The economic side of the Moon-Kim summit

September 21st, 2018

By Benjamin Katzeff Silberstein

The economic aspect has been continuously front-and-center throughout the Moon-Kim summit in Pyongyang (September 19–20). From a diplomatic standpoint, this is not all that surprising. Moon and Kim are pursuing what appears to be a rather classical Sunshine 2.0 pattern, with roughly the same contents as the predecessor. As Yonhap reports:

Earlier in the day, the leaders of South and North Korea agreed to work together for balanced economic development on the Korean Peninsula.

South Korean President Moon Jae-in and North Korean leader Kim Jong-un agreed to break ground on a joint project to connect railways and roads across their border this year and vowed diverse cooperative projects to deepen their friendly ties and foster a reconciliatory mood.

The agreements were reached during summit talks held in Pyongyang between Moon and Kim.

“We will prepare for (inter-Korean economic cooperation) in a calm and orderly manner,” Finance Minister Kim Dong-yeon said in a meeting with reporters here.

“But inter-Korean economic projects can gather speed if circumstances improve,” he said.

The minister said any inter-Korean economic projects should need support from the international community, and there are still many things to be done in advance.

The latest agreement came months after the leaders reached a deal during their April summit to modernize and eventually connect rail and road systems across their divided border.

Field surveys have been carried out to examine the state of some sections of the North’s rail and road networks, but the process has not moved fast enough, apparently due to stringent sanctions imposed on the North for its nuclear program.

Railways and infrastructure are both less politically touchy than outright trade, and potentially mutually beneficial, even though the south will carry the economic burden:

“The South and the North agreed to explore practical measures aimed at increasing exchange and cooperation and seeking balanced development,” read a joint statement they signed after the summit.

“The two agreed to hold a ground-breaking ceremony this year for connecting railways and roads running along their eastern and western coasts,” it also stated.

The decision came months after the leaders reached a deal during their April summit to modernize and eventually connect rail and road systems across their divided border. The Seoul government has set aside nearly 300 billion won for next year to carry out those projects.

Field surveys have been carried out to examine the state of some sections of the North’s rail and road networks, but the process has not been fast enough, apparently because of global sanctions on the North.

The second point of the Pyongyang Declaration promises more economic cooperation for “balanced” growth, and vows to reopen projects such as the Kumgangsan tourism zone, and the Kaesong Industrial Park, according to Moon, “when conditions allow“. Here’s an English-language full-text version of the declaration. A particularly interesting but understudied point is 2.3, on ecological cooperation.

Kim Jong-un’s forestry interest has been a recurring theme throughout his tenure, and as this blog has covered, he’s spoken about the problems associated with excessive tree-felling – the root cause of which is North Korea’s planning failures of the 1990s – in more honest terms than his father did. At the very least, there’s been strong hints of both pragmatism and understanding of North Korea’s structural problems in the way that Kim has talked about the forestry issue (and many others too for that matter). Indeed, the Korea Forest Service chief accompanied Moon to Pyongyang, and he hopes to get to work soon following the summit:

“Forests surrounding populous urban areas were heavily destroyed, but forests in less populated regions were well-preserved,” Kim Jae-hyun said in a meeting with reporters at a government complex in Daejeon. “I saw enough hope.”

He was speaking after accompanying South Korean President Moon Jae-in’s visit to North Korea from Tuesday to Thursday.

As the first step, Kim said the Korea Forest Service will explore ways to create tree nurseries in much-destroyed regions.

“The North Korean side wants large-scale tree nurseries, but it would be more practical to start with small nurseries in regions suffering from deforestation the most,” he said.

In regard to disease and insect control efforts, the official said the use of machinery could be limited as the North is under U.N. sanctions for its missile and nuclear tests, while pesticides are allowed.

“I think (the disease and insect control measures) should start immediately to build trust between the two Koreas,” he said.

The forest expert said his North Korea visit as part of the official entourage showed Moon’s “willingness” to pursue inter-Korean cooperation in the forest sector.

“Looking down from an airplane along the western coastline, North Korea’s forests were very impressive,” Kim said. “There were few trees on hills near Pyongyang, while trees were well-maintained on the way from Sunan Airport to Baekhwawon guesthouse.”

Mountains near Yalu River on the North Korean border with China were denuded, but Mount Paekdu showed off all colors of beautiful trees, he said.

Moon and Kim aren’t the only ones who have talked about economic cooperation. The mayor for Busan, South Korea’s second most populated city, for example, has announced projects that his city will spearhead. Yonhap again:

Busan’s envisioned projects, unveiled in time for President Moon Jae-in’s historic visit to North Korea, call for boosting the city’s cooperation with the North in the fields of fisheries trade and processing, modernization of fishing vessels and equipment, shipbuilding, exhibitions and conventions and smart city technology, the city said.

The city will push to invite North Korean filmmakers and actors to the Busan International Film Festival and hold an inter-Korean film festival.

Nikkei Asian Review also reports that the Moon government has put pressure on Samsung and its head, Lee Jae-yong, to present a large-scale investment plan for North Korea. Samsung has manufactured TV:s in North Korea before, but this time around, the company hasn’t appeared as eager as its other chaebol-counterparts to draft up implementable blueprints for investments up north. Politically, it makes sense. Samsung’s PR hasn’t exactly been superb as of late, with the arrest and later release from prison of its CEO relating to corruption charges tied to the Choi Soon-sil/Park Geun-hye-scandal.

South Korea’s main steelmaker Posco is also hoping for opportunities following the summit:

The executive was part of the business delegation that accompanied President Moon Jae-in on his trip to North Korea earlier this week. Choi and other businessmen discussed various inter-Korean economic cooperation projects that can be pursued going forward if conditions are right.

“It will be a big opportunity not only for POSCO but for the steel industry as a whole,” Choi said. “I think POSCO will be able to find chances for growth.”

The company recently created a new task force to prepare for potential business opportunities in North Korea. POSCO Daewoo, POSCO Engineering & Construction Co. and POSCO Chemtech Co. are participating in the task force.

The steelmaker said it wants to play a key role in railroad and other infrastructure projects in line with the changes in the geopolitical environment in Northeast Asia.

My five cents on what all this entails for the North Korean economy:

Of course, as of yet, nothing. Most of the plans and visions are routinely accompanied by the caveat “when conditions allow”. The infrastructure plans may be able to go ahead even with sanctions in place, at least the rhetoric from the Moon administration, and the timetable for breaking ground on the railway connections before this year is over, seems to suggest so. I’m no expert on the judicial side of the sanctions, but it’s hard to imagine that this will be fully uncontroversial from that standpoint.

In any case, North Korea is in dire need of infrastructure improvements and if they are extensive enough, they should hopefully not just connect South and North Korea with Russia and China for cheaper freight, but also make domestic goods transportation simpler and more efficient, with positive impacts for the markets and private manufacturing in the country.

On re-opening Kaesong, things are a bit more complicated. In its nature, Kaesong is a manufacturing zone mostly cut off from the rest of North Korea. Sure, the incomes of the workers did enter the North Korean economy, and arguably, the fact that South Korean consumer goods could to some extent enter North Korean markets through Kaesong spurred competition for more high-quality goods on the North Korean market as well. But Kaesong is hardly the only, and perhaps not even the main route through which such products enter the country. These are also pretty weak arguments when you look at the entire economic picture.

The problem with Kaesong isn’t so much what it was/is/will be, but the missed opportunities. The hope with special economic zones tends to be that institutional frameworks that are tried there first can later spill over into the rest of the country. In the case of North Korea, the arrangement made pretty sure that that didn’t happen, at least from what we can tell. Had inputs been sourced from North Korea, that could also have spurred wider economic growth, at least in some regions. In theory, there are lots of opportunities for synergy and cooperation between South Korean companies and smaller North Korean ones, not just the state. If the goal is economic development in North Korea more broadly, and not just economic profit on the southern side and incomes for the north, there are lots of models that carry far greater potential.

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Explaining North Korea’s exchange rate stability: it’s all about the companies

September 13th, 2018

By Benjamin Katzeff Silberstein and Peter Ward 

The stability of the market exchange rate for won-to-US dollars has been one of the most puzzling features of the economy over the past few years, and particularly so during the so-called period of “maximum pressure” and heavy sanctions by the international community. The market exchange has not once moved out of its ordinary – also remarkably stabile – territory over the past few years, as the following graph shows with clarity:

Won for USD-rates on the markets, 2009–September 2018. Data source: Daily NK. Graph: NK Econ Watch.

Thus far, to my knowledge, there have been two main, potential explanations:

(1) Maximum pressure is not having a meaningful impact on the North Korean economy as a whole. Even though it can’t export coal, minerals or textiles under current sanctions, its main sources for foreign currency revenue, the sanctions aren’t being enforced strictly enough to impact the economy as a whole, and foreign currency keeps flowing into the economy.

This explanation is pretty easy to dismiss offhand, since we know with more or less certainty that North Korea’s exports of these goods have plunged as Chinese sanctions enforcement has been fairly strict since the late summer/early fall of last year, even though it’s waxed and waned as it always does.

(2) The second explanation, most notably put forward by Bill Brown, is that Pyongyang is much better at monetary policy management than they’re given credit for. Chiefly (but not solely) through decreasing the amount of won in circulation, by giving state-owned enterprises (SOEs) smaller loans and credits in won, the government is able to keep the exchange rate stabile.

Speaking with my friend and colleague Peter Ward, a researcher of North Korean economic policy under Kim Jong-un and avid reader of North Korean economics journals, he explained a third possibility, partially in line with the latter hypothesis posed above. Ward visited North Korea twice in the past year, and was able to confirm many of the economic policy developments he had first detected in the literature from Pyongyang.

In short, Ward’s explanation is as follows: the main holders and users of foreign exchange in North Korea are not individual citizens, but state-owned enterprises, which legally (since 2013) use foreign exchange in transactions amongst themselves. The quantities of foreign exchange held by SOEs make them, and not the foreign currency markets that individual citizens access and use, the main determinant of the market exchange rate for foreign currency. Therefore, most of the foreign currency in circulation has been there for several years, not entering or exiting monetary circulation.

I asked Ward to share some of his thoughts with the readers of North Korean Economy Watch. Below is a brief Q&A of sorts.

Benjamin Katzeff Silberstein (BKS): first, when did this practice of SOEs trading in foreign currency become common and legally permissive?

Peter Ward (PW): probably around early 2013. This is when the “policy to make domestic production and exports one” came into force. The idea is to align domestic input prices for manufacturing, and consumer goods prices, with prevailing prices on international markets. This is literally what North Korean economics literature says that they aim to do, despite ostensibly being a socialist system in theory.

BKS: How is the FX-market price in North Korea determined? And where do the FX-market for SOEs and that for private citizens intersect?

PW: We don’t know, but one could imagine that there are major foreign exchange markets in North Korea – regional markets, both markets on the ground, so to speak, and between enterprises within regions. How does the center know the prevailing price? The regional price department of the regional People’s Committee price office and market management office (they may either be separate or the same) probably simply calls the local People’s Committee, who supposedly gathers this information from the local market management offices. At any rate, there’s reporting of the prevailing local exchange rate throughout the system.

Major enterprises will also know how much their inputs costs in foreign exchange, and a sense of how much their products would sell for on the world market. In that way, they’re able to assess the costs of their inputs in the world market (or at least China), and know how much they need to charge to make a profit or break even.

The market for individual citizens and SOEs intersect at several levels. SOEs likely source much of their inputs from wholesale markets, and from domestic private traders. They also obtain some of their foreign exchange from loans from private individuals. Private citizens can legally lend money to SOEs, but investments in SOEs by private citizens also happen, though they’re technically not legal, and both these investments and loans probably happen quite often in foreign exchange.

So the market price equilibrium happens through all these conduits, and as on any market, it is determined by countless instances of bargaining between traders, SOEs, and to a proportionally smaller extent, private citizens.

BKS: so where is the FX coming from, to begin with?

PW: if most inter-enterprise contracts and transactions are denominated in foreign currency, they’d be insulated from any sudden, exogenous trade shocks, such as sanctions. They’re still trading amongst themselves with whatever FX-holdings they have. For all intents and purposes, foreign currency inside North Korea is the principal legal tender – that’s what’s likely used for all major transactions inside the country, so exogenous shocks such as sanctions, from the outside, don’t necessarily impact the market price for foreign currency inside the country.

BKS: Is it likely, in your view and judging from your observations in North Korea, that the government maintains a price ceiling on the market exchange rate?

PW: Yes, it is. The government maintains price ceilings on a range of commodities, at least that’s what people inside the country say. They probably have an informal peg to the RMB, since China is their principal trade partner. It looks like it, but we don’t know for sure if they do. One possibility is that have significant cash reserves of RMB…

BKS: is it possible that China is simply helping North Korea keep the won stabile, by simply funneling RMB in?

PW: that’s certainly a possibility. The North Korean government keep a very close eye on the exchange rate, both in terms of physical cash in circulation and deposits in bank accounts, which SOEs have – both domestic and foreign currency bank accounts. They’ll keep a tight control over domestic currency-denominated loans to SOEs – that’s certainly one way of doing it. State banks will probably be encouraged to denominate such loans in foreign currency.

The government can also keep a pretty tight rope around money in circulation, since enterprises now have their own individual accounting system. The central government isn’t constantly borrowing money from the central bank to pump into SOEs, so the amount of money created by the central bank to lend to SOEs has gone down a lot.

That, at least partially, explains how the government manages to keep domestic currency circulation down. It doesn’t look like they’re printing much money overall, I saw bills from the pre-2009 currency re-denomination being used as late as July this year. And the highest denomination of North Korean won in circulation is the 5,000 won note, which has a market value of around 60 US cents, hardly appropriate for anything more groceries.

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North Koreans are getting paid deposits on banking, scholar says

September 12th, 2018

By Benjamin Katzeff Silberstein

Daily NK recently reported on a conference in Seoul, where one scholar working on the North Korean economic system, Jung Eun Lee, said that there’s at least anecdotal evidence to suggest that some North Koreans, who have (bravely) chosen to deposit money in regular banks, are actually getting paid interest on their deposits:

Another researcher at the press conference stated that system-wide, market-friendly reforms have occurred in the financial sector following Kim’s rise to power. North Korea under Kim Jong Un has been implementing a policy where “idle currency” is absorbed into the official economy. The policy is significant because it shows that the state is partially adopting capitalist practices.

“The North Korean authorities are emphasizing bank credit and releasing articles saying that ‘banks do not ask about the state of [customers’] ownership or the source of their deposit balance,” said Jung Eun Lee, another research fellow at KINU. “There are more and more North Koreans who say they have received both the principal and interest from their money deposited in North Korean banks.”

“What is more interesting is that the North Korea’s Central Bank launched a domestic electronic payment card called the Jongsong Card in 2015, and the number of stores accepting the card is increasing […] The use of electronic payment cards is increasing in Pyongyang and their use is expanding because [consumers] benefit by being able to prevent exposure of their identities, and are not burdened by the need to accept change during their financial transactions,” Jung concluded.

Full article:
Increasing autonomy for North Korean enterprises
Ha Yoon Ah
Daily NK
2018-09-10

There is likely much more happening under the surface in North Korean financial development than what reaches the audience in South Korea in the rest of the world. (See, for example, Peter Ward’s recent twitter-thread on financing of state-owned enterprise operations). If this assessment is true – that North Koreans have, in sizable numbers, been receiving interest on their deposits, it’s pretty significant. I’m not fully sure it’s a new development, but given the backdrop of the past few years – not least the currency revaluation in 2009 – it would mean that the official banking system has been able to gain some hard-earned trust back from at least a portion of citizens.

Now, it’s entirely possible that people are primarily depositing money for other reasons than savings. For example, with the payment cards that have popped up in recent years, people by definition have to deposit their cash with state-owned banks to use these cards, which many may do simply out of convenience. And then, the deposits earn interest as a nice side-effect. It’s certainly notable if more North Koreans trust that state-owned banks won’t confiscate the hard-earned cash that they choose to deposit, but it might not be a revolutionary development.

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Dollar exchange rate on North Korean markets at high-point

September 5th, 2018

By Benjamin Katzeff Silberstein

One of the more puzzling issues through the “maximum pressure”-period and harsh Chinese implementation of international sanctions on North Korea has been the lack fo significant changes in the market exchange rate between the won and the dollar. For a number of apparent reasons – lack of inflow of hard currency being the most significant one, as North Korea’s exports have dwindled – we should have logically seen the exchange rate appreciating, and the dollar becoming more expensive. This largely hasn’t happened.

The won is still remarkably stabile, but over the past few weeks, it’s gone up to higher levels than at any point through 2017 and 2018. An average of the three cities reported in Daily NK’s four most recent observations show that the dollar trades for an average of about 8237 won, the highest observation that I can find in my dataset (based on Daily NK price reports) since the summer of 2016.

Won for US-dollars at market rates, 2017–September 2018. Data source: Daily NK. Graph: NK Econ Watch.

It’s doubtful whether this suggests any significant change in market conditions. Currencies, after all, fluctuate, and this change isn’t all that great. The won is up by less than 200 since the previous observation, from 8041 on July 31st. That’s not a massive change, or beyond the scope of normal currency fluctuations. In a bigger-picture perspective, things still look remarkably stabile, as the graph below shows. Looking at the won-USD-exchange rate since 2009, it’s still very much hovering around 8000, perhaps and highly speculatively a currency peg the North Korean government has chosen, and is able to keep up through means that remain unknown.

Won for USD-rates on the markets, 2009–September 2018. Data source: Daily NK. Graph: NK Econ Watch.

Still, a number of things may be happening here. The most obvious factor to consider is whether the current stall between the US and North Korea in negotiations is causing people to hoard dollars, anticipating further restrictions in trade and currency inflow. Off the top of my head, this seems unlikely. If the won-USD-market exchange rate didn’t move much when North Korea was being slapped with sanctions against all of its crucial export goods, I doubt that a lack of diplomatic movement could move the exchange rate to higher levels than during, say, the summer and fall of 2017, when tensions were really ramping up.

It is more likely that domestic conditions are behind the increase. For example, border controls on trade and smuggling reportedly tightened on the Chinese side around mid-August. On the North Korean side of the border, too, news reports indicate that security has tightened as the 9th of September approaches, North Korea’s 70th founding anniversary. It’s also possible that the government’s generally increased demand for resources around the holiday has impacted the currency market.

Alone, this increase says little. Should the USD consistently keep appreciating on the markets, however, that would suggest more serious and prolonged difficulties for border trade and economic conditions overall.

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Electricity supply in Pyongyang keeps getting better as sanctions drag on

September 5th, 2018

By Benjamin Katzeff Silberstein

As North Korea’s economically crucial minerals exports are massively down (coal exports by over 70% in 2017 as compared with 2013, for example), some in the country see positive side effects. With coal not being exported, it is instead sent to the part of the country with the highest purchasing power after the previous exports recipients: Pyongyang, as the following article in Daily NK notes (as of now only in Korean, I believe). Electricity supply, indoor heating and warm water supply have all reportedly improved, at least in parts of the city, as a consequence.

This illustrates a crucial point on sanctions. They don’t hit all North Koreans equally, and whatever one may think of the efficiency and political justification of sanctions, the northeastern coal-producing regions are undoubtedly harder hit than the capital city. Daily NK:

최근 북중 접경지역으로 나온 평양의 한 주민은 5일 데일리NK와의 통화에서 “우리가(북한이) 여태까지 중국에 석탄을 수출하다보니 (화력)발전소를 제대로 못 돌렸었다”며 “하지만 이젠 동평양 화력발전소하고 평양(평천) 화력발전소에서 전기를 꽝꽝 만들어 평양으로 보내고 있다”고 전했다.

대한무역투자진흥공사(KOTRA)에 따르면 2017년 북한 광물 수출액은 대북제재가 본격적으로 시작되기 전인 2013년에 비해 64.7% 감소한 것으로 나타났다. 같은 기간 무연탄은 70.8% 감소한 것으로 조사됐다.

또한, 통계청에 따르면 북한의 화력발전 발전량은 2013년 이후 82억kWh에서 2016년 111억kWh로 37.9% 늘어난 것으로 나타났다. 2017년 북한 발전량에 대한 정확한 통계가 조사되지 않았지만 전반적인 발전량 상승 추이로 볼 때 2017년 북한 화력발전소 발전량도 상승했을 것으로 예측된다.

석탄의 내수용 전환과 전력 사정 개선은 난방 및 온수공급에도 영향을 미친 것으로 보인다.

평양의 대다수 가구는 열병합발전에 의한 난방으로 설계됐지만, 그동안 화력발전소들이 제대로 가동되지 않아 난방 문제는 항상 골칫거리였다. 그러나 최근 발전소 사정이 나아지면서 일부 세대에 난방이 공급되고 있는 것이다.

소식통은 “려명거리 같은 최근에 지어진 집들은 발전소 사정이 좀 나아져 온수 난방이 어느 정도 돌아가고 있다”고 말했다.

Full article:

Pyongyang resident: as sanctions stop coal exports, the electricity situation is improving [평양 주민 “석탄 수출길 막혔는데 전력 사정은 좋아져”]
Moon Dong-hui
Daily NK
2018-09-05

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Red Cross warns of heatwave threatening North Korea’s food production

August 10th, 2018

Benjamin Katzeff Silberstein

Full press release:

Beijing/Geneva, 10 August 2018 – A heatwave in the Democratic People’s Republic of Korea (DPRK) will have serious health consequences for children and elderly people unless urgent action is taken.

There has been no rainfall in DPRK since early July and temperatures are averaging 39 degrees C (102.2 degrees F) across the country. The next rain is expected in mid-August. Any threat to food security will have a serious effect on an already vulnerable and stressed population – a similar dry spell in 2017 caused a 7.2 per cent drop in food production at a vital point of the harvest cycle.

Joseph Muyambo, Programme Manager for the International Federation of Red Cross and Red Crescent Societies (IFRC) in Pyongyang, said: “This is not yet classified as a drought, but rice, maize and other crops are already withering in the fields, with potentially catastrophic effects for the people of DPRK.

“We cannot and must not let this situation become a full-blown food security crisis. We know that previous serious dry spells have disrupted the food supply to a point where it has caused serious health problems and malnutrition across the country.

“It’s children aged under 5 who will suffer the most. High levels of malnutrition can cause impaired physical and cognitive growth, and this is completely unacceptable. The lives of elderly people and those already suffering from illnesses are also at risk during this heatwave.”

Today, IFRC released 213,474 Swiss francs from its Disaster Relief Emergency Fund to help the DPRK Red Cross to support more than 13,700 of the most vulnerable people at risk from the heatwave.

The Red Cross has deployed emergency response teams and 20 water pumps to irrigate fields in the hardest-hit areas, while staff and volunteers are helping to raise awareness of the signs, symptoms and treatment of heat-related illnesses.

Even before the current crisis, more than 10 million people – 40 per cent of DPRK’s population – needed humanitarian assistance. This worrying situation has been exacerbated by the impact of international sanctions on DPRK, which have made it difficult for aid and supplies to get into the country and to reach people who desperately need support.

The press statement can be found here, on the IFRC website.

International bodies have previously warned of looming food shortages and poor harvests in North Korea, only to later see crop yields come out larger than expected. Let’s hope that’s the case this time as well. It’s also worth remembering that it’s not bad weather per se that threatens North Korean food production, but poor institutions and bad agricultural policies that lay at the core of the problem.

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Russia rejects new sanctions on North Korea

August 10th, 2018

Benjamin Katzeff Silberstein

Full comment here by the Russian Foreign Ministry:

Russia has blocked the US application to the UN Security Council Sanctions Committee on North Korea (1718) on introducing international sanctions against one individual and several legal entities, including the Russian commercial bank Agrosoyuz that are allegedly involved in illegal activities that are violating the sanctions regime against that country.

The US-presented evidence in support of this proposal is totally unconvincing.  We cannot accept the pressure exerted by the US delegation in the UN Security Council and its subsidiary bodies, which has already become a norm. By means of an artificially tightened deadline, it is trying to push through its own decisions without taking into account the opinion of the other members. The Americans are also obviously trying to use the prestige of UN Security Council Committee 1718 for justifying similar unilateral restrictions that they have just introduced under far-fetched pretexts.

Far from improving the atmosphere of Russia-US relations, the new US sanctions contradict the logic of easing tension around the DPRK. Clearly, Washington is trying to keep Pyongyang under maximum pressure as long as possible, in effect, up to the completion of the denuclearisation process. This policy is destructive for settling the issues of the Korean Peninsula and evokes extreme resentment.

Source:

Comment by the Information and Press Department on the US application to the UN Security Council Sanctions Committee on North Korea (1718) on expanding sanctions
Information and Press Department of the Ministry of Foreign Affairs of Russia
2018-08-10

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North Korean state security agents fine Chinese visitors for making phone calls abroad

August 9th, 2018

Benjamin Katzeff Silberstein

Daily NK:

North Korean Ministry of State Security (MSS) agents have been ramping up the issuance of monetary fines for Chinese business people and drivers in the country for various infractions.

“Chinese business people and truck drivers are being fined for taking calls from China while they are in North Korea,” a source in China close to North Korean affairs told Daily NK on August 7. “A surveillance agent stationed near the Wonjong Border Customs Office is stopping vehicles driven by Chinese business people and truckers who are detected receiving calls and issuing them with fines.”

“Chinese tourists have their phones confiscated by travel agencies so they cannot make calls, but business people and truck drivers are under no such restrictions and could previously receive calls from China without issue,” he continued, adding that international calls to China are permitted within a radius of one kilometer of the customs office.

Chinese nationals affected are responding with incredulity at the 1,000 yuan fines for taking calls from China but “they are forced to pay the fine, however, because they depend on good relations with the North Korean authorities to conduct cross-border business.”

MSS agents have long forced North Koreans to pay bribes in exchange for letting them off the hook for making international calls. But these agents are now more pressed than ever to find ways to earn money and it appears that Chinese nationals are now in their crosshairs.

The North Korean government keeps a watchful eye over the activities of its agents, but corruption has such deep roots within the MSS that agents have no qualms with taking advantage of Chinese nationals.

One of the driving forces behind the push to earn more money is the nationwide requirement to pay “loyalty funds,” which is aimed at supporting development of the Wonsan-Kalma marine tourist zone and the Samjiyon area.

On top of their surveillance of cellphone users, MSS agents are also fining Chinese vehicles that carry North Korean passengers.

‘There are cases where Chinese truck drivers take on North Korean passengers to make a little extra cash, but MSS agents are cracking down on this activity and fining the drivers 500 KPW for each male passenger and 1,000 KPW for each female passenger. Chinese drivers are now increasingly ignoring hitchhikers on the road,” a source in North Hamgyong Province added.

“The fines are causing Chinese business people to be more watchful of their activities in North Korea. Some are even questioning whether they should even be doing business in the country.”

Article source:
MSS agents fine Chinese nationals for infractions to earn money
Mun Dong-hui
Daily NK
2018-08-09

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Daily NK interviews a state security agent on sanctions, defectors, and life in North Korea

August 8th, 2018

Benjamin Katzeff Silberstein

Daily NK:

As changes to the political situation on the Korean Peninsula continue in the wake of the inter-Korean, US-DPRK (abbreviation for North Korea’s formal name) and Sino-DPRK summits, Daily NK recently met with an official from North Korea’s Ministry of State Security (MSS) in China to talk about international sanctions toward North Korea and the inter-Korean relationship. The MSS officer displayed a clear anti-American bias with his own ideological convictions, but also offered some objective evaluations of the North Korean regime.

Following is a transcript of the full interview.

Daily NK (DNK): International sanctions are still in effect for North Korea, as you know.

Ministry of State Security official (MSS): They are hard to accept. I’m not sure whether South Korea is trying to make itself look good in the eyes of Trump as it accepts the continued sanctions against North Korea, but in any case, they [the sanctions] are an irritant. There are many [North Korean] restaurants in China. The sanctions have made it impossible for new workers for these restaurants to enter China, and those who are here must return to North Korea next year.

I can understand [the international community] criticizing North Korea for not living as well as capitalist countries after moving away from socialism and operating in the international market like other countries. However, I’m angry that China, Russia and the South have come together to sanction us and that the US makes us a very poor country by preventing our goods from entering the international market.

If you ask anyone in North Korea – young or old – they will respond that North Korea must fight and drop a nuke on America. I think that Chairman Kim Jong Un got rid of nuclear weapons so that the sanctions would be lifted and our lives would improve, but personally speaking, I think we should drop a nuke on New York or Washington, D.C.

Why are South Koreans so angry about us making intercontinental ballistic missiles? We are seeking peace by destroying our [nuclear] underground facilities, but the US has simply stopped its military exercises. They could restart them again [at any time]. They claim they will get rid of the sanctions eventually but it’s hard to believe that.

DNK: The inter-Korean atmosphere, however, is focused on continuing exchanges and cooperation.

MSS: The sanctions must be lifted first for anything to really happen. With the sanctions still in effect, I could accept that President Moon Jae-in is the “trailblazer of the Korean people,” but he continues to look to America for guidance. We could ask South Korea to lift the sanctions, but they just do what America tells them to do. We are a brave people made up of the worker class, who form the basis of the socialist revolution. We have nothing to lose from a war. South Korea would hate to go to war, but the majority of us [North Koreans] would go to war without hesitation.

DNK: Have you ever watched South Korean dramas before?

MSS: Yes, I’ve watched them in secret in China. I have seen defectors on South Korean dramas like ‘Now on my way to meet you’ and ‘Moranbong Club.’ They don’t necessarily lie about everything; they get some things right. It is true life in North Korea is hard and that there are almost no rations from the government. There are some places that only give two-weeks worth of rations and people make up for the lack of food by going into business and cooking corn porridge, and some people even die due to the lack of food.

However, some defectors say that residents just walk by dead bodies on the street. How could that even be possible in a place inhabited by human beings? Even during the Arduous March [widespread famine of the mid-1990s], that wasn’t the case. Soldiers and inminban [neighborhood watch-like units] dug graves to bury the dead. That [walking by dead bodies] wouldn’t have even happened in Korea’s feudal period.

When I asked someone why the defectors lie like that, I was told that they are given money to appear on such TV shows. They received free education and healthcare in North Korea, but now they turn around and spit on their own country. They talk trash about their own country. I can acknowledge that life is tough in North Korea, and that people are hungry and there is no electricity so it’s difficult for factories to operate. But they [defectors] exaggerate too much.

Generally speaking, the women that go to South Korea end up living fairly well and the reality is that people [North Koreans] go to South Korea. However, half of them have committed some type of crime. They have fled because they have the police on their tail. At least half of them are in this situation. They have run away because they have committed a crime like borrowing money from people, and being unable to pay the money back, they have run away before getting caught by the police and being sent to a labor camp.

It is these types of people who come out on TV, crying and telling lies. I would be extremely upset if I lived [in the type of country they are describing]. There are difficulties in North Korea, but real people live there.

DNK: Does the North Korean state still have ironclad control over the country?

MSS: It is still difficult for people to move around freely. Nobody can go from the provinces into Pyongyang. You must have a pass to do that. I hope that the country will soon become like China where you only need a residence card to travel. We have a lot of problems. I hope that these problems will be resolved.

In China, people can send instant messages to those living in Germany or England. North Koreans can take pictures with their cellphones, but cannot use the internet. North Koreans cannot make international calls, either. They couldn’t even dream of it.

The state is worried about the impact of bringing in ‘capitalist-related things’ into the country because they could dampen the people’s ideological stance. I think in some ways the state’s restrictions on foreign things has helped keep North Korea’s ideological stance free of contamination.

Article source:
North Korean state security agent shares thoughts on sanctions, defectors and life in North Korea
Kim Song Il
Daily NK
2018-08-08

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North Korean officials disheartened over this year’s harvest

August 8th, 2018

Benjamin Katzeff Silberstein

Daily NK:

As North Korea continues to reel from an unprecedented heat wave, the authorities are conducting a nationwide assessment of the damage that has been inflicted on crops as well as on-site farm visits, report sources in the country.

“The temperature has risen daily and there’s no rain, so crops all over the country are drying out,” said a North Hamgyong Province-based source on August 6. “The authorities are investigating the damage done to the agricultural fields.”

The source said that the authorities have sent investigative teams to farms throughout the country who are taking photos of the damage and sending them back to central headquarters.

The roots of the corn crops have yellowed because they have dried out from the lack of rain. North Koreans consider the agricultural season to be “finished” this year. Farmers have suffered from both the double impact of intense heat and drought.

In Musan County, where mining activities have stopped, many miners have sought to obtain land after facing significant difficulties. The intense drought has created concerns about how they will feed their families.

“There are many people saying that the ‘weather is killing us’ while beating their fists against their chest in front of their dying crops,” said a source in Ryanggang Province.

“The authorities likely wanted to show people that they are keeping an eye on things and making an effort to improve the situation.”

Officials who are part of the investigation teams, however, are reportedly saying that there is no hope in recovering from this year’s agriculture troubles.

“Officials have dwindling hope about this year’s harvest, and some even say the only thing to do is wait for the intense heat to end,” the Ryanggang-based source added.

Meanwhile, the state-run publication Rodong Sinmun has reported, “Farmers are taking it upon themselves to conduct a powerful campaign to prevent damage [to the crops] from high temperatures and drought.” The state authorities are emphasizing “self-sufficiency” as a tool to combat damage to crops, which also hints that the authorities have little in the way of clear cut measures to deal with the situation.

Article source:
Disheartened North Korean officials label this year’s harvest ‘dead in the water’
Kim Yoo-jin
Daily NK
2018-08-08

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