelihoods, they need to shift policy toward denuclearisation and economic cooperation," the official said.

As the pandemic and natural disasters compounded the squeeze, North Korea's GDP suffered its biggest contraction in 23 years in 2020, while crop production hit its lowest level under Kim, at 4.4 million. North Korea's trade with top ally China has plunged more than 90% from its 2014 peak.

This month, Kim warned of a "very giant struggle" next year, and called in October for focusing on improving people's lives despite "grim" economic conditions.

North Korea has not confirmed any COVID-19 infections but shut its borders and tightly restricted public transport and inter-state movement.

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Reporting by Hyonhee Shin Editing by Robert Birsel

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