North Korean Economy Watch

Herald Tribune
Lee Su-hyun
2/11/2009

After she defected here from North Korea in 2006, Ahn Mi Ock was shocked to learn that most South Koreans lived in small apartments and had to struggle to buy one.

Ahn, 44, had fully expected that once in the South she would enjoy the same luxurious lifestyle portrayed in the television dramas she had watched on smuggled DVDs. It had not occurred to her that the fashionably dressed characters sipping Champagne in the gardens of stylishly furnished houses were not, well, average South Koreans.

That disappointment aside, she and many other North Korean defectors find themselves plunging into the unaccustomed wealth of South Korea’s entertainment and news media, fascinated by the astonishingly free flow of information and critiques of political leaders, but also searching for tips as to how to navigate this strange new society.

“When I first came here, I was glued to the TV screen every waking moment,” said Ahn, a former art teacher who now works in a restaurant.

Most newly arrived North Koreans spend up to three months at government settlement centers, taking crash courses in capitalism and democracy. They are also taught basic skills like how to use ATMs and home appliances.

But many say they still feel insecure about moving into the real world. With no previous exposure to a free press and 60 years of separation between the South and the North, they sometimes feel they are speaking different languages.

“I was so surprised when I first saw a music video here and didn’t understand a word of a rap song – in Korean,” said Yu Chong Song, 27, who is studying Chinese at Dongkuk University.

That’s where close study of South Korean media comes in.

Recent defectors say that in North Korea, the typical resident might watch half an hour of television news about how Kim Jong Il, the national leader, spent his day. They might spend another hour watching popular dramas, often involving the fate of the nation – assuming the electricity supply allows.

As for newspapers, the 20 former North Koreans interviewed said home delivery was only for the privileged. Those who did have access said the contents were boringly predictable, and that a better use of newsprint was for rolling cigarettes.

But in their first 6 to 12 months in South Korea, they said, they spent at least three hours a day watching television: talk shows, reality shows, quiz shows. (When they first arrived, they had few acquaintances and no jobs, and so had a lot of time on their hands.)

They said they paid closest attention to news and dramas, because they thought these provided the most useful portrayals of South Korean society. The hope was that by using television to study the differences between the two countries before daring to face actual South Koreans, they could reduce the chances of embarrassment.

Kim Heung Kwang, 49, a former computer science teacher who now works in an organization that finds jobs for defectors, said it was only by watching a television movie that he learned that a host should offer his guests a drink.

“Not only must I offer something to drink,” he said, “but ask if they want coffee or tea and whether they want sugar or milk, and then how many spoonfuls.”

Still, there are limits on media study as a learning tool. It is not always clear how much of what they are viewing is truly representative of South Korean life, and how much is fantasy.

“I stopped watching television dramas, because it was getting in the way of my relating to the South Korean people,” said Kim Heung Kwang, who said he still was not sure whether South Korea was a place where mistresses were bold enough to tell their lovers’ wives to get lost.

Ahn, for her part, was concerned about how her 19-year-old daughter might cope with the lust-consumed South Korean men, who apparently devote much of their daily routine seeking unencumbered romance – or so television dramas had led her to believe.

To alleviate their confusion, a Newspaper in Education program to encourage young people to read was introduced a year ago at Setnet High School, an alternative school for North Korean defectors. There, they can ask an instructor to explain concepts they encounter in newspaper pages.

“What is business and sales?” asked Park Jeong Hyang, 18, during a Setnet class.

“Amateur? Is that something to do with sports?” asked Mah Gwang Hyuck, 23.

“Can you explain what marketing is again?” asked Kim Su Ryun, 18.

Especially troublesome are the loan words, mostly derived from English, used in almost every sentence, and South Korean words not used in the North. But perhaps even more difficult to understand is the media’s role in South Korea.

The defectors express shock that the media can point a finger at a head of state. “I don’t know how President Lee Myung Bak can continue running the country after getting so much criticism,” said Cho Eun Hee, 23, a Setnet student.

All those interviewed agreed that freedom to challenge the government is desirable but felt uncomfortable seeing so much of it.

“Television even broadcasts scenes of politicians fighting in the National Assembly. That can’t be good for the image of the country,” Ahn said.

Still, Kim Heung Kwang saw some merits. He was impressed to see his modest apartment complex featured in a television news report about tenants of a nearby prayer house complaining about construction noise. He was familiar with the dispute and felt the reporters were relaying the facts fairly.

Cha Eun Chae, 20, said that in North Korea, there was no way of knowing how the economy was performing, because every story was upbeat: “They would always say, ‘The harvest was good this year.’ But we saw our neighbors starving.”

Over time, as the newcomers learned to read and understand them, the local media became more relevant to their everyday lives. Noticing that self-promotion is important in South Korea, one university student aspiring to a career in business scrutinizes newspaper columns and editorials for hints.

“I want to learn how to articulate my ideas while accommodating others’ opinions,” he said. “And I see that in the way editorials here are written – for example, on the controversy over embryonic cloning.”

Not everyone succeeds in applying media models to interaction with South Koreans.

Kim Keum Hee, 38, who works as a cleaner at a public bathhouse, tried to mimic a hotelier she had seen in a television drama.

“But I just couldn’t do it,” Kim said. “I’m still not used to being friendly when I don’t mean it.”

From the Choson Ilbo:

The number of North Korean refugees who remit money to their families in the North is rising. “Some 15,000 North Korean refugees have settled in the country, and over 6,000 of them are remitting money to North Korea,” a government official said. “We understand the size of the remittances is also growing.” An official with a refugee organization said there must be more than 10,000 who remit money to their families in the North.

If some 6,000 North Korean refugees here send money North, and a refugee remits US$1,000 a year, some $6 million is sent to North Korea per year. To that should be added 20,000-30,000 of the 100,000 North Koreans estimated to live in China.

Remittance routes are clandestine. Money is remitted to a Chinese broker, who contacts another in North Korea, who pays the recipient with his own money and settles the account with the Chinese broker later, leaving no documentary trail.

Currencies are usually American dollars and Chinese yuan. Commissions range between 15 and 20 percent, according to sources. “Remittances through brokers designated by North Koreans generally reach the recipient without a hitch, but Chinese brokers contacted in China are liable to steal the money,” a refugee said. The brokers handle tens of millions of dollars and are linked to organized gangs.

In the past, remittances required enormous bribes. First a man had to be sent to North Korea to bribe guards, with commissions exceeding 40 percent. But with the emergence of remittance brokers and the establishment of an organized system, the amount of money that reaches North Korean families has increased substantially.

The North Korean won is practically worthless in international exchange. A North Korean workers’ average salary was between W2,500 and 3,000 as of the end of 2008. Given that US$1 is traded at W3,200, $1,000 is the equivalent of 100 years’ worth of earnings and buys two apartments in places like Chongjin, North Hamgyeong Province, or Hamhung, South Hamgyeong Province.

In the past, the DPRK has promoted remittances—particularly to Koreans repatriated from Japan and their families.  The DPRK government then extracted its share of these funds by offering western goods for sale in hard currency shops at inflated prices.

The DPRK could do worse at promoting its legitimacy than to adopt the same policy in regards to remittances from every other country.  If the DPRK allowed remittances to flow through official channels, the government could simply extract a service fee equal to or slightly below the black market rate.  That is a win-win (except for the smugglers).

UPDATE: Japanese goods were (are?) historically sold at the Ragwan Deaprtment Store next to the Changwang Hotel (North-West of the Central District).

Another point to consider is the unfortunate role of politics in preventing the adoption of efficiency-enhancing economic reforms.  In the case of remittances, the DPRK would certainly have political problems with letting defectors send money to their relatives back home.  Under this particular constraint smuggling might be the next best option.  Since the operation is clandestine, the government does not have to acknowledge it exists, yet at the same time people can receive their remittancs and (some part of) the governance structure collects “taxes”.  

What “taxes”? The few people who are carrying out the financial transactions will have pay decent protection money to a sponsor high in the food chain.  The work is risky for numerous reasons, but we know some important people are behind it becuase the operation requires managers to keep enough hard currency on hand to cover the monthy/anual remittance payments from 6,000+ defectors. 

Read the full article here:
Refugees’ Remittances to N.Korea ‘Growing’
Choson Ilbo
2/10/2009

Writing in Marginal Revolution, Tyler Cowen points out a rather unique market in the Soviet Union—the market for burned-out light bulbs:

For most of us, it is hard to fathom the rationale for a market in burnt-out light bulbs. But in the scarcity-driven Soviet economy, the market was entirely reasonable. Light bulbs were rarely available to individual consumers, but were obtainable for state-sponsored activities. Thus, it would be difficult to purchase a light bulb for a new lamp in one’s home, while burnt-out bulbs in state-run offices or factories were routinely replaced. So if someone purchased a new lamp and needed a bulb, he would buy a used light bulb for a small fee and replace a functioning bulb at work with the dud. He would then take the functioning bulb home for the new lamp, while the burnt-out bulb at the office/factory would be replaced with a new functioning bulb. Meanwhile, the maintenance person at the office/factory would take the used bulb and sell it on the used light bulb market.

I have no problem believing similar markets exist in the DPRK.  If any readers from current or formerly communist countries have similar stories, please add them in the comments.

Korea Business Consultants has published their January newsletter.

Here is a link to the PDF.

Topics covered:
New Year Joint Editorial
Year of DPRK-China friendship
UNDP to resume DPRK operations
Buddhist Leader to Head DPRK’s ROK Affairs
DPRK Railroad Engineers Study in Russia
Housing Construction Progresses Apace
Orascom Opens Bank in Pyongyang
DPRK Tackles Clothing Shortage
“DPRK Harvest Best in Years”
China to Invest in NK Coal
US$ 3.75 Million in Australian Aid for DPRK
The Principles of the DPRK’s Foreign Trade
ROK Farmers Send Rice to DPRK
New SNG Kaesong Plant Idle
“Inter-Korean Trade Slides Due to Weak ROK Won”
ROK to Build Nursery in Kaesong Complex
DPRK Opens Consulate in Dandong
DPRK, China Foreign Officials Meet
Seoul Forum Highlights DPRK Films
“NK Martial Arts Team Best in World”
PUST Opening Delayed
DPRK TV Takes Note of Park Ji-sung
The Korean War

The Government started work on the Heroes Acre in 1981, one year after Independence. The design and artwork used at the site was done by seven artists from the Democratic Peoples Republic of Korea and ten Zimbabwean Artists.

Over 250 local workers were involved in the project at the height of construction. The black granite stone used for the main construction was quarried from Mutoko; a rural area situated about 140km Northeast of Harare. The Heroes Acre is protected under the Natural Resources Act.

See the Site on Wikimapia here. 

Learn more about the site here.

*This location will be added to the next version of North Korea Uncovered (North Korea Google Earth).  If readers are aware of other construction projects the DPRK has supported, please let me know.  I am especially interested in locating the North Korean restaurants in China, Thailand, Cambodia, Vietnam, and Bangladesh.  Are there others?

US slaps sanctions on DPRK companies
According to the Associated Press (Via CBS):

The United States is imposing sanctions on several Chinese, Iranian and North Korean companies for violating arms export regulations governing missile technology and other proliferation activities.

The sanctions are largely symbolic as they bar the companies from trade with the U.S. that they were not likely involved in. Although they were in the works for some time, the Obama team signed off on the sanctions on Jan. 21, a day after it took office, signaling a continuing tough stance from Washington on weapons technology transfers.

U.S. Slaps Sanctions On Overseas Companies
Associated Press (via CBS)
2/2/2009

Here is a link to the text from the US Federal Register. 
Below is a summary:

SUPPLEMENTARY INFORMATION: Pursuant to Section 73(a)(1) of the Arms Export Control Act (22 U.S.C. 2797b(a)(1)); Section 11B(b)(1) of the Export Administration Act of 1979 (50 U.S.C. app. 2410b(b)(1)), as carried out under Executive Order 13222 of August 17, 2001 (hereinafter cited as the “Export Administration Act of 1979”); and Executive Order 12851 of June 11, 1993; the U.S. Government determined on January 15, 2009 that the following foreign entities had engaged in missile technology proliferation activities that require the imposition of missile sanctions described in Section 73 of the AECA (22 U.S.C. 2797b)  and Section 11B of the EAA (50 U.S.C. Appx 24710b) on these entities:

—Korea Mining and Development Corporation (KOMID) (North Korea) and  its sub-units and successors
–Mokong Trading Corporation (North Korea) and its sub-units and successors
–Sino-Ki (North Korea) and its sub-units and successors

And from the Donga Ilbo:

This is the eighth time for the mining company, which has been closely watched by Washington as an exporter of Pyongyang’s ballistic missiles and conventional weapons, to get U.S. sanctions.

The company was slapped with sanctions in 1992, 1998, 2000, 2003, January and August in 2007, and August last year.

Ex-IRA figure faces US counterfeiting charge
According to the Associated Press:

Irish police arrested former Workers Party leader Sean Garland, 74, outside the entrance of the fringe party’s Dublin headquarters — more than three years after he jumped bail in the neighboring British territory of Northern Ireland while facing a similar U.S. extradition warrant there.

Garland had been living openly in the Republic of Ireland — which typically refuses to extradite citizens to face criminal charges outside the European Union — since he left Belfast and abandoned a bail of 30,000 British pounds (about $53,000 at the time) following his October 2005 arrest.

U.S. authorities that year indicted Garland with receiving, smuggling and laundering millions in “superdollars” — so called because of their expert design — that the government of North Korea allegedly began distributing in the late 1980s to weaken the American currency. If extradited and convicted, Garland could face up to five years in prison and a $250,000 fine.

Only one of the past two-dozen extradition requests from the U.S. Justice Department has been approved by Irish judges, who generally oppose extradition, citing America’s harsher sentences and penal system.

Under [Garland’s] leadership, the Workers Party appealed in 1986 to the Communist Party of the Soviet Union for funds. According to the 2005 U.S. indictment, Russian officials encouraged Garland and other Official IRA activists to take counterfeit U.S. $100 bills produced by North Korea.

Read the full story here:
Ex-IRA figure faces US counterfeiting charge
Associated Press
Shawn Pogatchnik
1/30/2009

NK Defectors’ Groups to Get US Gov’t Aid
According to the Korea Times:

The U.S. Department of State will directly provide groups organized by North Korean defectors here with financial support for the first time, according to reports Sunday.

Thus far, Washington has funded local groups working for improvement of North Korean human rights via the National Endowment for Democracy (NED), a private organization supporting freedom around the world.

The move was construed as part of increased U.S. efforts to shed light on humanitarian issues in the Stalinist state.

The State Department posted a notice on the Human Rights Democracy Fund (HRDF) last September and about 50 organizations reportedly applied for the program.

Among the beneficiaries, Free North Korea Radio and the Coalition for North Korean Women’s Rights were granted $500,000 and $300,000, respectively.

The groups will receive a certain amount of money every month for two to three years in accordance with their performance.

Kang Su-jin, founder and representative of the coalition, said she thinks that the U.S. department aims at nurturing North Korean defectors as future leaders through the direct funding.

An official of the department was quoted as saying on condition of anonymity by Radio Free Asia (RFA) that a total of $3 million has been set aside for the program.

But the official refused to elaborate on grantees, saying the issue was “very sensitive.”

Read the full story here:
NK Defectors’ Groups to Get US Gov’t Aid
Korea Times
Kim Sue-young
2/1/2009

By Michael Rank

LONDON – Britain is hosting the first ever delegation from the Workers’ Party of Korea (WPK) amid hopes that this will help to restart a dialogue between Pyongyang and the European Union on human rights, denuclearisation and other issues and lead to transfers of renewable energy technology to North Korea.

Labour Party member of the European Parliament (MEP) Glyn Ford, one of Europe’s top North Korea experts who has visited Pyongyang a dozen times, told NKEW that he was pressing the delegation to agree to reopen the dialogue that was broken off in 2005 after the EU sponsored a resolution at the United Nations in Geneva that was highly critical of North Korea’s human rights record.

He said it was hard to tell whether the four-member delegation would recommend reopening of the dialogue to decision-makers in Pyongyang. “It’s not the style of North Korea to make decisions on the spot,” Ford noted. He said he personally had opposed the resolution, which was supported by the US and Japan, because it was almost certain to result in suspension of the highly sensitive dialogue which had only just begun.

The four-man delegation is visiting Britain for a week and they are also going to Bristol and Cambridge. Ford accompanied the group to Bristol as this west of England city lies in his Euro-parliamentary constituency, and it is close to the possible site of a giant barrage across the river Severn which is currently being considered as a source of generating green electricity.

He said a deal on the nuclear issue and on reviving the human rights dialogue could result in the EU agreeing to provide wind, tidal and other renewable technology to North Korea, just as the EU has provided €500 million ($640 million) in humanitarian aid over the last eight years.

The delegation includes a scientist with a background in renewable energy, added Ford who has an MSc in marine earth science. He said the west coast of Korea has a tidal range of 11 metres (36 feet), which could make it highly suitable for an electricity-generating barrage. The Severn has a tidal range of 14 metres, the second highest in the world.

Tidal barrages are an attractive means of generating electricity because tides, unlike wind, are highly predictable, but the environmental cost of building a barrage over the Severn, up to 10 miles long, could be huge and there is considerable public opposition to the plan. But such factors are likely to loom less large in North Korea.

Ford said he had met three of the four-man delegation on previous visits to Pyongyang, and that he knew two of them fairly well. He is hoping to visit Pyongyang again with a European Socialist delegation at the end of March.

The group have already had a meeting with Foreign Office officials, who Ford said had presumably also pressed the North Koreans on human rights and the nuclear issue.

Apart from the North Korean visit to the UK, Britain’s Lord Alton, a veteran campaigner for human rights in North Korea, is due to visit Pyongyang early next month. Alton, a devout Catholic, is scheduled  to meet the chairman of Korean Religion Association and visit the Russian Orthodox church and the Jangchung Catholic church in Pyongyang. He will be one of the first Western visitors to the Russian Orthodox church, which opened in 2006 amid considerable official fanfare.

The WPK delegation’s visit to Britain has received little if any media attention so far. In fact hardly anyone would have known about it if the generally extraordinarily uninformative North Korean news agency KCNA had not announced on January 27 that “A delegation of the Workers’ Party of Korea led by Pak Kyong Son, vice department director of its Central Committee, left here today to visit the UK.”

The Dialachin Monument (a.k.a. Victory Monument, Derg Monument) was a gift from Pyongyang to Addis Ababa’s Derg regime in the 1970s.

You can see the location of the monument in Wikimapia here.

You can learn more about the Derg here.

See more photos of the monument here.

*This location will be added to the next version of North Korea Uncovered (North Korea Google Earth).  If readers are aware of other construction projects the DPRK has supported, please let me know.  I am especially interested in locating the North Korean restaurants in China, Thailand, Cambodia, Vietnam, and Bangladesh.  Are there others?

Council on Foreign Relations
1/28/2009

Download report here (PDF)

Continuing uncertainties about the health of North Korean leader Kim Jong-Il and possible succession arrangements “warrant heightened attention and preparation” by U.S. policymakers, says a new Council on Foreign Relations report. “The risks are too great and the stakes too high” for U.S. policymakers “to rely on last-minute improvisation for a peaceful and stable outcome” in nuclear-armed North Korea, says the report sponsored by CFR’s Center for Preventive Action (CPA).

In preparing for sudden change, the report recommends that the United States “continue to promote behavioral change within the current regime rather than actively seek to overthrow it unless extreme circumstances dictate otherwise.” But it cautions that: “The United States should not support efforts to prop up the current regime beyond the point at which it has clearly ceased to govern effectively.”

The report also warns against “high-handed U.S. action,” advocating that the United States “defer to South Korean wishes and leadership in the management of change in North Korea,” except if “overriding national interests compel unilateral action.” The report was coauthored by CPA Director Paul B. Stares and Joel S. Wit of the Weatherhead East Asia Institute at Columbia University.

The report also stresses that the potential political, economic, security, and humanitarian challenges presented by instability in the Korean Peninsula as a result of sudden change demand U.S. cooperation with the region’s principal powers. “Failure to accommodate [these powers’] national interests… could have profoundly negative consequences for the evolution of Korea, the stability of northeast Asia, and U.S. relations with major allies and other countries in the region,” says the report.

The report, titled Preparing for Sudden Change in North Korea, examines three potential succession scenarios, each of which poses its own set of challenges to U.S. policymakers:

1) Managed succession: the current regime, which has ruled North Korea since 1948, maintains power but under new leadership.

2) Contested succession: different factions vie for power in Pyongyang, resulting in regime change and a new policy direction. “How a power struggle would play out and who the eventual winner or winners might be is obviously impossible to predict, but a prolonged, divisive, and potentially even violent succession struggle is not out of the question,” says the report.

3) Failed succession: changes in North Korean leadership produce no clear and effective national leader, fatally weakening the state’s ability to function and leading to its eventual demise. In this scenario, North Korea’s “rapid absorption by South Korea is widely viewed as the inevitable next step.”

Regardless of how succession transpires, the report offers specific policy recommendations on how the United States can improve its ability to manage sudden change in the peninsula. These include:

1. Enhancing U.S. readiness: “The United States should upgrade its ability to discern and comprehend domestic political, economic, and other developments in North Korea.” For example, the report recommends enhancing U.S. intelligence to take advantage of a variety of new sources of information; establishing broader contacts with Pyongyang during ongoing denuclearization negotiations; and reestablishing the working relationship between the U.S. and North Korean militaries to recover the remains of American soldiers missing or killed in action during the Korean War.

2. Promoting allied coordination and preparedness: “The United States should work closely with South Korea and Japan to improve allied coordination and preparedness for contingencies in North Korea… The current joint military planning between the United States and South Korea needs to be augmented with a coordinated political, diplomatic, economic, and legal strategy to tackle the core issues likely to arise.”

3. Fostering regional transparency and capacity-building: “To reduce the risk of misunderstanding and friction in a crisis involving North Korea, the United States should pursue a quiet dialogue with the People’s Republic of China to discuss issues of mutual concern… The aim of such talks would be not only to raise potential concerns and discuss possible responses but also to minimize misunderstandings that might arise and seriously exacerbate a crisis.” The United States also should open discussions with South Korea and Japan, UN agencies, European counterparts, and nongovernmental organizations.

4. The report concludes: “Improving contingency planning, sharing the results of this planning, improving consultation on the future of the Korean peninsula, and taking concrete steps to build up generic, potentially useful capabilities—though certainly not sufficient in and of themselves to cope with these challenges—will establish a much firmer foundation for the future.”

The report is coauthored by Paul B. Stares, the General John W. Vessey Senior Fellow for Conflict Prevention and Director of the Center for Preventive Action at the Council on Foreign Relations, and Joel S. Wit, Adjunct Senior Research Fellow at the Weatherhead East Asia Institute, Columbia University, and a Visiting Fellow at the U.S.-Korea Institute at the Paul H. Nitze School of Advanced International Studies (SAIS) at Johns Hopkins University.

Download report here (PDF)

UPDATE: Information from the Korea Times:

South Korea and the United States should maintain about 460,000 troops to deal with any unusual situation on the Korean Peninsula that results from internal instability in North Korea, says a new report published by a private U.S. foreign policy organization Wednesday.

The figure represents a three-fold increase in the number of U.S. troops currently deployed to Iraq.

The authors believe Pyongyang possesses six to eight nuclear weapons as well as several ballistic missiles and 4,000 tons of chemical weapons. China might also try to secure the North’s WMDs in the case of an emergency, they forecast.

The South Korea-U.S. Combined Forces Command drew up a conceptual action plan to respond to sudden changes in North Korea, codenamed CONPLAN 5029, in 1999.

The plan includes outlines for joint military responses by South Korean and U.S. troops to various levels of internal turmoil in North Korea, according to sources.

Contingencies include a mass inflow of North Korean refugees, a civil war provoked by a revolt or coup, South Korean hostages being held in the North, and natural disasters such as earthquakes and floods.

The plan also includes measures to prevent Pyongyang’s weapons of mass destruction from being smuggled out of the country, if the regime was involved in a domestic crisis or suddenly collapses.

In 2005, the Roh Moo-hyun administration, which pursued a policy of greater independence from the United States, rejected a U.S. proposal to develop the conceptual plan to an operational plan involving more specific scenarios.

Read the full article here:
‘460,000 Troops Needed to Stabilize NK Collapse’
Korea Times
Jung Sung-ki
1/28/2009

UPDATE 3: February 26, 2009. According to Yonhap:

Prosecutors on Thursday questioned two activists who brought in North Korean bills for their leaflet campaign criticizing North Korea, allegedly in violation of South Korean law.

The South Korean government has not restricted the controversial leaflet campaign, which criticizes North Korean leader Kim Jong-il as “the most vicious dictator and murderer,” saying there was no law to stop it.

But the Unification Ministry requested a probe for the first time last week, after the activists attached North Korean banknotes to their flyers to encourage North Korean citizens to pick them up. 

Bringing North Korean money into South Korea is permitted only for trade purposes or for personal possession. Violations can result in up to three years in jail or 10 million won (US$6,562) in fines, according to the law on inter-Korean exchange and cooperation.

A North Korean defector, Park Sang-hak, and Choi Sung-yong whose fisherman father is allegedly being held in North Korea, flew scores of North Korean banknotes attached to some 20,000 propaganda leaflets toward North Korea via gas-filled balloons on Feb. 16, Kim’s birthday. Most of the flyers never reached the North, however, because of unfavorable winds.

Prosecutors said they questioned the activists about how the North Korean money was brought in. Other details were not available.

“They asked us how we acquired the North Korean bills and how much we have,” Park said. 

UPDATE 2: February 16, 2009.  Kim Jong Il’s official birthday.  The activists called Seoul’s bluff and sent the flyers across the DMZ with DPRK won in tow.  Nothing has happened. Pyongyang has not yet complained in the press (as of 2/24). 

UPDATE: South Korean government declares the use of DPRK won by groups is illegal:

“It is against the law for civic groups to bring in North Korean currency [into the ROK] without Unification Minister authorization and enclose it in leaflets,” ministry spokesman Kim Ho-nyeon said at a news briefing.

“It is the related ministries’ position that such a request for authorization, if it comes, is likely to harm the order of South-North cooperation and thus will not be granted.”

In other words: “You need permission to do this and we will not give it to you.” But according to Yonhap:

Defying the announcement, organizations of North Korean defectors and families of abducted South Koreans vowed to go ahead with a plan to fly a fresh batch of propaganda leaflets across the heavily fortified border in February. They said the new leaflets will be flown with North Korean bills attached to encourage people to pick them up.

If they go through with this plan, the stage will be set for what I assume will be a well-publicized showdown between the police and North Korean defector groups.

ORIGINAL POST:
South Korea-based human rights groups garnered headlines last year by sending hundreds of thousands of leaflets about Kim Jong il’s lifestyle into the DPRK attached to balloons.  (A copy of the leaflet and a rough English explication can be found here).  Not only did these leaflets promt repeated public complaints from Pyongyang, but they were also blamed for the North’s unilateral “renegotiation” of inter-Korean cooperation projects in Kaesong—which reduced cross border civilian traffic to 880—about 20% of the 4,200 licensed to enter the Kaesong Complex.  Of course closing down these projects was also a goal of the human rights groups, so in the end Pyongyang delivered its most vocal critics a double victory: South Korean subsidies to the North via Kaesong have been drastically curtailed and the balloons, which were temporarily suspended, have resumed. 

As an aside, there is evidence that the Kaesong projects were curtailed for other reasons, most notably internal political concerns and/or the politics of North-South relations.  No matter the true cause(s), Pyongyang publicly blamed the leaflets.

Although Pyongyang has discovered it had little political leverage over the supply side of the leaflet market, it retains significant leverage over the demand side.   Quoting from Yonhap:

North Korea is arresting citizens who possess U.S. one dollar bills as a way to crack down on packages of anti-Pyongyang propaganda leaflets sent by South Korean activists that include the currency, an activist here said Wednesday.

The North’s spy agency, the State Security Agency, issued the directive in early November to stop citizens from collecting the leaflets that criticize leader Kim Jong-il and his communist regime, said Park Sang-hak, a North Korean defector and leader of Fighters For Free North Korea in Seoul. 

So now we move to round three.  How will the human rights groups respond?

South Korean activist groups will attach N. Korean currency to anti-Pyongyang leaflets sent into North Korea, replacing US$1 bills, following rumors that citizens found with the notes are punished, an activist said Thursday.

Seoul’s National Intelligence Service confirmed that North Korean authorities arrest and interrogate those who possess U.S. dollars that allegedly came with the leaflets from South Korea. But the spy agency declined to comment on what kind of punishment they face.

To prevent further arrests, Park Sang-hak, a North Korean defector and head of Fighters for Free North Korea in Seoul, said his organization and another activist group will send 5,000 won North Korean notes — the highest denomination in the country — when they fly a fresh batch of balloons into North Korea next month.

The amount is just enough to purchase about 2kg of rice, officials and aid workers say, and is a little more than the average monthly salary for urban workers. A North Korean household needs at least 20,000 won a month to survive, they added.

This is an interesting move as it increases the demand for leaflets in the DPRK in two important ways.  The first, is that low-level workers and cadres will find it much easier to possess and spend DPRK won (compared to $US), particularly in the southern provinces.  Secondly, the DPRK-US$ exchange rate is about W3,000/$1, so the switch represents a 66% increase in purchasing power per collected note! 

Of course this raises the question of where they will get the DPRK won:

Park refused to elaborate on how he acquired the North Korean bills, except to say that they passed through China’s border region with North Korea.

South Koreans can bring North Korean money into the country only for trade purposes and must first receive government approval to do so. Failure to abide by these restrictions can result in three years in jail or a 20 million won (US$15,198) fine. The ministry is reviewing whether the activists’ possession of North Korean bills was legitimate.

But other than creating routine problems for North Korean state security, I am not sure what specific results human rights groups seek from these activities.  North Korea’s information blockade cracked over a decade ago—even in the southern provinces where the balloons drift.  Although people in these areas might possess little positive information about the outside world, they probably have a general sense that the state of global affairs is not as their leaders portray.  So, breaking the information blockade is a necessary but not sufficient condition for social change in the DPRK.  

Unfortunately, the information on the leaflets is predominately non-actionable.  Rather than condemning Kim Jong il’s lifestyle, the leaflets should provide instructions on accessing foreign radio and television broadcasts, tactics for clandestine organization, case studies in successful defection, business and smuggling opportunities, local prices, and even mundane news like sports scores, movie reviews, etc.  This would likely be much more valuable to the North Koreans than political propaganda. 

This is an interesting tactic, however, and I look forward to seeing what the next moves will be from players in both the North and South.

Read the full articles here:
N. Korea arresting carriers of $1 bills to stop anti-Pyongyang leaflets: activist
Yonhap
Kim Hyun
1/7/2009

Activists to send N. Korean currency with anti-Pyongyang leaflets
Yonhap
Kim Hyun
1/8/2009

North Korea cash sent with leaflets illegal: Seoul
Reuters
Jack Kim
1/27/2009

Seoul bars activists from bringing in N. Korean currency
Yonhap
1/28/2009