DPRK Economic Fiscal State Planning
DPRK National Space Agency
Economic, Fiscal State Planning
© By Charles P. Vick (All Rights Reserved)
Senior Technical Analyst, Globalsecurity.org
By understanding the economic engineering reference frame under which the DPRK ballistic missile and space programs operate via the North Korean authoritarian military based regime with its State Planning, Councils & Commissions and hereditary leadership continues following the Soviet era economic model. North Korea actually operates on the multiple Five Year Plan process with the Self Sufficiency policy while remaining on a continuous war time footing. The twice yearly meeting of the rubber stamp Supreme People's Assembly (Parliament) approves the State planning and other policy elements of the regime. In reality the industry and government policies are to blame for the real economic ills that are the disaster of the command economy of North Korea . By far the most reliable indicator Instrument of North Korean State policy was it missile programs activities. This makes their system immensely predictable.
Why is this Possible?
"According to James T. Westwood, senior consultant at Military Science and Defense Analytics, Unionville VA, in 1978, while employed as a senior special research analyst for one of the three-letter national intelligence agencies, he discovered and crystallized into application, a novel, original technique for interpreting and predicting all of the military and space programs of the former Soviet Union with consistent accuracy and reliability. There came from this numerous applications and non-surprises, e.g., that the ballistic missile programs, with their space rocket off-shoots (to coin a phrase), were arguably the most reliable and revealing among the thousands of armor, aircraft, ship, artillery, etc. military hardware and operations programs. In a recent interview with this author, Westwood says that to the extent that the military programs of the PRC as well as North Korea and Iran long may have replicated the former Soviet Union's national planning schema, the same methodology likely can successfully illuminate China's, Iran’s and North Korea’s future military and space programs. The present author was taught this methodology by Westwood in a Continuing Engineering Education short course at the George Washington University in the late 1980’s.
Conferring with James T. Westwood, senior consultant of Military Science and Defense Analytics, Unionville VA, he said that CIA failed again in a systemic and incredible manner ever to be able to reliably predict the strategic behavior of the former Soviet Union in terms of "reverse analysis," to wit, reading the tea leaves from the native, bureaucratic Soviet perspective --planning and projecting on the same basis and by same method as did the former USSR. This was, he said, the "great plan," the GOSPLAN. He hoped, this magnificent blunder is not now being repeated with respect to the Peoples' Republic of China, Iran and North Korea. Because the current, active PRC, North Korean and more recently Iranian national planning scheme is based on the former Soviet model and is running now in phase for over a half-century, Westwood emphasized, it should not be a problem to draw a matrix and populate it in detail from 1953 on in order to have, at long suffering last, a reliable analytic tool for interpreting and forecasting Chinese , North Korean and Iranian weapons, space, energy and a host of other, important, national programs and projects -- in planning now, and in the recent past, for pay-off in the future.
Budget Five Year Fiscal Planning Cycle Military Science & Technology
North Korea because of its authoritarian vertical structured military regime with its hereditary dynastic leadership must balance the military industrial bases of its existence since the State is the military and the military is the State verses the all too real economic depleted national reality all working under the same employer roof.
These five year plans are the previous 2001-2005 and the recent past plan 2006-2010 and its present "Five Year Plan" 2011-2015, and the follow on ten year “forecast plans” 2016-2020 and “outlook plan” 2021-2025 and the Future Forecast Plans discussions through 2026-2030. Although North Korea does not announce as much as other authoritarian States on their planning it has left enough gathered information to identify trends and expectations. In a true sense they serve to set up the future five year plan fiscal command economy planning for North Korea ’s development and utilization. From the start of this process North Korea has, like the West, used the available discretionary funds to push its military S & T to drive its national military economy to provide for development of its military industrial capabilities, all under the same Government employer roof. We have to understand why these programs are being pursued by North Korea . It has been the plan like in the West at least since the introduction for the total available government funding about 40% to basic scientific research to push the basic sciences and about 60% of the available funding to push the basic technologies, (research & development). (1) Above all, it is to provide for the national security of the nation by keeping the North Korean technologically competitive with the technologically advanced world leadership. Typically this so called budget funding largely derived from the vulnerable to external influence is very dependent on selling its military technology products to third world countries in order to acquire real hard currency for its primary leadership military need at the expense of the populace overall. The command economy operated through the five year plan via the State controlled allocation of material resources, equipment and personnel which is broken down between strictly military programs and civil military duel purpose programs is very weak because of its policies as posed by the North Korean regime. More recently the DPRK has referred to it space in just such as S & T development purpose as noted in the Policy Pronouncements.
Space Boosters and Ballistic Missile Economics Issues- A Preliminary Study
Since the Taep'o-dong-2 class booster as originally understood by the world underwent a major redesign change during the 2001-2005 time frame it was not unusual for it to have been flown outside the normal North Korean, Five Year Fiscal Plan and its nominal requirements. Nominally within a Five Year Plan the middle years are when a new space booster or potential ballistic missile program matures and is flight tested several times leading to it being put into operation and followed by production by the next five year plan. Because of the initial flight test failure the North Koreans have had to totally review what happened and go back to take the corrective actions. True to the Five Year Plan requirements the North Koreans have now the space booster satellite launch flight test on April 5, 2009 that failed.
Regardless of the diplomatic and strategic implications this space booster flight test was built into the North Korean, fiscal Five Year Plan and would take place as planned when ready because of the required State Plans.
It would also suggest that North Korea, like the Soviet practices, may already have a limited number of these missiles ( twenty has been suggested) produced and more in production for possible early field deployment or foreign sale to Iran in the not to distant relative future. Production numbers can only be estimated at perhaps 5-10 a year if that much at this juncture. Subsequently Defense Secretary Donald H. Rumsfeld stated in a radio interview that "They do — we do believe and they're assessed to have, oh, something like three or four or five additional Taepodong-2 airframes somewhere in their country," but that none were ready for launch in a July 8, 2006 interview for a radio talk show-hosted by Monica Crowley according to the Washington Times of July 13, 2006. http://www.defenselink.mil/transcripts/2006/tr20060708-13428.html Taking into account the 17 suggested in 2006 as well as the 20 suggested in 2008/9 and the 1996-2006 ground static test firing , full scale and sub scale dynamic test vehicle elements [2+], systems testing  and flight testing  in addition to preliminary fielding and facilities systems test vehicles  variants suggest that historically since the program start pre 1994 and since 1996 they have produced 10 vehicles for ground engineering testing work. This includes two flight test vehicles with one lost in flight with up to two or four lost in ground test losses (expected) would suggest that as many as 25 full vehicles have been produced which leaves about 20 vehicles including the present second flight test satellite launch vehicle flown April 5, 2009. That is not a small expenditure in North Korean national resources its currency but it does give some measure of the level of commitment to this program among many other missile programs and its vast industrial base alone much less other weapons systems of this authoritarian regime. It also says a very great deal about its profits in hard currency from its major trading cooperative partners that have been identified Iran , Pakistan , Syria , Yemen , Burma and Libya on both ballistic missiles and space boosters and also nuclear weapons design technology transfer. The primary cooperative partners are clearly Iran , Pakistan and Syria . China and Russia are the major contributors to North Korean missile technology as well as the extensive cooperation with Iran .
North Korea ’s continued insistence that it is “their right to have a launch as a part of their space program to be an economic power” is certainly important in understanding that this effort is driven by the need for hard foreign currency for the regimes survival. The fear is what Iran has already gotten from North Korea .
Economic Reality Updated
There has also been information released in 2006 by South Korean, National Assembly member Chung Hyung-Keun according to the North Korean Zone web site that North Korea intends to produce as many as seventeen Taep'o-dong-2 class launch vehicles for internal deployment and foreign sales. The Taep'o-dong-2 class booster first rendition is estimated to cost $62,893,081.76 while the rest are estimated at $26,250,450.73 (2006)--$30,000,000.00 (2009) each by the NIS. It was also noted that according to the NIS the 400 Scuds cost about $200,000.00 each which equal a total of $120,000,000.00 and the 450, No-dong-A's cost about $400,000.00 each equals $1,800,000,000.00. These figures seem low to reality. In the past the Taep'o-dong-1 cost was also given for its very limited production run of perhaps less than five vehicles after the estimated 10 R&D test models one of which was apparently sold to Iran and looked at by Pakistan.
North Korea is said to have gain as much as an estimated $1.5 billion dollars a year in earlier years from foreign missile sales. On Aug. 3, 2006 a report was released by the South Korean funded State run think tank ( IFANS) Institute of Foreign Affairs & National Security suggested that the commercial cost of the latest Scud-ER's is about $2,000,000.00 each and that the cost of the No-dong-A's is about $4,000,000.00 each with the Taep'o-dong-2 class missile being about $20,000,000.00-$30,000,000.00 each. It further stated that North Korea has annually obtained $150 million (or billion) from exported missile sales or both parts and technology. Total sales may be in the $580 million (or billion) ranges. Somewhere in this pricing process their clearly is the dollar devaluation inflation factor well before the recent global economic down fall. They also indicated that the North Koreans have about 200 No-dong-A's [versus previous reports of 450] and 50 No-dong-B's deployed in addition to 600 varying types of Scud's [versus previous reports of 400 plus]. Iran has received two shipments of No-dong-B’s. Clearly the pricing of the Scud's and No-doing-A's has been mixed up with the million dollar figures which are probably more accurate but the Taep'o-dong-2 pricing is reasonably accurate. No cost for the Taep'o-dong-1 pathfinder missile for the Taep'o-dong-2 class missile was given and no information indicated it was deployed. It is estimated that the Taep’o-dong-1 missile first models cost about $18,800,000.00 – $20,000,000.00 while the commercial cost was around $5,900,000.00 - $6,000,000.00 each copy. Literally the whole Taep’o-dong-2 program may well exceed “$537,634,408.61 – $604,837,709.68 in total investment of national resources, man hours, personnel and facilities equipment of the North Korean economy. The total missile programs investment through its many years must easily exceed many billions of equivalent dollars total.
**According to South Korean military officials the estimated 2012 US dollars cost of the new Sohae Satellite Launching Station in Cholsan County, North Phyongan Province is about $400 million while the booster rocket and payload is estimated at $300 million and $150 million equaling a total of $450 million. The total country wide cost was estimated at $850 million. (24) North korea is said to have spent the equivalent of $2.8 Billion - $3.2 Billion on ballistic missile development and launches since 1998 with $1.75 billion spent on ballistic missile research centers infrastructure and the new Sohae west coast launch site costing about $900 million. (24A) It was also noted that the nuclear weapons development program $1.1 - $1.5 billion on nuclear weapons development. (24A)
Additionally it is believed by South Korean senior military officials that the DPRK has some 10,000 personnel working on missile programs and that over 3.1 billion has been spent on the long range ballistic missile and space booster program. (26)
The inventory appears to have changed or has it? In reality it probably does not change this evaluation but only updates it perceptions.
|KN-1||1||turbojet||110 km||? 2006||20? unknown||SS-N-1- Styx|
|KN-2||1||solid||110 km||? 2006||20* uncertain?||SS-21 Scarab|
|Scud-B||1||liquid||300 km||1981||cancelled?||no longer active?|
|Hwasong-5||1||liquid||330 km||1984||< 20*<down from 150 estimate||Scud-B, KN-03?|
|Hwasong-6||1||liquid||500 km||1989||< 40* down from 300 estimate||Scud-C, KN-04?|
|Scud-ER||1||liquid||750 - 800 km||2003||<40* <down from 350 estimate||Scud-ER, KN-05?|
|No-dong-A||1||liquid||1,100 -1,600 km||1999||50* < down from 200 estimate||SS-N-5, KN-06???|
|No-dong-B||1||liquid||3,200 - 3,860 km||2004 -2007||50* latest estimate||SS-N-6, KN-07?|
|Taep'o-dong-1||2||liquid||2,000 - 2,900 km||N/A||Cancelled||TD-1 SLV|
|Taep'o-dong-2||2||liquid /TD>||6,750 -10,000 km||N/A 2014 ?||< 5 left R & D ?||TD-2 SLV, Unha-3|
|Taep'o-dong-3, Unha-9||3||liquid||10,000 - 12,000 km||2014/2018||R & D flight test models||TD-3 SLV, Unha-9|
|KN-08||3||liquid||6,000 - 6,700 km||2015/2018||6 + R & D testing||LR-ICBM, No-dong-C|
|NKSL-1 2||3||liquid + solid||orbital||1998 ILC||Cancelled||TD-1 SLV|
|NKSL-X-2 3||3||liquid||orbital||?? 2006 ILC?||R & D||TD-2 SLV, Unha-3 , 9|
|NK-SL-X||2-3-4||liquid||orbital, GEO, Crewed||2015/2018||R & D||NK-SL-X SLV|
1 - No-dong-B is a provisional designation created by John Pike
4 -* The Korean Institute for Defense Analysis (KIDA), http://www.kida.re.kr/eng/ latest suggested numbers of May 2013* Includes 100 short range Scud types mix, 50 No-dong-A's and 50 No-dong-B's or a total of about 200 semi-mobile Transport Erector Launcher (TEL) mounted launchers. This was also reported by the Department of Defense to the U. S. Senate on May 2, 2013. How many remain in storage as replacements for those stationed on TEL's is assumed to be higher.
Rough Order Magnitude North Korean, Missile Program Expenditures Expressed in Western Terms not DPRK Terms
Based on 2006-2009 figures estimated national investment of resources in Western experience terms
|Type System||Numbers deployed||Commercial cost in $||1 St. Models R&D 10 vehicle test elements||Totals|
|No-dong-B’s||50 or more||$7,800,000.00?||$?||$?|
|Taep’o-dong-1’s||15 or more 10 R&D||$6,000,000.00||$18,800,000.00 -$20,000,000.00||$48,800,000.00- $50,000,000.00|
|Taep’o-dong-2’s||25 or more 5-10 R&D & 20 production||$20,000,000.00
|$62,893,081.76||$587,902,096.36-$662,893,081.76 or $537,634,408.61 -$604,837,709.68|
|Total estimated investments which does not include military first infrastructure and industrial base, food, housing and for the additional foreign production sales etc. $4,037,730,791.44|
Foreign yearly high estimated income from sales and technical know how in excess of $1,500,000,000.00 the past yearly high, to - $580,000,000.000.00 billion total but these figures have been going down in recent years. The $1.5 billion yearly high has long since disappeared. This is for DPRK needed hard currency for world trade. Also the dollar value has been steadily devalued for this period considered.
Note: Regime Reality
First we need to understand the DPRK internal mentality and economic five year plan reality as it relates to them politically as well as how it relates geopolitically to the international community.
**This is all fine for a Western understanding but in reality, the command economy of North Korea with the military first at the serving table policy actually has no relationship or convertibility to the world economy currencies thus all of these figures suggested here in are merely Western suggested cost thinking based on the dollar values on the international; currency market which continuously changes not the nominal real materials, personnel, equipment and man hour resources basis of the DPRK’s barter economy. The DPRK can declare a hard currency value in a foreign currency for sales purposes as it must but that is a subjective estimation of reality as they do not know what it is worth in really for its products and services. (2)
The DPRK is first and foremost an authoritarian dynastic socialist and military State. That means everybody works under the same employer roof i.e. the military State. North Korea actually operates on the multiple Five Year Plan process with the Self Sufficiency policy while remaining on a continuous war time footing. Under socialism which has long since lost its DPRK appeal everybody is employed by the State but in practical terms the country must be kept on a constant wartime projects footing to achieve full employment for psychologically control focus of the masses. This is why “the military is the State and the State is the military” to quote retired General Odem describing the former Soviet Union applied to the DPRK. The same can be applied to a large degree to Iran and its theocracy authoritarian military State. For the DPRK it is all about the authoritarian dynastic military State regime’s survival and who has consolidated controls to run the DPRK game with internal communist party control over the military as well as its geopolitically image presented to the world. Yes, the DPRK Communist Party likes to think it is in control of the military but most of the military State is party members. So all the aggressive rhetoric is primarily for the internal consumption of the DPRK to confuse the outside world through this deception of a threatening enemy and lack of world public understanding how the regime and its five year plans work.
Because Iran and China have had several defense industry cooperation agreements it is quite reasonably certain that the Chinese hardware has made its way into the Taep'o-dong-2 class missile technology. The most recent example is the 10 wheeled No-dong-A TEL straight from the PRC. This same report also stated that the Taep'o-dong-2 class booster was a joint Iranian, North Korean effort with Chinese, Russian collaboration which is also known as the Iranian Shahab-5 and Shahab-6 space booster ICBM as has been repeatedly stated by this Globalsecurity.org web site.
Though these figures are only good through 2006 and partially for 2009 and 2012 for the North Korean command economy it perhaps does give some perspective of intelligence thinking on the equivalent world cost to the North Korean regime though they are and have no real value to world currency true value with in the DPRK (North Korea).
1. As I was taught at George Washington University and the Armed Forces Communications and Electronics Association courses on Soviet Economics Military S & T Prospects by James T. Westwood, Military Science and Defense Analytics, Unionville, Virginia,
1. N. Korea Vows to Continue Satellite Launches, The Chosun Ilbo, http://email@example.com , Oct. 26, 2012, P. 1
1A. KOREA NEWS SERVICE (KNS) http://www.kcna.co.jp/index-e.htm, Oct 26, 2012, P.1
2. Charles P. Vick Wrote the Following: NK IR Policy issues: Sat 10/15/2011 11:10 AM, Thu. , 10/20/2011 9:10 AM private Communications:
9. Gertz, Bill, “ N. Korea tests its missile engine“, The Washington Times, 3, July 2001, pp. 1 and 7.
10. Gertz, Bill, “Gore Raises Sale to Iran with Chernomyrdin”, The Washington Times, 13, Feb. 1997, p.?
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