Journal of Soviet Ambassador in the DPRK A.M. Puzanov for 10 February 1960

FROM THE JOURNAL [faded USSR SECRET Copy Nº 1

OF A. M. Puzanov MFA stamp:

2413-gs

24 February 1960]

[date too faded to read] February 1960

Nº 14

[handwritten: "23 March", followed

by an illegible instruction;

"to Samsonov, G. Ye."]

RECORD OF INFORMATION

of PAK YONG-GUK, Chief of the KWP CC International Department, to the ambassador of socialist counties accredited in Pyongyang

10 February 1960

Pak Yong-guk said in January the KWP CC adopted a decision and conducted some restructuring of the system of management of the economy but no material about this has yet been publicized since experience has not yet been accumulated.

What caused this restructuring?

1) The production capacity of industry has risen.

Based on the level of gross industrial output the first five-year plan was fulfilled ahead of time, in two and a half years. In 1959 gross industrial output was 3.1 times that of 1956 and 6.1 times that of prewar 1949.

After the June (1958) KWP CC Plenum local industry began to develop especially rapidly. The task set by the Plenum was to have [a task] not only fulfilled but overfulfilled for one or two local industrial enterprises in each district. At the present time there are more than 2,000 local industrial enterprises in the country. The volume of gross production of local industrial enterprises was 2.2 times that of 1958. The proportion of local industrial production in the overall volume of industrial production rose from 28% in 1958 to 39% in 1959.

At the present time DPRK industry is producing as much in 20 days as in all of 1946. During the first five-year plan the average annual growth of the output of industrial production was 44.6%, and in 1959 the growth was 53% compared to 1958.

As a result in the country at the present time the proportion of industrial production in the economy is 70% and the proportion of agriculture is 30%.

2) In recent years great changes have occurred in the placement of industrial enterprises

During Japanese rule the leading industrial enterprises were mainly located in the eastern and western parts of the country from where it was easier for them to ship raw material and semi-finished goods. Based on this in its economic policy the KWP CC has strived to eliminate the colonial disproportion in the development of industry and bring industrial enterprises closer to the bases of raw material. As a result of the implementation of this policy at the present time there is not a single district or city in the country which does not have one large or medium-sized centrally-subordinate industrial enterprise or local industry. In all districts of the country, with the exception of 39 districts, there are centrally-subordinate industrial enterprises. In addition there is an average of more 11 local industrial enterprises in each district. Centrally-subordinate industry has provided great help in the development of local industrial enterprises.

The rapid development of industry, both centrally- and locally-subordinate, has created a situation in which the previous system of industrial management no longer meets the requirements of the new stage of the country's economic development. A situation has been created in which ministries have become no longer able to successfully manage industrial enterprises. Ministries were poorly informed about the operation of industrial enterprises and their guidelines and directives often did not reach the addressees. In addition, such negative events occurred in the operation of the ministries as narrowly-departmental tendencies and also that headquarters industrial management organizations could not really develop political work with the masses and because of a lack of experienced personnel local authorities could not really managing developing industry.

Experience has shown that the determination of routine tasks and drafting a plan alone have become insufficient for the successful management of industry. Such issues as the mobilization of workers to successfully fulfill the economic plan, providing enterprises with raw material, strengthening the oversight functions of Party organizations, and also increasing the role of the masses in the performance of economic problems have become the order of the day.

Pak Yong-guk cited an example when in the course of the movement "a machine from a machine" the leaders of industrial enterprises of the region of Heungnam did not borrow the best practices of the operation of the Ryanson [sic] Plant only because the managers of industrial enterprises did not take sufficient responsibility for the managerial activity of the enterprises and oversight by Party organizations was at a low level.

In connection with these facts the KWP CC was faced with the task of  combining the management of central authorities with increased attention on the part of local Party organizations, the broad use of the masses' initiative, and identification of reserves locally.

The essence of the restructuring

The functions of provincial Party committees for the management of industry are being expanded while retaining central management of centrally-subordinate enterprises as before. Thus provincial Party organizations bear responsibility for the status of economic activity of the provinces' industrial enterprises together with the relevant central authorities.

Provincial Party committees are augmented and strengthened with experienced Party personnel and also with technically trained personnel.

Steps have been taken at the same time to increase the level of management by Party factory committees. Party factory committees have been charged with the management of all the activity of enterprises. The director and the secretary of the Party committee are under their supervision. Under the supervision of the Party committee the director performs administrative work and the secretary of the Party committee, Party [work].

In all provinces of the country except Pyongyang and Gaeseong economic management committees are being created which have nine or 15 members, of which five or nine are permanent members. The economic management committees are subordinate in their activity to provincial Party committees.

The chairmen of the provincial Party committees are also the chairmen of the economic management committees and their deputies are knowledgeable industrial officials.

The chairmen of provincial people's committees, the deputy chairmen of provincial Party committees for industry, the chiefs of directorates of local industry of provincial people's committees, scientists, directors, and chief engineers of some enterprises are non-permanent members.

Offices of experts are attached to the committees which are staffed with consulting specialists in individual industrial sectors.

The goal of the creation of the economic management committees to help provincial Party committees manage industrial enterprises and also to improve Party oversight and management in fulfilling economic plans with industrial enterprises located in the province.

Economic management committees have been entrusted with the following functions:

1) The main one - management of the operation of centrally-subordinate industrial enterprises. Along with this the committees deal with local industry. However, the committees do not have the right to change the directives of the Cabinet of Ministers and central authorities. if instructions of central authorities are not appropriate for local conditions the Committee has the right to state its opinion to the Cabinet of Ministers and KWP CC to thus solve the issue.

2) A committee has to analyze the economic activity of industrial enterprises, track the development and introduction of equipment, the increase of labor productivity, regulate the use of the workforce, carry out measures to increase the technical skills of the workers, and regulate the relationship between industry and agriculture and also production and consumption.

3) A committee identifies shortcomings of the operation of enterprises and factories and takes steps to correct them rapidly.

4) It summarizes and the best practices of the operation of enterprises and takes steps to introduce the best practices into production.

The KWP CC has conducted the following reorganization of the central apparatus of the country.

1) Three industrial ministries - of the metallurgical industry, the machinebuilding industry, and the power and chemical industries have been combined and a Committee of the Cabinet of Ministers for Heavy Industry has been created from them.

2) The Ministry of Light Industry has been reorganized into the Committee of the Cabinet of Ministers for Light Industry.

3) The Economics Committee of the Cabinet of Ministers created in May 1959 has been disbanded.

4) Steps have been taken to step up the activity of the Presidium of the Cabinet of Ministers.

5) Deputy Chairman of the Cabinet of Ministers Ri Dong-yong has been appointed Chairman of Committee of the Cabinet of Ministers for Heavy Industry. Appointed as his permanent deputies are: Han Sang-du, former Minister of the Metallurgical Industry; Kim Du-sam, former Minister of the Power and Chemical Industries; Choe [Ha Wan], former Minister of the Machine building Industry; and Kang Yeong-chang, Chief of the KWP CC Department of Heavy Industry (holding both positions concurrently).

6). Deputy Chairman of the Cabinet of Ministers Jeong Jun-taek has been appointed  chairman of the Committee of the Cabinet of Ministers for Light Industry.

Mun Man-uk, former Minister of Light Industry; Pak Yong-seon, former Deputy Chief of the KWP CC Department of Light Industry; and Ro Tae-seok, Chief of the KWP CC Department of Light Industry (holding both positions concurrently) have been appointed permanent deputies of the Chairman.

7) The Committee of Heavy Industry consists of 31 members and the Committee of Light Industry, of 23 members.

The Committees include as members scientists, specialists, chiefs of Gosplan directorates, the Chief of the Main Directorate for Material Supply, the Minister of Railways, the Minister of Agriculture, and also senior officials of other ministries and chiefs of the directorates of the relevant committees.

The newly-created Committees of the Cabinet of Ministers exercise administrative and technical supervision of heavy and light industry. The functions of these Committees are not substantially different from the functions which the previous ministries performed.

8) In relations with other countries these senior officials act as ministers of the corresponding ministries.

The goal of the creation of these committees is to provide a single centralized management, the achievement of better coordination of the technical industrial activity and manufacturing relations between various industrial sectors and the elimination of the previously existing narrowly-departmental tendencies. In addition, the formation of the Committees pursues the goal of reducing the size of the staff of the central authorities, which allows us to free us personnel to be sent to work in the field.

At the end of the information Pak Yong-guk dwelt on what importance this reorganization of the management system of state authorities has for the economy, pointing out that the new system of industrial management has the following advantages:

First. The new system of industrial management allows political work to be put ahead of everything else and the responsibility of local Party organizations for the operation of industry to be increased.

Provincial Party committees bear responsibility, manage, and oversee the operation of centrally subordinate industrial enterprises and local industry. Pak Yong-guk said before this reorganization provincial Party committees neither oversaw nor managed nor bore responsibility for the operation of centrally subordinate industrial enterprises.

Thanks to the reorganization which has been carried out provincial Party committees will be able to directly combine political work with economic activity, in connection with which they will be able to involve the masses in the management of enterprises on a broader scale, identify hidden reserves, and make maximum use of the potential of the popular masses' creativity.

Second. It provides an opportunity to expose shortcomings in the operation of industrial enterprises, and in matters of fulfilling the economic plan, to quickly correct the identified shortcomings more efficiently and in more timely fashion.

The reorganization which has been carried out allows central authorities to become closer to lower ones. It provides an opportunity to reduce the size of the staff of central authorities, with which local authorities and the technical administrative staffs of industrial enterprises will be strengthened.

Third. The reorganization which has been carried out allows narrowly-departmental tendencies to be eliminated and unified management from the center to be improved.

With the establishment of unified management and oversight an opportunity has appeared for provincial Party committees to solve economic problems together, to strengthen ties with production, and also to establish firm ties between individual enterprises, factories, and different economic organizations at the grass roots.

In conclusion Pak Yong-guk said that the steps taken by the KWP CC to reorganize the system of industrial management have met with the warm approval of industrial workers. The first small positive results which this reorganization have provided are already evident right now.

Ambassadors present at the briefing asked the following questions.

GDR Ambassador Kurt Schneidewind asked about the role of the economic management committees in drawing up the economic plan.

Pak Yong-guk replied that the Cabinet of Ministers committees for heavy and light industry draw up the economic plan by industrial sector and the economic management committees play an important role in drawing up the plan by industrial region and province.

People's Republic of Bulgaria chargé d'affaires M. A. Shipkovensky asked about the time the reorganization of the system of management of central authorities of the country was accomplished.

Pak Yong-guk replied that this reorganization was done in January 1960. Pak Yong-guk then said that an Economic Committee of the Cabinet of Ministers was created in the country in May 1959 which was given the task of eliminating the narrowly departmental tendencies which have occurred in the work of the ministries which then existed. Taking into consideration the positive experience of the work of this committee the KWP CC adopted a decision to eliminate all industrial ministries (except the Ministry of the Forest Industry) and organize two committees from them, the Committee of the Cabinet of Ministers for Heavy Industry and the Committee of the Cabinet of Ministers for Light Industry.

Ambassador of the Czechoslovak Republic Stanislav Kohousek asked what socialist country's experience the Korean friends used in carrying out this reorganization.

Pak Yong-guk replied that the KWP CC carefully studied the experience of the organization of the management of industry conducted in the Soviet Union. However, the reorganization of the system of industrial management conducted in January 1960 has many aspects which distinguish the DPRK system of industrial management from the system of industrial management in the USSR.

The Soviet Ambassador asked about the responsibilities of the members of the newly-created committees of the Cabinet of Ministers.

Pak Yong-guk replied that in the past collegiums existed in the ministries. In September 1959 the collegiums of ministries and directorates were abolished and their functions transferred to the ministries' Party committees. There are no collegiums in the newly-created Committees of the Cabinet of Ministers. However, the activity of the members of the committees of the Cabinet of Ministers corresponds to the activity of the members of the abolished collegiums of the ministries. Members of the committees of the Cabinet of Ministers collectively discuss managerial issues and make decisions which are subsequently implemented by departments [?of the committees?] [Translator's note: the last word was off the reproduced page].

People's Republic of Albania Ambassador Petro Gedeshi asked what is the role of the provincial people's committees and what are the functions of the consultants.

Pak Yong-guk said that provincial people's committees manage provincial- and district-subordinate enterprises through their departments and do not have the right to manage centrally-subordinate industry.

At the same time the Economic Management Committees exercise oversight and management of both centrally-subordinate industry as well as local industry. An Economic Management Committee does not have the right to directly give directives to the management of enterprises and does this through the provincial Party committee. Consultants of the Office of Experts attached to the Economic Management Committees watch and analyze the operation of industrial enterprises of the corresponding sectors and also study the progress of the fulfillment of the economic plan and summarize the positive experience of the operation of the enterprises. However, they do not have the right to give directives to the management of enterprises.

In reply to the question of Ambassador of the Czechoslovak Republic Kohousek about how many workers an Economic Management Committee has, Pak Yong-guk replied that the size of the Committees depends on the industrial development of the province.

The Czechoslovak Ambassador then asked the following questions: in connection with the reorganization of industrial management who has the right to appoint the directors of factories and enterprises? How many workers of the central government staff is it proposed to reduce and send to the field?

Pak Yong-guk replied that the directors of provincially-subordinate enterprises are appointed by the provincial Party committees. For large enterprises of state importance the directors are appointed by the KWP CC after a recommendation by the corresponding Committee of the Cabinet of Ministers. Pak Yong-guk said that he cannot give exact figures of how much the government staff is to be reduced as a result of the implementation of the reorganization of the system of industrial management.

Ambassador of the Polish People's Republic Jozef Dryglas asked about the relationship between the economic management committees and the committees of the Cabinet of Ministers.

Pak Yong-guk replied that the legally the Economic Management Committees are directly subordinate to the provincial Party committees and not to the Committees of the Cabinet of Ministers.

At the end of the conversation Pak Yong-guk asked those present not to publicize and not to disclose the substance of this information.

On behalf of the diplomatic corps DRV Ambassador to the DPRK Tran Xuan Do [sic] expressed gratitude for the information

Second Secretary of the Embassy Cde. V. M. Bakulin, made a record of the information.

USSR AMBASSADOR IN THE DPRK

[signature] (A. PUZANOV)

Five copies printed ap

1 - Cde. G. M. Pushkin

2 - Cde. Yu. V. Andropov

3 - Cde. B. F. Podtserob

4 - Cde. I. I. Tugarinov

5 - to file

Nº 167 17 February 1960