North Korean Economy Watch

According to the Daily NK:

With the border area enveloped in ‘Storm Trooper Unit’ inspections, operations against South Korean goods have been stepped up in distant Pyongyang, according to a man from the city who talked to the Daily NK in Dandong, China on Tuesday.

“Inspections by ‘Group 109’, which has been around for a while, have gradually become more intense,” the man, Kim, explained. “Worst of all, they are showing up in the middle of the night without warning to search for CDs, DVDs and recorders, and if there are any materials such as pornography or South Korean merchandise, then the offender is taken away. There are no exceptions.”

“In the past when the National Security Agency or People’s Safety Ministry came to inspect, people would pay them to let it slide, but nowadays the authorities send an agent from both of those agencies and the Defense Security Command as a team, which makes it hard to get out of it if you get caught,” he added.

A Daily NK source from Pyongyang confirmed the story, saying that as recently as July one could escape Group 109 punishment for watching South Korean or American DVDs with a bribe of $100 in central Pyongyang, or less in the surrounding areas.

Group 109 is an organization set up by the Chosun Workers’ Party to crack down on illegal media including CDs and DVDs. The group is one of a number of ‘Gruppas’, as they are locally known, currently operating in the capital, with others including Group 622, which handles juvenile delinquency, and Group 27, actually a branch of the Defense Security Command, which deals with mobile phone usage.

The various groups have been conducting their assorted inspections to weed out myriad ‘anti-socialist’ behavior for some time, but bribery has always provided an escape route, albeit while those without money or connections were made an example of. However in recent times, allegedly since successor Kim Jong Eun ordered more intense inspections and punishments, the ‘Gruppas’ have had to take their tasks more seriously.

The volume of South Korean goods trading in the market has contracted due to the recent crackdowns, but their popularity is undiminished; evasion of inspections is apparently being achieved via house calls to trusted clients. Kim says that the preference is only getting stronger for South Korean goods amongst cadres, a group which has always been safe from inspections.

“The traders go around the city knocking on people’s doors, quietly asking whether the residents would like to buy some South Korean merchandise. For this reason the nickname ‘knock-knocker’ is sometimes used to refer to them,” Kim explained.

Read the full story here:
Pyongyang Seeing Tighter Inspections
Daily NK
Lee Seok Young
2011-8-24

Pictured above (Google Earth): A bus depot in Rakrang-guyok, Pyongyang.  See in Google Maps here.

According to the Daily NK:

Growth and improvement is evident in some areas of the private sector in North Korea, Ishimaru Jiro of ASIAPRESS revealed on the 16th, pointing to the growth of bigger, better private transit concerns and relatively productive coal mining operations as evidence of this trend.

In the past, trains were almost the only viable means of long-distance transportation in North Korea. Then, as private business began to grow and the railways fell into a deep malaise, vehicles such as trucks and cars belonging to military bases, state security and state enterprises were pushed into service to earn money for moving people; this, the so-called ‘servi-cha’ industry.

The servi-cha industry has long been fragmented and small scale; but now transportation companies run by rich individuals (‘donju’) which purchase several buses and hire drivers, guides and mechanics, are acting just as a transit company in a capitalist state would do.

With profit-sharing and bribery as the backbone, a large number of North Korean organs and enterprises have decided to lend their name to these individuals, fuelling the growth and development of a network of sorts.

“From the early 2000s, a high-speed bus network mostly between major cities began to emerge,” Ishimaru, revealing the latest research by ASIAPRESS internal North Korean sources, commented. “The companies are packaged as an enterprise affiliated to some state authority outwardly, but they are actually operated by individuals who pay kickbacks to that authority.”

The People’s Safety Ministry affiliated 116 Task Force Team is one such transportation company, Ishimaru says. It operates buses connecting Shinuiju, South Pyongan Province and Pyongyang. Ordinarily, the bus parks at a station or major public location, and then departs when it is full of passengers going to the next destination.

Here are previous posts on the servi-cha industry.

Read the full sotry here:
Green Shoots of Private Enterprise Growth
Daily NK
2011-8-17

Part 1: The Illogicality of Anti-Socialist Policy
Lee Seok Young
2011-6-22

In North Korea today, those actions which are subject to the harshest oversight and most excessive punishment are those deemed anti-socialist, an expression of the extent to which such actions are seen as a threat to the regime.

Yet these very actions have already taken deep root in people’s lifestyles, spreading rapidly as a result of chronic economic difficulties, food insecurity, endemic corruption and the inflow of information from abroad.

First of all, every North Korean and defector the Daily NK meets says much the same thing; that if people had not followed an ‘anti-socialist’ path during the mid-90s famine, they could not have survived. The power which maintains North Korean society through the hardest times is that derived from anti-socialist actions, and it is those actions which the authorities would like to put an end to.

The blocking of these so-called ‘anti-socialist trends’ nominally began with Kim Jong Il’s 1992 work, ‘Socialism Is a Science’, issued following the fall of the Eastern Bloc. A time of great fear for the regime, ‘Socialism Is a Science’ expressed a determination to block out anti-socialist phenomena.

However, a famine exploded nationwide shortly after the publication of the thesis, placing these very anti-socialist modes of behavior at the core of the lives of almost everybody in the nation.

Having completely replaced Kim Jong Il and the Chosun Workers’ Party as the alpha provider of sustenance, money is now uppermost in the minds of the people. If they can, they are moving away from the collective farms, factories and enterprises to become more active in the market.

“At a time when the state didn’t provide rations and workers were not even receiving their monthly wages, the ones who started trading early on were all best able to avoid this predicament,” said one defector, “Others followed after their example and, rather than trying to find work, went straight into the market.”

Money, then, is the fundamental toxin that now threatens to shake the very basis of the Kim regime, completely undermining the ‘let’s work the same, have the same and live well’ lifestyle that the regime has long been demanding from the people.The authorities, as part of a losing battle to halt this slide, ‘educates’ the people with the mantra, “Don’t become a slave to money,” but it makes no difference.

People are growing more and more money-oriented. What simply began as a desperate rearguard action to survive extreme poverty has become a preoccupation with accumulating wealth. The many who don’t have the capital to start a business are keen to work with those who do.

One interviewee, a woman hailing from North Hamkyung Province, told The Daily NK, “They have to keep trying, but they can’t eliminate it. How could they, when the state itself is actually encouraging its spread? Everywhere you go, they demand bribes, and people with money never get punished even when clearly guilty, because everyone is desperate to earn money.”

Given that the central authorities demand Party funds from regional bodies, and regional Party and military cadres in turn work with smugglers, and the cadres charged with inspection turn a blind eye to criminal acts in exchange for bribes, the whole system is, as the interviewee said, rotten from the top down.

One defector who left his position as a cadre in a Yangkang Province enterprise agreed, recalling, “The Party periodically collected money from our factory, but since all the machinery had long since stopped running, they made us work in the market and give 30% of the profits to the authorities. It was the state that promoted anti-socialism in consequence.”

Another defector originally from North Hamkyung Province said in a similar vein, “The National Security and People’s Safety agents stationed on provincial borders stop people without the right permit to travel, but let them pass in exchange for a few packs of cigarettes. Some even ask for your wrist watch. It’s not just the people; the whole nation is busy being anti-socialist.”

Increasing exposure to foreign materials is also influencing the situation somewhat. Such things are especially popular with students and women working in the markets, two groups which are more up-to-date than most.

South Korean and Western culture is being transmitted quickly via DVD, and materials that are brought into the state from China by traders and smugglers are also pushing forward new trends such as the ‘Korean Wave.’

To the North Korean people, who once lived in near complete isolation from the rest of the world, the introduction of foreign materials has intensified their yearnings for a new life style. The stricter the regulations become, the thirstier for something else the people become.

Part 2: Crackdowns Enhancing Anti-Socialist Cycle
Mok Yong Jae
2011-06-23

‘Anti-socialism’ in North Korea is a destabilizing force disturbing the foundations of the system. For that reason, the authorities place a great emphasis on rooting it out. Inspections are frequent and their targets varied. But the fact is that this has done little to stop the growth of such activities; in fact, quite the opposite; some believe that targeted inspections actually increase instances of smuggling, for example.

These focused inspections are handed down in the name of the ‘Party Center’ in other words Kim Jong Il. The latest inspections over anti-socialist trends in border areas have been being carried out by Kim Jong Eun’s direct instruction. First people are educated about and warned against ‘anti-socialist behavior’, then provincial Party and military cadres launch an inspection.

If a concerted inspection is to be unleashed on a given area, an inspection unit is set up, and it does the work. In the case of recent inspections targeting drugs and defection, the inspection units have even been sent from the Central Committee of the Party. The makeup of the unit can differ slightly depending on the target of the inspection, but usually includes agents from the National Security Agency (NSA), People’s Safety Ministry and Prosecutors Office. Precise search sites are usually selected at random and the searches conducted without warning, while ‘criminals’ are flushed out in part by getting citizens to report on one another.

However, the effectiveness of this system has a limit. This is primarily due to an overwhelming degree of official corruption at nearly all levels.

The Spread of Bureaucracy and the Limits of Inspections

The primary agents conducting the inspections, agents from the NSA and PSM, collude with smugglers for their own benefit. Anti-socialist activities are not a new means of survival, and the more commonplace the inspections become, the more focused the agents doing it become on their own self-interest; i.e. rent seeking rather than uncovering instances of wrongdoing.

For example, agents seek out big smugglers only in order to offer them an opportunity for their actions to be ignored, something they will do for a price. A source from Yangkang Province explained to The Daily NK, “Hoping not to lose their goods, also so as to avoid prison, in many cases smugglers try to win over agents. They talk to the official for a while, and if they think ‘this guy can be won over’ then some even gently encourage them to find a way to forego any punishment.”

Then, when the inspecting agents begin dropping heavy hints about expensive merchandise, electronics or a piano, for example, the smugglers say, “I’d be delighted to buy that for you,” and for that receive their freedom.

Thus, it is rare for money to change hands directly; goods are bought in China and handed over when the inspection period has come to a close. The smuggler also obtains a permit to import a certain amount of other goods without penalty in the future. By winning over agents in this way, assistance in future times of trouble can also be secured.

In addition, as Lee Jae Won, the former chairman of the Korean Bar Association Committee on Human Rights in North Korea and someone who has interviewed a great number of defectors as author of the 2010 White Paper on Human Rights in North Korea, concludes, “Anti-socialist activities are extremely common for North Korean cadres in public positions such as prosecutors and judges.” The bribing of prosecutors and judges in exchange for leniency or to escape conviction is a daily occurrence, as much as bribing the security forces and cadres.

What Anti-socialist Counteroffensive? Officials are the source of Antisocialism

Now much more so than in the past, cadres and agents are directly involved in the antisocialist activities.

A Chinese-Korean trader who often goes between Dandong and Shinuiju told The Daily NK, “There are so many drugs in North Korea that even the officers supposed to be policing it are taking drugs themselves. Some of them even asked me to take opium to China and sell it. I go back to North Korea every year to visit relatives, and I’ve seen officers there doing bingdu (methamphetamines) with my own eyes.

It is also said that the families of cadres are the main source of South Korean movies and dramas on DVD. Party cadres are, in effect, the very source of the Korean Wave that their bosses in Pyongyang ban on the premise of defending the state from the ‘ideological and cultural invasion of the South Chosun reactionaries’.

A source from Pyongan Province confirmed the story, telling The Daily NK, “These DVDs and VCDs come from the houses of cadres who travel overseas a lot. The children of cadres love watching them. The families of traders have a lot of them, too, but it’s the cadres they’re spreading from.”

Thus, while the central Party single-mindedly attacks anti-socialist behaviour, the cadres and agents who are meant to be carrying out the orders are deeply involved in the ‘anti-socialism’ themselves. The more crackdowns that occur, the more contact there is between the elite and security forces on the one hand and smugglers and traders on the other, offering more opportunities for symbiosis. It is for this reason that some claim the inspections are actually catalyzing the anti-socialism.

Meanwhile, An Chan Il of the World North Korea Study Center pointed out to The Daily NK that the whole thing is completely inevitable, saying, “These inspection teams are not receiving proper rations from the state, so of course they take bribes instead when sent out into the field. Administrative irregularities and corruption are at the very heart of these anti-socialist inspections. The only way for the families of inspecting agents to survive is for the father to be a part of this anti-socialist behavior.”

Choi Yong Hwan from the Gyeonggi Research Institute agreed, adding, “These inspections are intensifying social inequality. The fundamental cause of this is the collapse of the state rationing system due to economic difficulties. It’s a situation where even the agents are hungry, so there is a permanent pattern of them attempting to guarantee their own survival via corruption. There is a vicious cycle repeating here, whereby those who are able to ingratiate themselves with the inspecting agents and cadres survive, and those who do not or cannot get punished.”

According to the Daily NK:

Recently, younger cadres have started being posted to city and county units of the National Security Agency (NSA) and People’s Safety Ministry (PSM), according to sources.

One such source from North Pyongan Province explained on Sunday, “NSA and PSM cadres are being rapidly changed for younger men, who are now playing a pivotal role. There are now two or three men in their late 20s and early 30s in the case of an NSA office, and among the ten men in a PSM office, five or six are in their 30s.”

“The change to younger agents began last year, making men in their mid-40s who should be at peak capacity start looking over their shoulder,” the source added.

A source from Yangkang Province concurred, adding, “Just now in the local NSA, prosecutors’ office and PSM, early- to mid-30s people have been stationed in almost all posts. These early- and mid-30s people are even taking places as high as vice director of the city or county NSA.”

The NSA and PSM represent the domestic force behind the Kim dictatorship, the tools of both policing and intelligence functions. As such, experts assert that if people loyal to the Kim Jong Il system are being replaced, that is another telling sign that North Korea is edging towards a system led by successor Kim Jong Eun.

Cheong Seong Chang of Sejong Research Institute explained, “This looks like generational change to facilitate the Kim Jong Eun succession system. To increase Kim Jong Eun’s ability to secure the system, they are changing existing cadres for younger men at a rapid pace.”

Even as late as the early 2000s, to become an NSA or PSM agent required an individual to have ten years of military service and two years of civilian work under his belt, and to have passed through a political college dedicated to the respective service.

Having gotten a foot in the door, an individual needed at least three to five years to gain promotion through local agent, vice section chief, section chief, vice director and then director positions, and as a result one would often be in one’s 50s before reaching the vice director’s chair. Of course, family background and political conditions also had to be met.

However, now there is an alternative course, with viable candidates being plucked from military service of only five or six years to enter an ordinary civilian college, and thereafter being stationed with the security forces.

After which, following two or three years as an entry-level agent, those who enter via this foreshortened route are sent for six months of political education, graduating whilst still in their late 20s or early 30s. It is these individuals who are now emerging early into mid-level positions in the security forces.

While it is claimed that this process is open to all soldiers with good backgrounds and represents an example of “Kim Jong Il’s consideration” of his subjects, the reality is that only a minority of young people, noticeably the children of cadres, can benefit from it, according to sources.

Regardless of which, the Pyongan Province source said that this policy change is causing problems, with the younger men speaking disrespectfully to people who are below them but who society traditionally views as their elder.

The Yangkang Province source explained, “Because they got pushed down the pecking order overnight, got hurt or feel betrayed, many are driven to drink. These older men are complaining at getting nagged by younger people.”

Alongside this, recently most new placements are far from an individual’s home.

A Shinuiju source commented, “In the past, prosecutors or People’s Safety agents were people born locally, but since August they have been coming from other provinces or counties. This seems to be a policy handed down to combat the many cases of agents turning a blind eye to the actions of family and friends.”

However, “These days, if you have money you can solve anything, so the interpersonal connections of these people make no difference,” the source concluded.

Read the full story here:
Younger Men Taking Over Security World
Daily NK
Lee Beom Ki and Lee Seok Young
2011-6-21

According to the Daily NK:

Loan-sharking of both money and food is back to being widespread in North Korea these days, and sources say this is causing problems.

The activity is said to have waned for a time in the face of strict crackdowns during the currency redenomination in 2009; however, according to sources, a lot of those people who were expropriated by the currency redenomination have now started borrowing money from loan sharks in order to begin trading or get access to food, meaning it has spread widely once again.

A source from Hyesan, Yangkang Province explained on the 13th, “Those without funding for trade tend to borrow money at high interest. If they borrow money from an acquaintance, the interest rate is five percent, or they make an agreement with a loan-shark, who they don’t know well, to give ten percent.”

“Some loan-sharks get from 15 to 20 percent interest from smugglers for loans over a single night! Even though it is risky, depending on the regulations, they lend money to smugglers because they can earn large sums of money in just a few days.”

Loan sharks have been the target of crackdowns for years. In August 1997, the Ministry of Public Security (formerly the People’s Safety Ministry) released a decree stating that authorities could go so far as to execute those caught loaning food at high interest rates. Additionally, right before the currency redenomination in September of 2009, the National Security Agency cracked down on loan-sharking, releasing a decree calling on officials to “Map out measures to uproot usury.”

However, given that even agents of the People Safety Ministry use loan-sharking for the trading activities of their families, the crackdowns are doomed to fail.

According to sources from several provinces, the activity is also more common in rural areas than in cities, because in cities people have more survival mechanisms, but rural people do not have many alternative ways to get hold of money or food.

Loans are used in these agricultural areas in order to borrow grain from March to May, and are paid back double in the harvest season. In Yangkang Province, meanwhile, when people borrow one kilogram of rice or flour, they must pay it back in the form of 2.5 or 3 kg of potato starch, since the major product of the province is potatoes.

It is the kind of interest rate that was applied during the March of Tribulation, but people still apply it now.

This is a vicious circle of poverty, another defector pointed out. “Those who suffer loan-sharking each year face another worrying fall because their harvest must be paid to the loan sharks.”

The author of this Daily NK story unfortunately chooses to describe the DPRK’s “informal lenders” as “loan sharks,” making them morally equivalent to thieves and bullies, rather than describing them as lenders in a high-risk market.  This sort of pejorative name-calling is common among those who don’t understand how credit markets work, particularly in a high-risk business environment such as the DPRK.

The reality is that informal and black market lenders in the DPRK are making de jure illegal loans from their own savings.  This means that if the loan is officially discovered, the lender (and probably the borrower) will face criminal charges.  Even if the lender is not arrested, he must pay regular protection money to keep it that way.  Additionally, there is little property in the DPRK which can be credibly used as collateral in a loan, which means that even if the loan is not discovered by the authorities, if the borrower defaults or absconds with the funds there is little the lender can take possession of to recover his capital.  This level of risk requires borrowers to pay much higher interest rates to coax scarce lenders into the market.

In addition to the high interest rates that black market lenders usually charge, they also earn a bad reputation for their resort to “informal” mechanisms to insure and recover these loans.  Some insurance mechanisms, such as lending to family members and close acquaintances, might work well.  Other mechanisms, such as making threats of harm (and following through), are not as widely respected. But these are “technological” adaptations and responses to the DPRK business environment, not purely sadistic behavior.  In other words, these market practices are completely predictable given the institutional environment and not unique to the DPRK.  If the DPRK court system impartially enforced contracts, and collateral could be legally secured, these sorts of technologies would be unnecessary.

I am not claiming that black market lenders are angels, or even pleasant people (in fact some of them may be powerful individuals in the party and security infrastructure), but they are financing the development of the DPRK’s unofficial economy out of nothing more than financial self-interest.  Without their efforts a whole class of informal and black market entrepreneurs would be unable to access capital markets to start new businesses or finance operations.  The unpleasant side of black market lending should not be placed on the market participants themselves, but on the DPRK’s policymakers who have pursued economic policies that have made this sort of behavior necessary.

Read the full Daily NK story here:
Loans Creating Circle of Poverty
Daily NK
Kang Mi Jin
2011-5-16

According to the Choson Ilbo:

The North Korean regime in January launched a new surveillance bureau charged with snooping on its people, Radio Free Asia reported Thursday.

Quoting a source in the city of Hyesan, Ryanggang Province RFA said the bureau, named 118 Sangmu, combines forces from the State Security Department, the Ministry of Public Security, prosecutors’ offices and party organs, in accordance with leader Kim Jong-il’s instructions “to eradicate antisocialist elements.” Senior officials involved are baffled because the new bureau’s tasks overlap with those of an already existing bureau, 109 Sangmu, it claimed.

Since its launch in 2005, 109 Sangmu cracked down on drugs and DVDs of South Korean soap operas. Over recent years, surveillance bodies have mushroomed, including Bureau 27, an agency which monitors mobile phone use under the State Security Department; 111 Sangmu, which cracks down on child beggars; patrol units of the Ministry of Public Security; mobile strike forces; border guard posts under the Civil Defense Department; and worker inspectors.

The proliferation is already causing problems. On Feb. 24, a pitched battle broke out near the border in North Hamgyong Province between border guards and a security patrol over how to handle three smugglers, a man and two women, who were arrested by the patrol after border guards pursued them, RFA quoted another source in the province as saying. “It nearly led to a shoot-out between the two groups,” the source added.

Internal Surveillance Agencies Mushroom in N.Korea
Choson Ilbo
3/4/2010

UPDATE 4 (2/20/2011): Kim Tong-un (김동은) named Kim Jong-il’s fund manager.  According to Yonhap:

A senior official of North Korea’s ruling party has been named to lead a special party bureau, code-named Office 38, that oversees coffers and raises slush funds for its leader Kim Jong-il and the ruling elites, a source on North Korea said Sunday.

Kim Tong-un, formerly head of Office 39 in the Workers’ Party of Korea, assumed the post in May last year, when North Korea revived Office 38, which was merged with Office 39 in 2009, the source said on condition of anonymity. Office 39 is believed to be another organ that governs a wide network of business operations both legal and illegal.

Both Offices 38 and 39 belong to the Secretariat of the Workers’ Party, which Kim Jong-il chairs, according to a diagram of the North’s power structure released by the Unification Ministry, which handles inter-Korean affairs. Last year, the ministry had only included Office 39 in a similar diagram.

In a meeting with reporters last week, a ministry official said Office 38 has been spun off from Office 39 and is now running on its own again. The official, who would speak only on the condition of anonymity citing the sensitive nature of his comments, described “a stream of information” that has come through since mid-2010.

Office 38 mainly oversees transactions involving foreign currency, hotels and trade, the official said, while Office 39, headed by Jon Il-chun, drives revenue by dealing in narcotics, arms, natural resources and others.

The North’s revival of Office 38 is interpreted as an effort to cover the increasing cost of leader Kim Jong-il’s ceding of power to his youngest son, Jong-un.

The story was also reported in Yonhap.

UPDATE 3: Here are links to the Ministry of Unification‘s English language organization charts of the North Korean leadership in which some of the changes mentioned below are listed (though not all): Workers’ Party, State Organs, Parties and Organizations

UPDATE (2/15/2011): According to the Daily NK:

The number of Special Departments under the Secretariat of the Chosun Workers’ Party has been increased from 18 to 20, a move that includes the revival of the No. 38 Department, which previously served as Kim Jong Il’s private bank vault, and the foundation of a film department.

The Ministry of Unification revealed the news yesterday in its 2011 North Korean Power Structure and Index of Figures, Agencies and Organizations. It incorporates North Korean changes from December, 2009 up to the present day, completed after consultation with relevant agencies and experts.

The revival of the No. 38 Department and founding of a film department

The report states, “The No. 38 Department, which was merged with the No. 39 Department in 2009, was spun off again last year. Kang Neung Su, who was appointed Deputy Prime Minister in June of 2010, was introduced as head of the film department at the same time. The exact foundation date of the film department is unknown; however, it appears to be newly established.”

No. 38 and No. 39 Departments are directly controlled by Kim Jong Il and serve as a private vault for his ruling funds. The No. 38 Department manages hotels, foreign currency stores and restaurants etc, while illegal weapons trading through foreign trade companies, the smuggling of gold, illegal trade in drugs and the distribution of counterfeit dollars, so-called supernotes, are handled by the No. 39 Department.

“They combined two offices which had different functions, and it appears that this did not result in the intended efficiency,” a knowledgeable source commented.

Meanwhile, on the establishment of a film department, the source added, “North Korea’s cultural art is a political means by which to carry out Party policy and a policy tool to implant policy in the North Korean citizens.”

Among the reshuffled special departments, the existing ‘Munitions Industry Department’ has been renamed the ‘Machine Industry Department’, and the ‘Administration and Capital Construction Department’ has been scaled back to simply ‘Administration Department’.

Elsewhere, the existing National Resources Development and Guidance Department under the Ministry of Extractive Industries has been promoted to National Resources Development Council and, as reported, the Joint Investment Guidance Department rose to become the Joint Investment Committee, while the National Price Establishment Department became the National Price Establishment Committee. Again, as reported, the ‘People’s Safety Agency’ under the Cabinet became the People’s Safety Ministry under the National Defense Commission, while the Capital Construction Department was downsized to become the General Bureau of Capital Construction.

The Central Court and Central Prosecutors Office were also renamed the Supreme Court and Supreme Prosecutors Office respectively.

The Ministry of Unification report also notes that North Korea added Nampo City to its list of eleven cities and provinces, increasing the total number to twelve.

The newly designated Nampo City includes five former parts of South Pyongan Province; Gangseo, Daean, Oncheon, Yonggang, and Chollima districts. Previously, Nampo was under the direct control of the central government as part of South Pyongan Province proper.

At the same time, North Korea also transferred the existing Kangnam-gun, Joonghwa-gun, Sangwon-gun, and Seungho-district, all formerly southern sections of Pyongyang City, to North Hwanghae Province.

Military Commission placed under the Central Committee of the Party

The relationship of the Central Committee and Central Military Commission, which was formerly said to be in parallel, has been changed, reflecting the idea that the Military Commission is now under the Central Committee of the Party.

The Ministry of Unification commented, “By revising the Party regulations, the Central Military Commission and Central Committee were marked as parallel in 2009 and 2010. However, after confirming the revised Party regulations at the Chosun Workers’ Party Delegates’ Conference on September 28th last year, this relationship was adjusted, and an election is now held for the Central Military Commission via a plenary session of the Central Committee.”

Also, the ‘Bureau of General Staff’ under the National Defense Commission was judged to be below the Ministry of the People’s Armed Forces, but is now shown to be in a parallel relationship with the Ministry of the People’s Armed Force and ‘General Political Department’.

ORIGINAL POST (2/14/2011): According to Yonhap:

North Korea has revived a special party bureau, codenamed Office 38, that oversees coffers and raises slush funds for its leader Kim Jong-il and the ruling elites, South Korea said Monday in its annual assessment of the power structure in the communist country.

In 2009, the bureau had been merged with Office 39, another organ that governs a wide network of business operations both legal and illegal, according to the Unification Ministry in Seoul.

In a meeting with reporters, however, a ministry official said Office 38 has been spun off from Office 39 and is now running on its own again. The official, who would speak only on the condition of anonymity citing the intelligence nature of his comments, cited “a stream of information” that has come through since mid-2010.

The official would not elaborate on how the information has been obtained, only saying the ministry works closely with “related government bodies” to outline the North’s power structure.

Office 38, whose chief remains unknown, mainly oversees transactions involving foreign currency, hotels and trade, the official said, while Office 39, headed by Jon Il-chun, drives revenue by dealing in narcotics, arms, natural resources and others.

A source privy to North Korea matters said the spin-off suggests that North Korea has been experiencing difficulties in earning foreign currency since merging the two offices.

“Efficiency was probably compromised after the two, which have different functions, were combined,” the source said, declining to be identified citing the speculative nature of the topic. “More importantly, it seems related to the current state of foreign currency stocks. The North is apparently trying to address those difficulties.”

In August last year, the United States blacklisted Office 39 as one of several North Korean entities to newly come under sanctions for involvement in illegal deeds such as currency counterfeiting.

North Korea is also believed to have been hit hard financially after South Korea imposed a series of economic penalties last year on Pyongyang when the sinking of a warship was blamed on it.

Both Offices 38 and 39 belong to the Secretariat of the Workers’ Party, which Kim Jong-il chairs, according to a diagram of the North’s power structure released by the Unification Ministry. Last year, the ministry had only included Office 39 in a similar diagram.

Both offices have often been referred to as Kim Jong-il’s “personal safes” for their role in raising and managing secret funds and procuring luxury goods for the aging leader.

Read the full story here:
North Korea Splits No. 38 and 39 Departments Up Again
Daily NK
Kim So Yeol
2/15/2011

N. Korea revives ‘Office 38′ managing Kim Jong-il’s funds: ministry
Yonhap
Sam Kim
2/14/2011

According to the Daily NK:

According to a former North Korean logger in Russia, instances of forestry workers running away from a “Forestry Mission” program organized by North Korea’s Forestry Ministry in the Russian Far East are increasing due to excessive salary deductions currently being imposed by the North Korean authorities.

Song Ki Bok, a 48-year old former logger who now lives in South Korea told The Daily NK on November 18th, “The Forestry Mission takes 70% of monthly salary in the name of Party funding. Who would want to work there when all the money you earn from working yourself to death is taken from you?”

Prior to 2008, North Korea took 30% of the North Koreans’ wages for “Party loyalty funds”. However, after sanctions put in place by the international community following the first North Korean nuclear test began to bite, the amount was increased to 70%.

The North Korean forestry workers do hard physical labor. Depending on the intensity of their work, they receive just $40 to $100 per month.

Therefore, once 70% is deducted as Party funds, the take-home pay of the worker is between $12 and $30. As a result, workers cannot even dream of wiring sums back to family in the North. They just deliver what cash they can gather via colleagues returning home.

Worse yet, with this kind of swingeing monthly deduction, many workers cannot even recover the bribe they had to offer Party officials in order to be sent to Russia in the first place. For example, the total amount Song ended up paying was nearly $400.

Before escaping from the forestry program, Song saw a monthly salary of $30, meaning that even if he had saved every penny he earned for a year he still would not have recouped the $400 he paid out in bribes.

In the beginning, he was buoyed by the ‘Russia Dream’. The family of a worker in a foreign country traditionally lives in better conditions than most people. Therefore, Song went to Russia in the belief that if he worked hard for three years, he could make 10 years of a North Korean working man’s salary; however, the reality was as harsh as the bitter cold of Siberia.

The Forestry Mission in Russia; Kim Jong Il’s hard currency provider

According to Song, there are 17 forestry sites in Russia which employ North Koreans. Depending on the size of the camp there are differences; however, approximately 1,500~2,000 North Koreans work at each.

The major activities of the Party Committee in each camp are surveillance and the collection of Party funds. A manager, Party secretary and an agent from each of the National Security Agency and People’s Security Ministry are assigned to each site, and 15 administrative officers below them manage operations.

The life of workers is the same as it would be if they lived in North Korea. They must partake of weekly evaluation meetings, and food is provided by distribution. They plant potatoes and wheat in cleared areas near their digs to supplement the insufficient state provisions.

If workers leave without permission, they are punished upon their return. If the crime is grave, the worker might be summoned to North Korea for reeducation.

Song commented, “Sometime people leave the camp to go hunting to earn money. They can only escape punishment by bribing the management.”

In total, the amount gathered in the name of Party funds by the North Korean authorities from each camp can exceed $140,000 per month. Calculations suggest that the annual North Korean government take from the program exceeds $25 million.

However, this harsh Party policy is driving escapes, according to Song, “Since most of their monthly salary began to be taken away as Party funds, the number of workers escaping started to increase. Just from those I know, the average has reached 30 workers per a year.”

Song, describing the harsh working conditions at the site, said, “In 2006, a wood cutter from Dukcheon in South Pyongan Province who had frostbite in both feet at work didn’t receive treatment in time. In the end, they had to cut off both his legs. His co-workers, who could not ignore the situation, raised it with the Party Committee there; however, not only was this opinion ignored, but the wood cutter was sent home with the explanation, ‘It was an accident caused by my own carelessness’.”

“The life of a forestry worker fighting against cold which can reach -40˚C in winter is unspeakably tough,” Song said. “Meanwhile, they don’t even receive a proper month’s salary, which reduces their will to work.”

“If a worker escapes, in the end he has no choice but to head to South Korea. When I think about those of my colleagues who couldn’t come to South Korea with me, it is still hard to sleep at night.”

Read more about logging camps in Russia (including satellite imagery) here and here.

Read the full story here:
Runaway Loggers on the Rise Due to Wage Cuts
Daily NK
Kang Mi Jin
11/22/2010

Institute for Far Eastern Studies (IFES)
NK Brief No. 10-11-01-1
11/1/2010

The North Korean Ministry of People’s Security (MPS) recently issued an order restricting the use of automobiles and warning that any car or truck used to earn private income would be confiscated by the State. There were a few cases of authorities cracking down on the use of private buses in the mid-2000s, but this is the first time there has been a widespread crackdown on the private use of all vehicles.

According to a report from the Daily NK, a source from North Hamgyeong Province has revealed that “on an order from the MPS, a crackdown on privately-owned cars, buses, and 1.5-2 ton small trucks began last month,” and, “all traffic police were mobilized and are checking all registrations, car-use permits, and driving licenses.” According to the source, each regional transportation authority is filing comprehensive situation reports, which show that with the exception of cars used by the elite, all illegally-used cars are being confiscated. Even cars used by military-run foreign capital organizations are subject to inspection by police.

In North Korea, the lack of electricity has led, since the mid~2000s, to the sharp drop in the use of trains and a rise in reliance on the so-called ‘service car’ as the primary method of moving people and goods around the country. This crackdown on service cars will be carried out in two phases: Phase 1 will run until the end of the year, then Phase 2 will be carried out until April 2011. The ownership and use of cars by organizations and businesses will also be investigated, while other cars will be inspected one at a time as they travel the roads. If any illegal use is discovered, the car will be impounded.

This kind of measure appears to be one aspect of North Korean authorities’ on-going battle against “anti-socialism.” Cars and other government property being put to private use is problematic, but a crackdown of this size indicates that organizations and government workers are abusing the rules on such a scale that the government can no longer tolerate their corruption. In order for these service cars to exist, authorities must break laws, forge documents, and pay bribes to get a car registered, purchase gas, and handle profits.

However, a crackdown on these cars is expected to have many side-effects. Service cars began replacing trains in 2004, but the people’s reliance on them grew so quickly that they are now the primary means of transportation throughout North Korea.

Ultimately, the North can not avoid significant aftershocks of the measure; without service cars, not only will businesses suffer production problems, those people who make their living through wholesale and retail markets will suffer, and the standard of living for people across the country will take a hit.

Previous posts on this topic cna be found here and here.

According to the Daily NK:

The North Korean authorities consider both prostitution and drugs to be serious problems and are actively seeking ways to combat them, according to an internal document obtained by The Daily NK.

Obtained on the 28th, the document, “Measures against Young Women Earning Money through Prostitution,” produced internally by the People’s Safety Ministry (PSM), reveals that the PSM has instructed local offices to crackdown on prostitution and drug-related crimes more vigorously.

This document was reportedly distributed to provincial committees of the Party and local PSM offices in July this year.

According to the document, “Anti-socialist phenomenon, young women and college students taking part in prostitution included, are appearing,” adding, “Strong measures to overcome this situation must be prepared.”

“At commuting times, women in large groups have been seen taking part in prostitution around bus stops or train stations,” the document states. “Law enforcement officials must not yield to these actions.”

The PSM document also focuses on drug crimes, reporting that, “The circulation and use of illegal drugs is increasing. We must establish measures to overcome drug-related activities.”

The document represents a tacit admission by the PSM that both prostitution and drug use have expanded to the point of becoming social problems in North Korea, a fact which the authorities have never admitted publicly.

As in many other countries, economic difficulties in North Korea tend to lead to an increase in the number of young women entering prostitution, because it represents one of the few ways to make ends meet. Inside North Korea sources say that the March of Tribulation led to a significant increase in prostitute numbers, and last year’s confiscatory currency redenomination is said to have had a similar effect.

As a result, sources say that regardless of the authorities’ will to crack down on prostitution and other illegal activities, it will be impossible because they are now an ingrained part of North Korean society.

Furthermore, even though public trials of persons accused of prostitution-related offences are held regularly in provincial areas, the law is unable to reach the most powerful prostitution rings because they are tacitly protected by paid-off PSM officials.

Read the full story here:
PSM Admits to Seriousness of Social Ills
Daily NK
Shin Joo Hyun
11/1/2010