Archive for July, 2008

DPRK bolsters social security laws

Monday, July 21st, 2008

Institute for Far Eastern Studies
NK Brief No. 08-7-17-1

Recent transformations in the North Korean economy and society have led the government to draft policies to link the social welfare matrix to the social security law. The ‘Democratic Chosun’, a publication of the Central Peoples’ Standing Committee and the Cabinet, has on five occasions (April 3 and 4, May 14, 16, and 23, 2008) run articles titled, “Regarding the Social Security Law,” explaining recent changes to the law and its affects on the North’s social welfare.

This law contains six sections and 49 articles, the purpose of which is to strictly establish the structure and methodology of the nation’s social security system, and to protect the health of the people while providing them with secure and happy lives. Details of the law have not yet been made available.

North Korea established the National Social Security Law on August 30, 1951, although it was not actually enforced until after the April 14, 1978 Socialist Labor Law was passed. North Korea’s social security system is a means with which to control the country’s socialist economy, and also acts to restrict the lives of the people, as well. From when the September 8, 1948 Constitution was passed right up until today, North Korea has provided its people with social insurance and social security systems. Society’s sick, feeble, and handicapped receive treatment assistance or material support from the social insurance system.

By looking at past transitioning countries, one can see that transforming systems and quickly changing social and economic structures lead to linking of social security with social welfare in order to protect the society’s weak. In North Korea, the passing of the July 1, 2002 Economic Management Reform Measures and other sudden changes in the social and economic environments raised concerns regarding the issue of protecting the country’s most vulnerable. Combined with the North’s food shortages, the protection of the society’s elderly, children, pregnant, and other vulnerable elements has become a special issue of concern for North Korean authorities.   

NKeconWatch commentary:
This article surprised me.  Aside from this post, IFES updates are pretty well researched.  Does anyone really believe that the dejure intent and defacto incidence of legislation in North Korea are the same?  You would have to be completely ignorant of life in any communist country to actually believe the statement, “From when the September 8, 1948 Constitution was passed right up until today, North Korea has provided its people with social insurance and social security systems. Society’s sick, feeble, and handicapped receive treatment assistance or material support from the social insurance system.”

Not only is health care under-supplied in the DPRK, it is also not provided free-of-charge.  I am told by people who have had to obtain health care in the DPRK that you generally have to pay bribes to get access.  This was the reality of life in most communist countries. Here is a much better analysis of the supply of health care in the DPRK. 

As for the concern of North Korean authorities to maintain a social safety net during a difficult economic transition, this is no doubt true for a number of DPRK policy makers.  But the people who actually make decisions are still siding with security hawks who refuse to give aid workers and NGOs the freedom they need to effectively help people.


N Korea worker killed in Kaesong

Thursday, July 17th, 2008

From the BBC:

A North Korean worker was killed and four others were injured in an accident in the Kaesong industrial complex in North Korea, Southern officials said.

It happened when a steel frame collapsed at a factory owned by a South Korean company, Pyeongan, on Wednesday.

An investigation into the cause of the accident is reportedly under way.

Two of the four injured are in critical condition, a spokesman for South Korea’s Unification Ministry said, according to Associated Press.

They are all being treated in a hospital in the zone.

Read the full story here:
N Korea worker killed in Kaesong


GPI Consultancy: Economic Mission to North-Korea

Wednesday, July 16th, 2008

Netherlands Centrum voor Handelsbevordering
27 September – 4 October 2008  
View the information flyer with more information here: it-tour_dprk.pdf

For the past decades, the Democratic People’s Republic of Korea (DPRK) also known as North-Korea has been one of the most isolated countries in the world. Until recently, foreign companies could hardly enter this country. Inspired by the economic successes of its neighbouring country China, North-Korea has since a few years opened its doors for foreign enterprises. The DPRK established several free trade zones to attract foreign investors. In 2002 North Korea started to experiment with the Kaesong Industrial Region, near the South-Korean border. Moreover, other areas were designated as Special Administrative Regions, such as Sinŭiju near the border with China.
Currently, China and South-Korea are the most important trade partners of North-Korea; their mutual trade is growing fast. Also for European companies there are many opportunities to trade with North-Korea. During the recent seminar: ‘Doing Business with North-Korea’ (The Hague, 30 May) the representative from North-Korea highlighted that there are business opportunities in several fields, including Textile Industry, Shipbuilding, Agro Business, Logistics and Information Technology.

DPRK finds itself at the beginning of a new era of openness. In North-Korea there is a need for many foreign products and investments. The Chamber of Commerce Amsterdam, GPI Consultancy and the Netherlands Council for Trade Promotion are organizing an economic mission to investigate the business opportunities for foreign companies in this country. This unique economic mission to North-Korea will take place from 27 September to 4 October 2008. Our partner in North-Korea is the Pyongyang Chamber of Commerce. Mr. Renze Hasper, Member of the Board of the Chamber of Commerce Amsterdam, will be the mission leader of this economic mission. 
The program includes individual matchmaking, company visits, network receptions and dinners. Furthermore, a visit is being planned tot the Kaesong Industrial Region.

GPI Consultancy is responsable for the IT-program of the mission. As an example, the program for the IT-delegates has been attached; they will visit firms in Pyongyang in the field of software development, animation, cartoons, computer games and BPO (Business Process Outsourcing). Similar matchmaking visits will be arranged for delegates from other business sectors.
The mission is open for participants from other countries as well.
If you are interested in joining this trade mission, please contact:

Paul Tjia
GPI Consultancy
P.O. Box 26151,
3002 ED Rotterdam,
The Netherlands
E-mail: [email protected]
tel: +31-10-4254172 
fax: +31-10-4254317


What caused the DPRK’s spring ’08 food price increases?

Sunday, July 13th, 2008

North Korea’s agricultural and food markets suffer from a number of permanent constraints that prevent their efficient operation.  Rail transport is slow and/or unreliable, internal travel restrictions for “ordinary” merchants, and poor road conditions limit the distance food can travel before it goes bad.  Restrictions on communications and lack of a futures market makes it difficult to know how much food is available in each location, or what is expected to be available in each location.  This leads to hoarding, volatile prices, and a mismatch between local supply and demand.  Compounding these basic problems is a poor business environment characterized by collective farming practices, corruption, bribery, poor property rights protection, poor contract enforcement, and ex-post expropriation of profits.  Given these constraints, it is amazing agricultural and food markets work at all. 

In addition to these factors, the DPRK’s food markets suffered a number of adverse supply shocks this year from flooding, China’s restrictions on food exports, and a decrease in expected food aid from China, South Korea, and the US (See the effects on prices in this chart by Noland/Haggard/Weeks here). The arrival of food aid has since brought some of these prices down.

This week, the Daily NK reports on two other causes of price increases in the DPRK: Anti-corruption campaigns and restrictions on farming private plots.

Anti Corruption campaigns (more here and here)

He reported that “From March to late April, for almost 40 days, inspections were undertaken nationally. In Hwanghae Province, the inspection groups under the Central Court came down and confiscated food which the cadres in farms had embezzled. In some cases, they confiscated 500-1000kg of rice and grains from cadres’ households by searching with metal sticks in their backyard.”

The Director of the Ministry of Administration of the Chosun (North Korea) Workers’ Party Jang Sung Taek and his inspection group went to Shinuiju and inspected persons in charge of trading.

No. 112 Land System

The No. 112 land system operates whereby the authorities offer a certain width of fallow lands, which are different by grade of food distribution amount, to national public servants and clerical workers, given in order to make them solve their food problem by farming instead of relying on distribution. Ishimaru explained that “However, the new Kim Young Il cabinet abrogated this system and banned them from planting seeds on those fields.” 

Read the full story here:
Intensive Inspections in March and April a Direct Reason for Rise in Food Prices
Daily NK 
Kim So Yeol


(UPDATED) DPRK signs ASEAN non-agression treaty

Friday, July 11th, 2008

UPDATE: From Voice of America:

North Korea’s foreign minister signed the Treaty of Amity and Cooperation – often called the TAC – at the conclusion of the Association of Southeast Asian nations regional security forum, Thursday in Singapore.

The deal was drafted in 1976, and has been signed by all of ASEAN’s ten members, plus 14 other nations including South Korea, with whom North Korea has never formally concluded its 1950s war.

Alan Chong, a political science expert at the National University of Singapore, says the TAC is very general, but sets a framework for peace.

“It has been morally binding in a positive way rather than legally binding. It is a diplomatic device that commits signatories to this notion of a minimal peaceful coexistence, you know, ‘Don’t resort to the use of arms and other physical hostile measures the moment you have international disputes,'” said Chong.

ORIGINAL POST: According to Bloomberg:

North Korea agreed to sign the Association of Southeast Asian Nations’ non-aggression treaty, Kyodo News reported yesterday, citing a letter by the communist state’s Foreign Minister Pak Ui Chun.

North Korea has requested the treaty not be imposed on its relations with countries outside the 10 ASEAN members, the news service said, citing the letter from Pak to Singaporean Foreign Minister George Yeo, ASEAN current chairman.

ASEAN member nations: Brunei Darussalam, Cambodia, Indonesia, Lao PDR, Malaysia, Myanmar, Philippines, Singapore, Thailand, Vietnam.

Read the full stories here:
North Korea Signs On to Southeast Asia ‘Amity’ Pact
Voice of America
Kurt Achin

North Korea to Sign ASEAN’s Non-Aggression Treaty, Kyodo Says
Takahiko Hyuga


Pyongyang wants McDonald’s franchise?!?

Wednesday, July 9th, 2008


Burger Chain ‘Rebuffed N.Korean Overtures’
Choson Ilbo
Influential North Koreans tried to bring McDonalds into the country, but the fast-food chain declined citing lack of profitability, Radio Free Asia reported Wednesday. RFA quoted Nancy Mazeska at MacDonald’s International Franchise Division as saying the person who contacted the chain probably had “political connections” and a “history of success in North Korea.” But due to the poor infrastructure and distribution network and probable lack of demand, McDonalds decided to take a rain check.

McDonalds at one point thought about letting its franchise in South Korea handle North Korean operations, she said. She did not comment further on who the businessman was and when he contacted the company. According to North Korean press, mass-produced hamburgers were distributed in universities in Pyongyang in September 2000 at the orders of North Korean leader Kim Jong-il.

Many thoughts are running through my head:

1.  Can you imagine?  The “golden arches” right next to the Arch of Triumph in Pyongyang.  Of course the North Koreans would make sure that their “golden arches” were the largest in the world—3 meters taller than the ones in America.

2. Rumor has it that no two countries with a McDonald’s in them have ever attacked each other…with one recent exception: the bombing of Serbia in the 1990s.  Despite the fact that McDonald’s is frequently targeted by anti-American activists, the opening of a franchise in Pyongyang would in fact be a great symbol of hope.

I remember visiting the first McDonald’s in the Soviet Union just after it opened in Moscow.  I stood in line for hours to eat food that tasted exactly like it did in America (of course I was living in England at the time and their food didn’t taste much better than the Soviets’).  The reason I stood in line for so long is because so many Russians wanted to try it as well, and it was finally considered politically acceptable.  The same would probably be true of Pyongyang residents, and the line out the door would be telling.

3.  The hamburger is not entirely unknown to North Koreans.  All outbound flights on Air Koryo serve a hamburger (or at least it is some kind of meat patty in a much larger bun with a piece of lettuce).  In business class, you get it on a plate.  I don’t think it is that great, but it is made in the DPRK.  Here is a bad photo I took of the alleged burger.

UPDATE: 4. ROK Drop wonders if they would have used US beef! 


Lankov’s North Korea scenarios…

Wednesday, July 9th, 2008

As Marcus Noland has noted, one of the most difficult aspects of developing scenarios of North Korea’s future is that we do not know Kim Jong il’s vision for the DPRK after he has passed. Is he grooming members of his family to take his place or just to make sure they are wealthy and protected? Is Kim looking at China as a model? Some reports claim he is looking at Thailand’s royal family. What about a military dictatorship?

This week, Andrei Lankov weighs in with several scenarios he has outlined in four Daily NK stories:

Scenario 1:Kim Jong il follows the China/Vietnam model. Agriculture privatized along with a number of small- medium-sized firms. Workers Party remains in control. Lankov believes this scenario politically unobtainable since the inflow of knowledge of the outside world, particularly of the wealth in South Korea, will make incumbent political legitimacy almost impossible to maintain.

Scenario 2: The North Korean regime collapses because it does not have the power or resources to maintain its authority. If this happens, South Korean might not have any choice but to move to take over despite the high economic costs.

Scenario 3:If North Korea does collapse, South Korea does not have to be the only government to assert control in the territory. China has political and economic incentives to be heavily involved in North Korea’s re-composition, or to enter into a protective relationship with incumbent North Korean authorities. Market reforms would follow and opposition would be manageable.

Scenario 4: Weak political power gives various factions (including the military) space to revolt. Neither China nor South Korea want to get involved in an internal clash and North Korea descends into medium-term chaos.

Taking a step back, I use Lankov’s examples to build a broader scenario map using his drivers (regime strength/weakness and foreign intervention/non-intervention):


(Click on image for larger view)

Along the vertical axis is the strength of the DPRK’s central government. It is strong in the top two quadrants and weak in the bottom two quadrants. Along the horizontal axis is intervention or non-intervention by China or South Korea.

Using this framework, we see that Lankov’s first scenario falls into quadrant 2 (upper right), and economic reforms lead to a weakening of the central government, pushing the country into quadrants 3 or 4. This transition is based on the notion that the North Korean central government, or whichever coalition holds it together, can’t survive an economic transition, mainly due to the visible success of South Korea. I think this is an interesting argument, but I am not entirely convinced by it. Hong Kong is not inspiring revolts in China for the same reasons that North Korea does not need to fall prey to political upheaval—mainly, keep people from organizing and dispersing information, and make sure that some fraction of the productive gains from economic reforms are strategically redistributed as political rents. Of course, it would be interesting to see if a communist government could survive in Hong Kong if China was the giant, capitalist neighbor.

Special shout out to Herman Khan here.

Comments welcome.

ReadLinks to Lankov’s articles below the fold:


labor constraints at Kaesong

Wednesday, July 9th, 2008

According to the Korea Times, the end of official North-South dialogues has put plans on hold to expand housing for workers in the Kaesong Industrial Zone. 

From the article:

Officials at the complex expressed concerns that South Korean companies intending to set up operations there may be unable to do so as a lack of housing will likely see manpower shortages.

According to the Gaesong Industrial District Management Committee, the number of North Korean workers at 72 companies operating in the site totals 30,084 and the figure could reach 40,000 by late this year.

Besides, approximately 80,000 to 100,000 workers would be needed by 2010 when 450 companies are expected to settle in the industrial park.

However infrastructure projections show that less than 60,000 North Korean workers will likely be able to commute to the industrial site.

Currently, North Korean workers head for their workplaces by 88 commuter buses and bicycles and the authorities promised to provide an additional 100 buses until the year’s end.

South and North Korea agreed last December to build dormitories to accommodate 15,000 North Korean workers.

The two sides were to conduct a geological survey early this year and start construction work in the first half of the year following the agreement but the suspended talks have hindered the plan.

After conservative President Lee Myung-bak vowed a tougher line toward the North, the communist North kicked South Korean officials out of its territory in March and cut off official communication channels.

The Seoul government recognizes the lodging problem as urgent. Yet, it admitted it cannot find a solution at the moment since the North is rejecting any talks.

Read the full story here:
Gaeseong Complex Lacks in Lodgings for N. Korean Workers
Korea Times
Kim Sue-young


Russia sends fuel to DPRK

Wednesday, July 9th, 2008

According to Yonhap:

Russia will deliver another 100,000 tons of fuel oil to North Korea by October as a reward for the country’s shutdown of its nuclear power facilities, Itar-Tass news agency reported Wednesday, quoting a top Russian envoy to the six-party nuclear talks.

North Korea has been promised energy aid equivalent to a million tons of heavy fuel oil as part of economic and political rewards for declaring all its nuclear programs and disabling its main nuclear plants under a six-party deal on ending the North’s nuclear activities.

“We’ve fulfilled our promises — delivered 100,000 tons of fuel oil in two batches by the middle of the year,” Russian Deputy Foreign Minister Alexei Borodavkin was quoted as telling journalists in Beijing Wednesday. “We are preparing to fulfil our obligations further and send another 100,000 tons by October,” he said.

Read the full article here:
Russia to send more fuel oil to N.K. by October: report


Noko Jeans

Tuesday, July 8th, 2008

Some enterprising Swedes are attempting to manufacture and export jeans from North Korea.  As far as western countries go, Sweden has been one of the leaders in commercial interaction with the DPRK.  Although, according to Erik Cornell, they were frequently burned. 

The project, Noko Jeans, would be the first jeans manufacturer in North Korea.  Here is some info from their website:

Noko Jeans – jeans from North Korea

Noko Jeans began with an e-mail sent to North Korea, fueled by the enthusiasim of being able to contact the country directly. We thought Noko Jeans would end there, before it even began. It didn’t. Instead, and despite our lack of experience in international trading, it swiftly grew to a much more serious level.

Initiated and managed by three Swedes with a background in advertising and PR, Noko Jeans is our attempt to approach and get closer to North Korea, and it is our attempt to answer the question: is it possible to do what no one has ever done before? Is it possible to design, produce and import jeans from North Korea?

Greetings from North Korea!

After months of research, loads of headache and, lastly, several meetings with North Korean government representatives, we are finally allowed into the country. As official visitors, and by invitation of the state. Take off: 27th of July.

We are just now beginning to sense that this experiment actually might come true. Please stay with us as we tell you the unique process – and story – that is Noko Jeans.