Archive for April, 2009

South Korean government restricts access to Kaesong Zone after launch

Sunday, April 12th, 2009

According to Radio Free Asia:

Following North Korea’s April 6 rocket launch, South Korea began limiting the number of its citizens allowed to cross the border to the Kaesong Industrial Zone, which was set up just inside North Korea amid thawing relations between the two sides in 2004.

“We plan on maintaining the minimum personnel needed to run the Kaesong operations,” South Korean Unification Ministry spokeswoman Lee Jong-joo said.

“The South Korean government has requested enterprises invested in Kaesong to maintain their staff at the minimum level necessary to avoid disruption of production and business operations in the complex.”

South Koreans trying to travel to Kaesong this week were surprised to find their entry permits revoked by the South in the wake of the rocket launch, with the number of South Koreans working in the zone cut to a little above the minimum needed for basic operations.

“Eight persons initially received permission to travel to Kaesong, but eventually only three were allowed to take the trip, and actually most South Korean managerial staff had to stay behind,” a Kaesong-based South Korean entrepreneur said.

‘Skills gap’
“The big issue here is that the skill level of North Korean workers is insufficient, and that’s why South Korean management is essential.”

He warned of negative economic consequences if management personnel were unable to reach the zone from the South.

“Banning South Korean managerial staff from traveling to Kaesong will inevitably have a negative impact on production in the complex,” the entrepreneur said.

Tensions have further escalated over the March 30 detention of a South Korean employee of the Kaesong-based Hyundai Asan factory, allegedly for encouraging North Koreans to defect and criticizing the communist regime.

Hyundai’s company president visited Kaesong for a second time this week to press North Korean officials for the employee’s release, but he was refused permission to see the employee, identified only by his surname, Yoo.

Unification Minister Hyun In-taek warned that Seoul wouldn’t tolerate further detention of the employee.

Warning to North
“In the case of Mr. Yoo, the Hyundai Asan employee in the custody of the North Korean authorities, we will react vigorously to any unreasonable extension of the detention of the South Korean,” Hyun told a foreign affairs, trade, and unification committee in Seoul.

He also warned against “any punitive measures exceeding what was agreed upon between the two Koreas, such as a warning or expulsion to South Korea.”

The South has ruled out the possibility of closing the joint industrial park despite rising tensions with the North, however.

In March, in protest against a joint South Korea-U.S. military exercise, the North blocked the border crossing to the industrial complex several times, affecting production in some factories.

Experts have called for bilateral talks to hash out a clear framework for the running of Kaesong, to prevent economic fallout from political events in future.

“South and North Korea need to discuss and consult on the relevant systemic and legal issues associated with inter-Korean economic cooperation in the area,” said Hong Ik-pyo, researcher at the Korea Institute for International Economic Policy.

Read the full story here:
Korean Tensions Hit Zone
Radio Free Asia
J.W. Noh


US religionists perform at Pyongyang Friendship Festival

Sunday, April 12th, 2009

UPDATE:  According to the band (via Christian Post):

“Made many friends. We performed twice and were awarded for the performance of Lifesong,” he added Monday. “We also recorded the Korean song, White Dove, in their studio in Pyongyang.”

ORIGINAL POST: According to the Christian Post:

Contemporary Christian band Casting Crowns will again participate in North Korea’s annual Spring Friendship Arts Festival but this time won’t be the only U.S. Christian group there performing.

The Grammy Award-winning band will be joined by the Annie Moses Band (AMB), a five-sibling ensemble whose ages range from ten to 24.

“In early December we received an official invitation from the North Korean government to perform in the Spring Friendship Arts Festival,” AMB lead vocalist and violinist Annie Wolaver told The Christian Post on Friday.

“We have been praying for many years that the Lord would open doors for us to tour overseas. We had some grand visions of playing Celtic jigs in the Scottish highlands, but instead He opened a door that was entirely unexpected,” she reported.

Two years ago, Casting Crowns was invited to perform at the 25th Annual April Spring Arts Festival with help from Global Resource Services (GRS), which has worked in the Democratic People’s Republic of Korea – the official name of North Korea – for more than a decade.

The annual Spring Arts Festival reportedly emphasizes artistic exchange and promotes peace and good will.

According to GRS, the band was well received and even drew praise from the vice chairman of the festival, Jang Chol-sun, who expressed his hope that groups like GRS, Casting Crowns and the people of North Korea can work together to bring unity and peace.

Here is a web page by Jason Carter who performed in this show some years ago.

Read the full article here:
Casting Crowns to Return to North Korea for ‘Friendship’ Festival
By Josh Kimball
Christian Post


Last week in North Korea’s government

Sunday, April 12th, 2009

jangsongtaek.jpgJang Song-taek, Kim Jong il’s brother in law, and his senior aid were promoted to the DPRK’s top governing body the National Defense Commission.  Jang was recently elected to the Supreme People’s Assembly last month. 

Of slightly less interest was the fact that Kim Jong il was reappointed to the National Defense Commission as well.

According to Yonhap, the Supreme People’s Assembly, which formally “elected” Kim and Jang to the NDC also unanimously voted to revise the DPRK’s constitution for the first time in 11 years.  They did not announce what those changes were intended to be.

This session of the Supreme People’s Assembly saw the first video appearance by Kim Jong il since last summer when he is reported to have suffered a stroke.

And according to IFES, the SPA approved the state budget:

DPRK sets 2009 budget at USD$3.45 billion
Institute for Far Eastern Studies (IFES)
NK Brief No. 09-4-13-1

On April 9, North Korea opened the first session of the 12th Supreme People’s Committee, at which this year’s budget, 5.2 percent larger than that of last year, was passed. Pyongyang set the 2009 budget at 482.6 billion Won (1 USD=140 Won).

At this meeting, North Korea’s newly appointed Minister of Finance Kim Whan-su reported on last year’s budget and introduced the spending plan for 2009. While details were not revealed, it was noted that the overall budget had grown by 5.2 percent, with expenditures up 7 percent. The 2008 budget had been set at 451.5 billion won. It was also reported that last year’s spending was 1.6 percent over-budget, but that 99.9 percent of budgeted expenditures had been carried out.

Minister Kim reported that taxes from Chinese enterprises and related national businesses had grown by 5.8 percent, and that cooperative organizations were up 3.1 percent, production earnings were up 6.1 percent, real estate income had grown 3.6 percent, and social insurance had brought in an addition 1.6 percent.

As for the expenditure plan, city administration was allotted an additional 11.5 percent, while mining of metal, coal, steal, and other natural resources was boosted by 8.7 percent, education received an additional 8.2 percent, public health care grew by 8 percent, farming was bumped by 6.9 percent, physical education by 5.8 percent, light industry by 5.6 percent, and cultural activities by 3.2 percent. National defense accounted for 15.8 percent of the overall budget, just as it did last year, meaning that 545 million USD will be put toward the military.

Kim explained that the 2009 budget was based on the idea of “reducing unproductive expenditures in order to find the utmost source of revenue to ensure perfect support for the funds necessary to strengthen national security, improve the lives of the people, and build an economically strong nation.”

At this meeting, Kim Jong Il was reappointed to the post of chairman of the national defense commission, and Kim Yong Nam was reaffirmed as the head of the Cabinet.


Japan renews sanctions after rocket launch

Saturday, April 11th, 2009

From the National Comittee on North Korea:

On April 10, 2009 the Japanese government renewed sanctions on the DPRK that were set to expire on April 13. The sanctions, first implemented in 2006, ban entry into Japanese ports of all North Korean flagged vessels and charted flights between Japan and the DPRK, as well as ban, in principle, visits by Japanese government officials to the DPRK and visits by DPRK government officials to Japan. The sanctions also ban all DPRK imports and payments for imports from the DPRK. The 2006 sanctions, initially implemented for six months and renewed for six month periods thereafter, were renewed for a full year on April 10.

The Japanese government also instituted stricter reporting requirements on the amount of funds people in Japan can remit or transfer to the DPRK. The new regulations reduce the amount of funds that can be transferred undeclared to the DPRK from 30 million yen (US$298,000) to 10 million yen ($99,000). In addition, travelers can bring only 300,000 yen cash ($2,990) to the DPRK without reporting it; this is down from a previous limit of over a million yen.

Although the new reporting requirement has been called a “new sanction,” it does not seem to be a genuine sanction since it does not limit remittances to the DPRK. According to Xinhua, Japanese Chief Cabinet Secretary Takeo Kawamura told reporters, “The measure is aimed at getting a clearer picture of fund flows to North Korea (DPRK).” He also said that the move is “appropriate giving consideration to the unsettled abduction issue.”

Japan considered but rejected a ban on all exports to the DPRK. Newspapers report that the Japanese government thought such a ban would have little impact.

And according to Bloomberg:

Trade between Japan and North Korea fell 97 percent to 793 million yen in 2008 — all in Japanese exports — from 21.4 billion yen in 2005, according to Japan’s Finance Ministry.

You can read the full Bloomberg story here:
Japan Imposes New North Korea Sanctions After Missile Launch
Takashi Hirokawa and Toko Sekiguchi


Friday Fun: Tourism, humor, and keeping up with the Joneses

Thursday, April 9th, 2009

koryotourslogo.jpgKoryo Tours has notified the world that the DPRK will be putting on the Arirang Mass Games again this summer.  American tourists will be allowed to attend–click here to book your tourMost other passport holders can opt for a longer visit–click here to check out the dates and locations.   I saw the mass games in 2005, and it is something I will never forget.


Someone posted a North Korean comedy routine on Youtube.  If you have ever wondered if North Korean women wear Kim Jong il jumpers, consider the question resolved…though I am still not sure how funny it is.



My local Korean language expert cannot understand the dialect over the audience noise and the music, so if any viewers out there know what it is about, please post in the comments below.  Here is an older post of North Korean (and other communist) jokes.

Keeping up with the Joneses:
The Guardian published a humorous comparison between the North and South Korean ambassadors in London.  Check out the PDF here.


Chinese investment in DPRK

Wednesday, April 8th, 2009

Writing in the Wall Street Journal, Evan Ramstad offers some information on China’s investments in North Korea:

The diplomatic minuet is taking place after China increased trade with North Korea over the past four years. Last year, trade between China and North Korea jumped 41% to $2.79 billion, with most of that coming from increased exports by China.

 On Tuesday, truck traffic between the two countries resumed after a break Monday for a Chinese holiday. Dozens of trucks made the crossing in Dandong, a major city along the North Korean border.

China has been North Korea’s chief political and economic sponsor since the Soviet Union collapsed nearly 20 years ago. For much of that time, it served as donor of last resort, making up the difference when energy, food and donations to North Korea dropped off from other countries. That often amounted to $100 million to $200 million in aid.

China broke from that pattern in 2005 by boosting its exports and widening its trade surplus with North Korea. Outside experts view China’s trade surplus as the chief measure of its economic aid to North Korea because North Korea has no measurable debt instrument and little ability to narrow the trade gap.

Chinese companies, sometimes with help from the Chinese government, are investing heavily in North Korea’s mining industry, construction and light manufacturing such as textiles. Chinese consumer goods line store shelves and market stalls in North Korea.

Many executives of Chinese companies in North Korea say it’s a difficult place to operate. Among the challenges: getting money out of the country. China helped Panda Electronics Group, based in Nanjing, start a computer assembly factory with Taedong River Computer Corp. in North Korea five years ago.

North Korea’s currency, the won, can’t be converted. To move money out of the country, Panda must buy commodities in North Korea and sell them in China for cash, an executive said.

The increased business activity in North Korea reflects China’s desire to treat North Korea more as a “normal country” rather than a socialist brother entitled to unlimited assistance, scholars and analysts in China say. They say China also hopes its companies in North Korea will encourage the North’s government to open its economy as China began to do in the 1980s.

Wang Kai, a manager of Liaoning Fuxin Tianxin Technology and Development Co., says the company decided to build a pipe-making factory in North Korea because the country’s economy has few places to go but up.

“North Korea’s situation and economic status are pretty similar to China’s before the start of the opening up and reform policy,” Mr. Wang said in an interview before the rocket launch.

Others note China’s desire is to prevent North Korea’s collapse, which might pour refugees into China’s northeast.

The increased business is yielding a payoff in political influence for China in Pyongyang that’s become more important since North Korean dictator Kim Jong Il was incapacitated by illness in August. One signal that Mr. Kim was back in control came when he met in late January with a delegation of visiting diplomats from Beijing.

Read the full story here:
Economic interests shape Beijing’s Pyongyang Policy
Wall Street Journal Online
Evan Romstad


Noland on DPRK trade sanctions

Tuesday, April 7th, 2009

Marcus Noland, co author of The North Korean Famine and Senior Fellow at the Peterson Institute of International Economics, wrote a short policy piece in the Asia Pacific Bulletin calling for more effective sanctions on North Korea to deter Pyongyang’s belligerence:

Regrettably, toothless trade restrictions have provided inadequate to deter Pyongyang ex ante, and the world is now faced with dealing with the situation ex post.  Willingness to impose a comprehensive set of sanctions–trade, aid, travel, energy assistance, and finance–might reign in reckless North Kean behavior before another provocation fundamentally destabilizes the situation in Northeast Asia. (Noland, 2009)

The Asia Pacific Bulletin article draws from a thorough empirical study Noland conducted on the (non) impact of UN sanctions on North Korea’s trade. “The (Non-) Impact of UN Sanctions on North Korea” can be downloaded here.  Here is the abstract:

Before North Korea conducted an underground nuclear test on October 9, 2006, it was widely believed that such an event would have cataclysmic diplomatic ramifications in Asia. Based on a visual inspection of the data and statistical models, this study finds that, although the UN Security Council imposed economic sanctions against the export of heavy arms and luxury goods to North Korea within one week of Pyongyang’s nuclear test, the imposition of these sanctions has had no perceptible effect on North Korea’s trade with the country’s two largest partners, China and South Korea.
policy implications:

1. North Korea appears to have calculated correctly that the direct penalties to its foreign trade for establishing itself as a nuclear power would be modest (or, alternatively, Pyongyang put such a high value on demonstrating the country’s nuclear capability that it outweighed the downside risks, however large). Presumably this experience will condition the reactions of North Korean policymakers in the future—making deterrence with respect to this issue and other sources of conflict more difficult.

2. Despite pre-test diplomatic warnings not to test, the post-test behavior of public and private sector actors in China and South Korea has been accepting of North Korea’s nuclear status. Thus if such warnings are to be heeded in the future, they must embody credible threats of penalty, be much more enthusiastically implemented, and be more broadly targeted.

Though I have tremendous respect for Dr. Noland’s work, I am fairly skeptical about the ability of economic santions to change the DPRK’s policies or behavior.  Carrots and sticks are essential tools for any diplomatic negotiation, but China, the DPRK’s strongest political ally and largest trading partner is simply not interested in implementing rigid economic restrictions vis a vis North Korea (for many rational reasons).  Given the uncanny ability of the North Korean elite to remain in power despite severe economic problems, I am afraid that any achievable sanctions regime would only make life more difficult for “ordinary” North Koreans with little possibility of delivering changes at the top.


Unha-2 (Kwangmyongsong 2) Compendium

Sunday, April 5th, 2009

UPDATE 7: Here is the Wikipedia Page.

UPDATE 6 (2009-4-5):  The DPRK claimed to have successfully launched its second satellite, the Kwangmyongsong-2.  (Aside: “Kwangmyongsong” means or “Lodestar” in Korean and it is a nickname officially attributed to Kim Jong il–the lodestar of the 21st centuryin a poem by his father.)

According to KCNA:

Scientists and technicians of the DPRK (North Korea) have succeeded in putting satellite Kwangmyongsong-2, an experimental communications satellite, into orbit by means of carrier rocket Unha-2 under the state’s long-term plan for the development of outer space.

Unha-2, which was launched at the Tonghae Satellite Launching Ground in Hwadae County, North Hamgyong Province at 11:20 (3:20 a.m. British time) on April 5, accurately put Kwangmyongsong-2 into its orbit at 11:29:02, nine minutes and two seconds after its launch.

The satellite is going round the earth along its elliptic orbit at the angle of inclination of 40.6 degrees at 490 km perigee and 1,426 km apogee. Its cycle is 104 minutes and 12 seconds.

Mounted on the satellite are necessary measuring devices and communications apparatuses.

The satellite is going round on its routine orbit.

It is sending to the earth the melodies of the immortal revolutionary paeans ‘Song of General Kim Il-sung’ and ‘Song of General Kim Jong-il’ and measured information at 470 MHz. By the use of the satellite the relay communications is now underway by UHF frequency band.

The satellite is of decisive significance in promoting the scientific researches into the peaceful use of outer space and solving scientific and technological problems for the launch of practical satellites in the future.

Carrier rocket Unha-2 has three stages.

The carrier rocket and the satellite developed by the indigenous wisdom and technology are the shining results gained in the efforts to develop the nation’s space science and technology on a higher level.

The successful satellite launch is symbolic of the leaping advance made in the nation’s space science and technology was conducted against the background of the stirring period when a high-pitched drive for bringing about a fresh great revolutionary surge is under way throughout the country to open the gate to a great prosperous and powerful nation without fail by 2012, the centenary of the birth of President Kim Il-sung, under the far-reaching plan of leader Kim Jong-il.

This is powerfully encouraging the Korean people all out in the general advance.

The US and South Korea claim that two of the rocket’s stages and its payload fell into the ocean and that the satellite did not reach orbit.

So if we can believe the North Korean media, there are now TWO satellites in orbit broadcasting the “Song of General Kim il Sung” and the “Song of General Kin Jong il” at 27 MHz and 470 MHz.  Too bad short wave radios are so rare in the DPRK.

To date, however, no other country has verified the Kwangmyongsong No. 1 is in orbit–with one minor exception.  That minor exception came from the Russian space agency which seems to have offered a temporary confirmation of the satellite (followed by a quick retraction) so the DPRK could assert that another country verified the satellite’s existence.

Repeating history, Russian Foreign Ministry “verifies” Kwangmyongsong No. 2 satellite launch:

The DPRK sent an artificial Earth Satellite into a low-Earth orbit on the morning of April 5. According to Russian aerospace monitoring data, the launch trajectory did not pass over the territory of the Russian Federation. The parameters of the satellite’s orbit are being specified.

The DPRK had informed the Russian side ahead of time about the launch.

We call on all concerned states to show restraint in judgments and action in the current situation and to proceed from objective data on the nature of the DPRK launch.

We intend to watch further developments attentively, remaining in close touch and holding consultations with all concerned sides.

Note that the above quote is from the Russian Foreign Ministry—not its space agency—and it is coupled with a call for political restraint.  This is entirely a political statement, not a scientific acknowledgement of the satellite’s existence.  Essentially, this quote asserts that for the purposes of public diplomacy, the Russian Foreign Ministry classifies this event as a satellite launch rather than a missile test. This follow up story in RIA Novosti is much more agnostic.

But the original satellite’s importance to domestic politics seems to have faded.  Even KCNA’s coverage has significantly tapered off over the years.  Below is a table of KCNA mentions of the Kwangmyongsong No. 1 satellite from its launch date through today:



Let’s see if 10 years from now reporting on the Kwangmyongsong No. 2 is any different.  Meanwhile, we can all feel sorry for the people at KCNA who will now have to report on TWO satellites that do not exist.

Below are additional links and media related to this story:

1. Satellite image of the rocket lift off

2. Joint US-EU statement

3. Scott Snyder identifies the missile’s political targets

4. Evan Ramstad focuses on the recket’s use in domestic politics

UPDATE 5 (2009-3-16): The Choson Ilbo reports that the DPRK spent at least $30 million on the missile:

Experts speculate that impoverished North Korea spent at least US$30 million on development of a missile it is apparently poised to launch. While the North says it is launching a rocket to propel a satellite into orbit, many in the West are convinced this is in fact a Taepodong-2 long-range missile.

When North Korea test-launched seven medium and long-range missiles in July 2006, South Korean military authorities estimated the total cost at about $63.69 million (about W60 billion according to the exchange rate at that time).

Grand National Party spokesman Yoon Sang-hyun on Friday said his party estimates North Korea spent about $30 million test-launching the Taepodong-2 missile three years ago. “They should have spent the money to feed and clothe their people,” Yoon added.

North Korea spent approximately $20 million test-firing the Taepodong-1 missile in 1998, and experts guess it cost more this time since performance and capabilities including the airframe and range of the Taepodong-2 missile have been improved by more than 10 percent since the rocket fizzled ignominiously in a test three years ago.

A researcher with a government-funded think tank said, “North Korea may have spent between W800 billion and W900 billion (US$1=W1,488) developing and manufacturing the rocket for the Taepodong-2 alone.”

UPDATE 4 (2009-3-16):  Martyn Williams informs me that the North Koreans have closed air routes throught their controlled airspace:

North Korea will close two aerial routes through its controlled airspace from April 4 to 8 in order to launch what Pyongyang claims is a communications satellite, Japan’s transport ministry said Saturday. (Kyodo)

And the routes to be closed:

APR 02:00 2009 UNTIL 08 APR 07:00 2009. CREATED: 21 MAR 03:22 2009

These waypoints have been added to a Google Earth application which you may download here.

UPDATE 3 (2009-3-15): Martyn Williams was kind enough to send me the NOTAM (Notice to Airmen) from Fukuoka (Japan) Air Traffic Control—posted below in full. The NOTAM provides the best estimate of the date and time of the launch.

Using this information, I have mapped out the Musudan launch path and areas of falling debris on Google Earth:



Click on image for a larger view.

Download this .KMZ file (with additional closed air routes) to your Google Earth here.




404140N1353445E 402722N1383040E
401634N1383022E 403052N1353426E
343542N1644042E 312222N1721836E
295553N1721347E 330916N1643542E

*(11:00am-4:00pm in Japan)

UPDATE 2 (2009-2-24): The DPRK has officially announced that it intends to put another “satellite” into orbit.  According to KCNA:

The preparations for launching experimental communications satellite Kwangmyongsong-2 by means of delivery rocket Unha-2 are now making brisk headway at Tonghae Satellite Launching Ground in Hwadae County, North Hamgyong Province.

When this satellite launch proves successful, the nation’s space science and technology will make another giant stride forward in building an economic power.

The “Tonghae Satellite Launching Ground (TSLG)” is also known as the “Musudan-ri Launching Station.” TSLG is a new name, and today is the first time that KCNA has ever used it!

The full KCNA story can be read here.

Below you can find previous posts on the DPRK’s efforts to put a satellite into orbit—including information on the mysterious Kwangmyongsong-1.

UPDATE 1 (2009-2-13):  The Daily NK is reporting that the DPRK plans to launch “another satellite” called the “Kwongmyongsong No. 2.”

Senior Technical Analyst at Charles P. Vick stated, “North Korea is expected to flight test one or two Teap’o-dong-2(sic) class missiles, either as a satellite launch attempt, or a ballistic missile flight, or both, in the spring or summer of 2009,” in a report entitled “The Latest up-date in North Korean Ballistic Missile & Space Booster Developments.”

North Korea Intellectuals Solidarity (NKIS) reported on the 12th news from its source in North Hamkyung Province, which seemed to confirm the satellite theory; “The Kwangmyungsung-2, an artificial satellite, will be launched soon at the missile site in Moosudan-ri, Hwadae (county),” the source announced.

According to the NKIS report, the Kwangmyungsung-2, allegedly a communications satellite, was developed by the Institute of Electronic War under the Academy of Sciences for Defense.

If they go through with it, KCNA will have to report on two satellites that are not in orbit.

Read the full story here:
Taepodong-2: Missile or Satellite?
Daily NK
Jeong Jae Sung

ORIGINAL POST: Shortly after the Onion reported this, the Australian tells us that the Kim Jong il government has declared it is actively pursuing a “space program”:

“The DPRK’s (North Korea) policy of advancing to space for peaceful purposes is a justifiable aim that fits the global trend of the times. There is no power in the world that can stop it,” the newspaper said in an editorial.

“As long as developing and using space are aimed at peaceful purposes and such efforts contribute to enhancing human beings’ happiness, no one in the world can find fault with them.”

It noted that Iran on Monday successfully launched a satellite carried by a home-built rocket, setting alarm bells ringing among Western powers because of the implications for the range of its ballistic missiles.

Rodong said North Korea had long been working on space research and development.

“Currently, our scientists and engineers, in keeping with the international trend, are actively pushing ahead with projects aimed at utilising space for peaceful goals,” it added. (The Australian)

Of course North Korea has used its purported space program as political cover for missle tests before.  Back in 1998, Pyongyang informed the world about the successful launch of the “Kwangmyongsong No.1” satellite (which coincided with a previous round of missile tests).  The satellite supposedly circles the earth playing the Song of General Kim il Sung.  Although no one has been able to verify it is in orbit, as far as the North Korean people are aware the satellite is still circling the earth!  KCNA just reported on it in January.

I should also point out that Pyongyang has consistently emphasized space travel as a policy goal in the mass games. See this photo at Pyongyang’s Moranbong Middle School and this photo in the Mangyongdae Children’s Palace.


DPRK market restrictions ineffective

Friday, April 3rd, 2009

Granted that information from the DPRK is nearly impossible to verify, it seems likely that the DPRK government continues to encounter difficulties implementing its most restrictive market regulations.  They have tried repeatedly to impose rules which dictate who may work in the markets, how to allocate vending slots, what goods may be sold in the markets, what prices may be charged, and when markets may open. 

With each new rule vendors and entrepreneurs respond by fighting back against the authorities (sometimes violently) or simply moving to the black market, which (as in other communist countries) composes a significant portion of the nation’s GDP.

The DPRK’s most recent market regulation (issued in the autumn of 2008) is the 10-day rule—prohibiting markets from opening except every tenth day.  This rule was supposed to take effect in March 2009, yet it has not been successfully implemented—even in the areas where Pyongyang exercises the most control (large cities).

According to the Daily NK:

The North Korean authorities issued a decree in October, 2008 aimed at shifting the existing market system over to a 10-day market system and restricting the range of items being sold, but by mid-March of this year there was no market where the decree had been properly implemented.

Decrees attached to the entrances to markets were all removed and only the specific list of restricted goods is posted there. However, secondhand goods have been strictly regulated in some regions, so conflicts between citizens have arisen.

Each story about the failure of market restrictions stresses the inconsistency with which the rules are imposed across the country.  In other words, local conditions predict the effectiveness of Pyongyang’s dictates.  This is perhaps due to the DPRK’s market governance structure.  Local markets are controlled by a local Market Management Office which is in turn subordinate to each City People’s Committee.  According to the Worker’s Party organizational chart (view here), each City People’s Committee is subordinate to a Provincial People’s Committee (PPC), and all PPCs are subordinate to the Central Committee of the Workers Party.  

This governance structure puts three layers of bureaucracy between the Central Committee and the actual markets, perhaps allowing local leaders to exercise significant discretion over market operations.  True, random inspection units from the central authorities can make surprise visits, but their numbers are likely too small to enforce country-wide compliance, particularly when local officials can benefit from accomodating traders.

Still, these kinds of stories are both disconcerting and pleasing.  Why disconcerting?  Because the expectation by “Western” analysts (including myself) that market legitimization signaled a stable policy shift by Pyongyang has proven unjustified.  The good news, however, is that the DPRK’s markets are proving surprisingly robust.

In 2003, North Korean authorities “legalized” markets throughout the country by converting previously existing “farmers’ markets” into “combined general markets” and allowing all traders sell their wares. After the legislation was passed, markets began to spring up in neighborhoods across the country–even in Pyongyang.

Although it is clear now that this was a politically defensive move on the part of the central government,  North Koreans now reportedly spend more than 80 percent of their incomes in these markets.  Despite authorities’ efforts to assert more control over the markets, they have (paradoxically) become the social safety net of socialist Korea. 


Seoul stock market at 5.5 month high…

Wednesday, April 1st, 2009

UPDATE: According to the Wall Street Journal, Friday was even better:

The Korea Composite Stock Price Index, or Kospi, gained 6.78 points, or 0.5%, to end at 1283.75. The index is up 3.7% on this week following last week’s 5.7% gain.

“Improving economic data and overnight gains in offshore markets lent support to the market, but Asian markets generally lagged U.S. and European peers as they needed to slow down after steep gains over a short period,” said Kim Hak-kyoon, an analyst at Korea Investment & Securities.

“But the upward march has not stopped and foreigners continued to show strong appetite for local stocks again today,” added Kim.

Meanwhile, market participants didn’t react much to news that North Korea may launch a rocket as early Saturday.

“Isn’t it the fact that North Korea will launch a rocket? The key to determine the mood in the financial market will be how South Korea and the U.S. will handle the case. So far market participants, in particular foreigners, don’t seem to worry too much about that,” said Kim at Korea Investment & Securities.

Market analysts continued to treat the potential missile launch as a short-term event to the financial market.
“North Korea’s main goal seems to be to push for a lifting of current sanctions and get economic aid flowing by showing off its ability to attack the mainland of the U.S.,” said You Seung-min, an analyst at Samsung Securities. “In reality any direct military clash seems to be unlikely….The stock market will likely return fast to its normal track after experiencing short-term volatility caused by the launch.”

ORIGINAL POST:Just the news I expected (sort of).  According to Reuters:

Meanwhile investors largely ignored news that North Korea had begun fueling a long-range rocket it plans to launch between April 4-8, starting a process that experts say means the rocket will be ready for lift-off in three to four days.

“Yes, the North will probably launch the missile, and that certainly can’t be good. But markets will probably bounce backafter a couple days as they always do…market participants have learned over time to remain calm to North Korea-related developments,” Lee added.

Read the full articles here:
S Korean Shares End Tad Up On Econ Recovery Hopes
Wall Street Journal
Soo-Kyung Seo

Seoul shares hit 5-½ mth high;North news ignored
Jungyoun Park