North Korean Economy Watch

According to the Financial Times:

Orascom Telecom, the Egypt-based mobile network operator, says its subsidiary in North Korea, Koryolink, has acquired 100,000 subscribers in its first year and expects to add millions more in the next five years.

The expansion plans come as the isolated country of 24m, which says it wants to be considered a “mighty and prosperous nation” by 2012, steps up efforts to attract foreign investment.

Pyongyang’s economic ambitions come in the face of tough international sanctions on its nuclear arms programme.

“We see that there is a very big plan for an economic boom,” said Khaled Bichara, chief executive of Orascom. “They are really looking to have, by 2012, a much stronger economy. We believe that mobiles and eventually international communication will definitely be part of this.”

Koryolink, a pre-pay system, has been available in Pyongyang and Nampo, the capital’s port, since December 2008. To help expand the network from there, Mr Bichara said North Korea was laying fibre-optic cables in the provinces.

Orascom was installing its most technologically advanced 3G network in North Korea, he said. The 2010 target for user numbers was ambitious but Mr Bichara declined to put a figure on it.

“I think if we achieve the target of this year, that will be a big milestone,” he said. “The number will be big enough to make Koryolink look like a significant company for us because the revenues per customer are interesting and we believe that this business will have customers in the millions within the next four or five years.”

Mr Bichara said the subscription figures showed that mobile phones were not limited to elite members of the military and communist party, as many observers had speculated.

However, the handset price of €140 ($195) put a mobile phone out of most people’s grasp.

So far, Koryolink offers only a basic voice and text messaging service. International calls and roaming services are not provided but Mr Bichara said starting them would be simple given the sophistication of the network being installed.

Koryolink is a joint venture in which Orascom has a 75 per cent stake. The rest is owned by Korea Post & Telecommunications Corp, the state fixed-line provider.

Thanks to a reader for sending this to me. 

Read the full article here:
N Korea operator looks to millions of 3G users
Financial Times
Christian Oliver and Heba Saleh
2/3/2010

According to the Choson Ilbo:

The North Korean regime apparently sacked the Workers’ Party’s Finance Director Pak Nam-gi, letting him take the fall for the failed currency reform late last year. Pak was appointed finance director in July 2007 to oversee North Korea’s economic policies and has spent the past few years trying to root out a nascent market economy.

“Right now, North Korean officials are busy blaming each other for the failed currency reform and Pak, who spearheaded the revaluation, is believed to have been sacked,” said a diplomatic source in Beijing. “Markets have come to a grinding halt following the currency revaluation and prices have soared,” the source said. It seems North Korea hoped to stabilize prices through the currency reform and then credit the achievement to Kim Jong-il’s third son and heir apparent Jong-un to consolidate his grip on power, but this flopped, the source added.

Some North Korea watchers in China predict that the regime may perform a U-turn back to timid market reforms now that Pak, who led the crusade against capitalism, has been fired. One North Korea expert in Beijing said, “There is a strong possibility that high-ranking North Korean officials who led the drive to crush market forces since 2004 will be removed from office, while policies will shift toward market reforms starting in the second half of this year.”

Meanwhile, the new North Korean won is still plummeting against the U.S. dollar. North Korea valued the new currency to 98 won per dollar after the old won weakened to 3,500. But the new won has plunged since last month and is now being traded at between 300 and 500 won per dollar, according to people who trade goods with North Koreans.

According to the Daily NK:

In the tradition of dictatorial regimes worldwide, scapegoats have apparently also been chosen. South Korea’s Chosun Ilbo today claimed that Park Nam Ki, Director of the Planning and Financial Department of the Central Committee, has taken responsibility for the failed redenomination, which initiated a period of hyper-inflation, and been dismissed.

According to the report, Park was appointed to the top economic position in the North Korean government in July, 2005, where he began to pull up the green shoots of spontaneous market economy.

If the news is confirmed, Park will be following in the undesirable footsteps of Ministry of Agriculture head Seo Gwan Hee and Premier Park Bong Ju.

Seo was executed for his role in the 1990s famine. According to defector testimony, Kim Jong Il shifted responsibility for the famine onto him and had him publicly executed in 1997.

Meanwhile, Park Bong Ju became the Premier of the North Korean Cabinet in 2003, the year after the adoption of the July 1st Economic Management Reform Measure, and was responsible for introducing revised market economic elements according to the July 1st Measure. However, results were not sufficient and he was sent to manage the Suncheon Vinylon Complex in South Pyongan Province. 

Lets hope that the jangmadang come back with a vengeance. 

Read the full articles here:
N.Korean Finance Chief Sacked Over Currency Debacle
Choson Ilbo
2/3/2010

Read the full story here:
Ban on Markets lifted
Daily NK
Jung Kwon Ho
2/3/2010

Daily NK
Park Sung Kook
2/2/2010

There has been an explosion in the number of casualties resulting from popular resentment at harsh regulation of market activities by the security apparatus across North Korea, according to various Daily NK sources.

For instance, in Pyongsung, North Pyongan Province, normally one of the key distribution centers in North Korea, there have been several incidents of agents from the People’s Safety Agency (PSA), the organization charged with cracking down on the smuggling of food and other officially “immoral” acts, being attacked by unidentified assailants.

A Daily NK source reported on Monday, “A group of agents who had just finished doing the rounds of the jangmadang and alley markets in Naengcheon-dong, Haksu-dong, and Cheongok-ri in Pyongsung were attacked by a number of people, who assaulted them and immediately ran away. As a result, PSA officials are feeling very tense these days.”

Commenting privately on these incidents, some people savor them as acts of revenge, but others are worried about the situation, according to The Daily NK’s sources.

There have been more examples unearthed in recent days, too. For instance, North Korea Intellectuals Solidarity (NKIS), a Seoul-based defector group, recently received news that “a fight broke out between agents of the PSA, who monitor the Hyesan jangmadang, and some residents. As the fight turned serious, one resident snatched an agent’s gun and fired randomly into the crowd. One agent, Choe, is in a critical condition.”

According to NKIS, the fight began after the PSA agents beat up a trader who was trying to avoid the crackdown, and that made other residents angry, so they attacked the agents in return. As the fight grew more serious, agents threatened residents, but this only added fuel to the flames.

Finally, a Daily NK source from North Hamkyung Province released one other incident: Cho, who used to work for the Prosecutions Department of the National Security Agency in the region, was apparently killed by a Chongjin Steel Mill worker called Jeung Hyun Deuk.

The source explained, “Jeung’s father, the chief of a foreign currency-generating company, was interrogated last July on suspicion of embezzling enormous amounts of property and foreign currency, and in January was sentenced to life in prison. However, a few days after being imprisoned, he died. Thereafter, Jeung held a grudge against his father’s interrogator, Cho, and eventually killed him.”

The source concluded, “Traders and residents have lost their property due to the redenomination and are pretty much being treated as criminals as a result of the NSA and PSA’s ‘50-Day Battle.’ Therefore, people are taking revenge on agents, since they feel so desperate that, regardless of their actions, they will die. As a result, social unrest is becoming more serious.”

On January 2, the National Defense Commission released an order entitled “On completely sweeping away hostile factions who attempt to demolish our Republic from the inside,” initiating the “50-Day Battle” crackdown by the PSA and NSA in every city, county, and province which was referred to by the North Hamkyung Province source.

Item 1: Koryo Credit Development Bank. This bank is located in the Yangakdo Hotel and is accessible to foreign visitors.  Here are the marketing materials they provide to “encourage” foreigners to set up hard currency accounts: Folder (PDF), Inserts (PDF).

Item 2: DPRK Customs Form (PDF)

Item 3: The Ryugyong Hotel is looking more like a spaceship (Source here. Date: 12/2009)

Click for larger version

Too bad it will never take off

Item 4: DPRK Transportation. Last September I linked to a collection of vehicles manufactured in the DPRK.  See them here.  This month Kernbeisser posted a great collection of photos he has taken of vehicles on the DPRK’s roads.  Seem them here. 

UPDATE: According to the Choson Ilbo:

North Korea recently announced it wants to create a bank to finance national development projects and appointed a Korean-Chinese businessman named Pak Chol-su to head what is to be called the [North] Korea Taepung International Investment Group, which is to attract foreign capital for the bank. The seven-member board of directors at the investment company include usual suspects like Kim Yang-gon, the director of the Workers’ Party’s United Front Department, Jang Song-taek, Kim Jong-il’s brother-in-law, and other key players.

But analysts say Pak, a foreigner, is the only one with the ability to attract overseas capital, leading to a sense among South Korean intelligence analysts that Pak was brought in to save what he can of the North Korean economy. It is not the first time. In 2002, the hermit country appointed Chinese-Dutch entrepreneur Yang Bin governor of the Sinuiju Special Administrative Region, though the plan belly-flopped when the Chinese arrested Yang on corruption charges.

According to North Korean sources, Pak was born in 1959, graduated from Yanbian University and has a master’s degree in business and commerce from another university in China. He later developed close ties with high-ranking North Korean officials selling Chinese gasoline in the North. “Since Chinese gasoline is used in cars, it is sold directly to North Korean military officers or key government agencies” since top officials are practically the only ones likely to have one, said one North Korean source. “Pak appears to have gained the confidence of high-ranking officials in the process.”

Pak is believed to have been responsible for setting up a secret meeting between Kim Yang-gon and South Korean Labor Minister Yim Tae-hee in Singapore last October. “Pak used his connections to help North Korea when it was looking for a contact point with the South Korean government after August last year, and it appears this position is his reward,” said Cho Bong-Hyun, a North Korea analyst with the Industrial Bank of Korea. There is speculation that Pak may be tasked with luring South Korean capital for investment in North Korea.

The Taepung International Investment Group was established in China and Hong Kong in September 2006 to lure foreign investment to North Korea. In 2007, Taepung signed an agreement with China’s Tangshan Iron and Steel to build a production plant in North Korea and was involved in getting the New York Philharmonic Orchestra to perform in Pyongyang in February 2008. The North announced last Wednesday that both Taepung and the bank would be headquartered in Pyongyang.

It remains to be seen whether Pak will generate the results the regime hopes for. Lee Jo-won, a professor of North Korean studies at Chung-Ang University, said, “Unlike the appointment of Yang Bin, there seems to have been a certain level of consent in terms of the role Pak will play. But without progress in the North Korean nuclear crisis, it’ll be virtually impossible for him to attract foreign investment.” One senior South Korean government official said, “Last year, North Korea apparently held an investment blitz in the EU and was disappointed to learn that continued economic sanctions due to its nuclear weapons program in effect prevent other countries from making any investment there.”

UPDATE: DPRK establishes national development bank in order to attract foreign capital
Institute for Far Eastern Studies (IFES)
NK Brief No.10-01-22-1
1/22/2010

On January 20, the (North) Korean Central News Agency (KCNA) reported that the North’s most powerful government organization, the National Defense Commission, ordered the establishment of a ‘National Development Bank’ to “carry out investment affairs for projects important to national policy and to conduct business with international commercial banks and international financial institutions.”

Furthermore, the committee decided to establish the main branch of the ‘Korea Daepung International Investment Group’ in Pyongyang, which will operate as an economic consortium attracting foreign monies and ensuring the flow of capital for the National Development Bank. The KCNA reported that an announcement was made at the Pyongyang Yanggakdo International Hotel explaining that “the first meeting of the Korea Daepung International Investment Group board of directors had opened, and that at the meeting, the National Defense Commission’s decision regarding the establishment of the National Development Bank and the mediation committee of the Korea Daepung International Investment Group had been created.”

The news agency went on to explain that the National Development Bank would conduct business with international financial institutions and commercial banks according to “modern financial standards and systems,” ensuring necessary investments in support of projects central to the promotion of national policy. The KCNA also reported that at the meeting, an order from Kim Jong Il was passed down with the title “On Ensuring the Operations of the Korean Daepung International Financial Group.”

Kim Yang-gun (a member of the National Defense Commission and director of the Unification Strategy Department) was selected as Chairman of the Korean Asia-Pacific Peace Committee, while Chinese-Korean Bak Cheol-su was chosen as president and chairman of the board. The 7-member board of directors is reportedly made up of representatives from the National Defense Commission, the Cabinet, the Ministry of Public Finance, the Korean Asia-Pacific Peace Committee, the Korea Daepung International Investment Group, and other related offices.

The board of directors meeting also discussed and voted on bylaws, a 2010 action plan and an annual budget for the Korea Daepung International Investment Group as well as activities for a preparatory committee for the establishment of the National Development Bank. It was also decided to form a secretariat for the board of directors.

In September 2006 the Daepung International Investment Group was established in Hong Kong by North Korean authorities in order to serve as a window for foreign investment, and the group was part of the effort in October 2007 to entice investment from the Chinese Tangshan Iron and Steel Group. It also played a role in bringing the New York Philharmonic Orchestra to Pyongyang in February 2008.

This latest measure appears to indicate that the North Korean leadership is taking a more aggressive drive to entice foreign capital, but it is not yet clear if the move will have any significant impact. It stands out that as sanctions enforced against the North by the international community make it difficult for Pyongyang to attract foreign investment, the North is stressing its intention to uphold “modern standards” for those willing to invest.

The Daepung Group rose to prominence in 2007 as a new window for attracting foreign investment into the North when it reached agreements with China’s Dangshan Steel and Iron Group, the country’s 3rd largest steel company, and Datang Power to form a joint venture to build a 1.5 million-ton processing plant and a 600,000 kW coal-burning power plant in the Kimchaek Industrial District.

ORIGINAL POST: According to KCNA:

Pyongyang, January 20 (KCNA) — The first meeting of the Board of Directors of the Korea Taepung International Investment Group took place at Yanggakdo International Hotel on Wednesday.

It was attended by directors of the board of the group and officials concerned as observers.

Conveyed there were an order of the chairman of the DPRK National Defence Commission “On ensuring the activities of the Korea Taepung International Investment Group” and decisions of the DPRK NDC “On establishing the State Development Bank” and “On setting up the Coordinating Committee of the Korea Taepung International Investment Group”.

At the meeting Kim Yang Gon, chairman of the Korea Asia-Pacific Peace Committee, was elected director-general of the board of the group and Pak Chol Su, a Korean resident in China, permanent deputy director-general and president of the group.

The board of directors is made up of seven persons including representatives of the National Defence Commission, the Cabinet, the Ministry of Finance and an office concerned of the DPRK, the Korea Asia-Pacific Peace Committee and the Korea Taepung International Investment Group.

The meeting decided to set up a secretariat of the board of directors and named its members.

It deliberated and decided on the draft rules of the Korea Taepung International Investment Group, its action program and financial budget bill for 2010, a resolution on starting the operation of a preparatory committee for establishment of the State Development Bank and other agenda items related to the work of the group.

Kim Yang Gon made a keynote report and Pak Chol Su an address on the work of the group at the meeting.

The group, an external economic cooperation body, will play the role of an economic complex ensuring the induction of investment and finances for the State Development Bank, and it will be headquartered in Pyongyang.

The State Development Bank is to provide investment on major projects to be carried out according to the state policy after being equipped with advanced banking rules and system needed for transactions with international monetary organizations and commercial banks.

The Choson Ilbo has more:

North Korea will establish a state development bank which will deal with international financial organizations and commercial banks and invest according to state policies, the official [North] Korean Central News Agency reported Wednesday. The decision was made by the powerful National Defense Commission, which is headed by leader Kim Jong-il.

It will also set up an international cooperation agency called the Joson Daepung International Investment Group to take charge of attracting investment for the bank, KCNA said.

KCNA claimed the bank has “modern financial rules.” Kim Yang-gon, the director of the Workers’ Party’s United Front Department, has been named chairman of the Joson Daepung Investment Group, and Pak Chol-su vice chairman.

A North Korean source said Pak is a Korean-Chinese businessman who maintains relations with South Korean officials and businessmen. He apparently once arranged a secret inter-Korean meeting.

Pak is also believed to have been involved in a secret meeting held between Labor Minister Yim Tae-hee and Kim Yang-gon in Singapore last October.

Rumor has it that Jang Song-taek, Kim Jong-il’s brother-in-law and the director of the Administrative Department of the Workers’ Party, is also on the board of directors.

North Korea will establish a state development bank which will deal with international financial organizations and commercial banks and invest according to state policies, the official [North] Korean Central News Agency reported Wednesday. The decision was made by the powerful National Defense Commission, which is headed by leader Kim Jong-il.

It will also set up an international cooperation agency called the Joson Daepung International Investment Group to take charge of attracting investment for the bank, KCNA said.

KCNA claimed the bank has “modern financial rules.” Kim Yang-gon, the director of the Workers’ Party’s United Front Department, has been named chairman of the Joson Daepung Investment Group, and Pak Chol-su vice chairman.

A North Korean source said Pak is a Korean-Chinese businessman who maintains relations with South Korean officials and businessmen. He apparently once arranged a secret inter-Korean meeting.

Pak is also believed to have been involved in a secret meeting held between Labor Minister Yim Tae-hee and Kim Yang-gon in Singapore last October.

Rumor has it that Jang Song-taek, Kim Jong-il’s brother-in-law and the director of the Administrative Department of the Workers’ Party, is also on the board of directors.

(From a reader):  The Korea Taepung International Investment Group (조선태풍국제투자그룹) will attract and coordinate investment – ostensibly from China as a founding member is a Korean Chinese. The group’s charter came from Kim Jong-il , Chairman of the NDC, and its board members include Kim Yang-gon, chairman of the Korea Asia-Pacific Peace Committee (who was elected chairman of the board), Pak Ch’ol-su, a Korean-Chinese (elected standing vice chairman of the board and president), and seven persons representing the NDC, Cabinet, Ministry of Finance, relevant ministries, Korea Asia-Pacific Peace Committee, and the Choson Taep’ung International Investment Group. This seems to be a major salvo in North Korea’s current campaign to ease international tensions, curry desperately needed investment, and ultimately get the country back on its centralized economy track.

According to NK Leadership Watch: In the video footage of the meeting (1/20/2010 on Elufa.net) Kim Chang-sun can bee seen.  He is on Kim Jong il’s secretariat.

The Pyongyang Times has more here.

According to the AFP:

A South Korean company said Tuesday it is planning a joint-venture factory in a free-trade zone in northeastern North Korea, the first such investment by Seoul in the faltering project.

Food processor Merry Co said Pyongyang last month approved its partnership with state-run Korea Gaeson General Trading Corp in the Rason zone near the North’s border with China and Russia.

“We’re going to have a first joint venture between the two Koreas in Rason,” Merry president Chung Han-Gi told AFP.

The North this month upgraded the status of the zone in an attempt to invigorate anaemic foreign investment there.

Chung said his company would invest 60 percent of the 7.5 million dollar cost of the new plant while its North Korean partner would put in 40 percent.

He said he would this week ask the South’s unification ministry, which must authorise all cross-border contacts, to approve the joint venture.

The communist state designated the Rajin-Sonbong Economic Special Zone — later renamed Rason — in 1991, its first such project. But little foreign investment materialised and senior officials who headed the project were reportedly sacked.

In recent years the North has begun trying to revive it, signing an accord with Russia to rebuild railways and the port there. China has also been exploring investment opportunities in the city.

The North’s leader Kim Jong-Il paid his first visit to the zone last month and state media said later that parliament has designated Rason as a municipality to upgrade its status.

South and North Korea have a joint-venture industrial estate at Kaesong near their border. Its operations have often been hit by political tensions, but the two sides were to start talks Tuesday on ways to develop it.

Chung said his firm’s joint venture at Rason, which would have some 200 North Korean employees, plans to produce canned and processed food including tuna for exports.

Merry, which also has a factory in Shanghai, will send Chinese engineers to Rason next month to install production facilities.

The Choson Ilbo adds some interesting details:

This is the first time that Pyongyang has allowed for direct business collaboration, set to take place between North Korea’s Gaeson General Company and the South’s Chilbosan Merry Joint Venture.

The firms are slated to split investment 60/40 and will work together to process and export canned marine and agricultural products starting in March.

UPDATE 1: As reader Gag Halfron points out, this is not the first DPRK-RoK joint Venture. Remember Pyonghwa Motors and Pyongyang’s fried chicken restaurant?

UPDATE 2: In the comments, Werner notes the following: http://www1.korea-np.co.jp/pk/149th_issue/2000101405.htm

Read the full articles below:
N.Korea OKs joint venture with South in trade zone
AFP
1/18/2009

First Inter-Korean Joint Venture to Be Established
Choson Ilbo
1/20/2010

Institute for Far Eastern Studies (IFES)
NK Brief No.10-01-18-1
2010-01-18

Following the currency reform undertaken by North Korea at the end of 2009, the Chinese newspaper International Herald Leader (國際先驅導報) reported on January 7 that the Choson Bank of Trade had set the USD:DPRK Won exchange rate at 1:96.9. There have been other reports of the DPRK’s new exchange rate through organizations related to North Korea, but this is the first report of an official exchange rate by an official Chinese media source. The International Herald Leader is the global news paper of the government-run Xinhua news agency.

Good Friends, a South Korea-based organization working for human rights in the North, had reported earlier that the new exchange rate was 1 USD:35 Won. The conflicting reports appear to be a result of a constantly changing exchange rate. North Korean authorities control the exchange rate, announcing changes to the exchange rate system at their whim.

According to the International Herald Leader, the exchange rates for the new DPRK Won are 96.9:1 USD, 138.35:1 Euro and 14.19:1 Chinese Yuan. These new rates are approximately 25-30 percent lower than previous rates, indicating a rise in the value of the DPRK Won.

North Korean security forces released a notice titled ‘Regarding the Strict Punishment of Those Overissuing Foreign Currency Within the Republic’ on December 28, and banned the use of foreign currency across the country beginning January 1. Immediately following the announcement of the measure banning the use of foreign currency, the DPRK Won:PRC Yuan exchange rate rose sharply, indicating a steep drop in the value of the Won.

Until the December 28 announcement banning foreign currency, North Koreans were exchanging Chinese money for the new DPRK Won at a rate of 1:5 (the official rate was 1:1.6). Before the currency reform, the Won:Yuan exchange rate was 600:1. However, after the ban on foreign currency, the value of the new North Korean money quickly fell, with the exchange rate toppling 4-5 times over within just days. According to a Daily NK report, on January 5 of this year, the Won:Yuan exchange rate in Hyesan, Yanggang Province hit 20:1, while in North Hamgyeong Province’s cities and towns of Hoeryeong, Onseong, Musan, and Cheongjin, the Won is being exchanged for Yuan at a rate of 1:15. Therefore, it appears that the Chinese media’s report of a 1:14.19 exchange rate reflects the reality of only some regions of North Korea.

Caijing (Chinese Finance Magazine)
12/20/2009
Translated by Bert Acosta

A Chinese reporter from the Chinese state media outlet Xinhua saw a government public notice posted on the entryway to a market stating that beginning January 1, 2010, North Korea will prohibit the circulation of foreign currencies on the open market.

Issued by the DPRK’s Public Safety Bureau, these regulations will apply to official state administrations, enterprises, social organizations (such as the military and special organizations), citizens, and foreigners. After these rules come into effect, citizens of the DPRK will not be permitted to use the Dollar, Euro, and other foreign currencies in stores and restaurants. Foreigners bringing these currencies into the DPRK must exchange them for Wan – even at the airport and international hotels.  The various exchange and transportation fees of the past will also change to a Won-centric system.

The notice also states that, in accordance with government authority, related institutions will adopt steps to establish a strict national monetary circulation system. The foreign exchange needs of all organizations will be guaranteed by state planning, and all related banks will be required to established foreign currency and Won exchange programs to responsibly undertake the task of exchange.

Furthermore, the notice stated that organizations found violating exchange regulations will be ordered to cease operational activities or be disbanded – with the government confiscating its trade capital and other resources. Regarding products purchased with foreign currencies, black market trading, usury loans, broker activities, bribery, illegal currency exchange, and other illegal actions, violators will be prosecuted in conformity with legal provisions.

This is North Korea’s first economic management measure since revaluing the Won on November 30th, 2009.  Since revaluing its currency, North Korea has not announced an official exchange rate.

Institute for Far Eastern Studies (IFES)
NK Brief No.10-01-08-1
2010-01-08

North Korean authorities appear to be closing regional, large-scale wholesale markets, one after another. According to the latest newsletter from the North Korean human rights group Good Friends (January 6), “Based on a Cabinet measure passed on December 30 of last year, North Korean authorities will suspend operations management of the Sunam Market in Cheongjin [LOCATION HERE] from the end of this March, effectively deciding to close [the market].”

Like the South Pyeongan Province Pyeongseong Market [LOCATION HERE] reportedly closed last year, the Sunam Market, North Korea’s representative wholesale market, was built less than five years ago. Good Friends reported that provincial authorities from North Hamgyeong Province plan to raze the market, located between Chumok and Cheongnam neighborhoods, and build a modern park and residential housing.

The newsletter revealed, “More than 40 percent of Cheongjin residents rely on the Sunam Market to maintain their lifestyles, and if the market is closed, there will be considerable consequences,” and added that those who trade in the market or rely on it for their shopping are already worried about how they will continue to put food on the table if the market gets shut down.

It has also been reported that the Chupyeong Market [LOCATION HERE], in the Sapo district of Hamheung City, South Hamgyeong Province, will also be closed. The Chupyeong Market, which attracts as many traders as the Pyeongseong Market, apparently specializes in the wholesale trade of imitation goods. Good Friends explains that the Chupyeong Market is a very busy and crowded market, with many shoppers coming and going, and this has also led to an increase in scams, thefts and other crimes. It is anticipated that following the closing of the Sunam Market early in the year, the next move authorities make will be to shut down the Chupyeong Market, as well.

A directive has been issued that North Korean authorities are to ban the sale of manufactured goods in the country’s permanent markets, and that all goods are to be sold only in state-sanctioned retail stores, and at state-set prices. However, sources inside the North report that traders are gauging the attitudes of local authorities, and often not turning over their goods for sale in retail stores. This, along with the North’s currency reform and ban on foreign currency, as well as the increase in farmers’ wages, has led to huge increases in exchange rates and prices.

Currently, workers in state-operated enterprises are being paid anywhere from 1,500 won to as much as 5,000 won per month. With the currency revaluation, this is considerably more than they were making before, but taking into account the massive increases in prices, as well, the impact of the higher wages is negligible.

UPDATE: In addition to the information below, the Choson Ilbo reports that  the DPRK’s former trade minister has been appointed mayor of Rason.  According to the article:

The North Korean regime has appointed former foreign trade minister Rim Kyong-man as the mayor of the Rajin-Sonbong Economic Special Zone, which was promoted to a special city in January. A source said Rim was appointed as part of a reshuffle and new regulations for the city.

Rim is known as an expert in trade who served as the minister for foreign trade from April 2004 to March 2008, and headed the North Korean trade representatives to Dalian in China. He also toured Africa (June 2005), Latin America (November 2005), Libya and Malaysia (June 2006) and Russia (March 2007) as the leader of the North Korean economic delegation.

“It seems that North Korea appointed Rim, who is very experienced in trade with foreign countries, with an aim to further open Rajin-Sonbong as a free trade area,” the source added.

ORIGINAL POST: The designation of Rason as a “special city” this week left me a bit confused, but I believe I have sorted it out.

This week, Reuters reported:

“The city of Rason has become a special city,” the North’s KCNA news agency said in a brief dispatch on Monday.

And Yonhap reported:

North Korea designated Rason, the country’s first free trade zone, as a “special city” on Monday, the North’s official news media reported.

North Korea designated Rason and nearby Sonbong, located on the country’s northernmost coast close to both China and Russia, as an economic free trade zone in 1991, though foreign investment has never materialized.

According to the Korean Central News Agency (KCNA) monitored here, the Standing Committee of the North’s Supreme People’s Assembly designated Rason as a special city in a decree.

So aside from the fact that Rason was named “special” there were no other details given.  What does it mean to be a “special city”?

Well, today the nice Chongryun individual in Japan who updates the KCNA web page finally came back from vacation and posted the story to the official KCNA web page.  Here is what it says:

Rason City Designated as Municipality
Pyongyang, January 5 (KCNA) — Rason City was designated as a municipality.

The Presidium of the Supreme People’s Assembly of the DPRK said in its decree promulgated on Jan. 4:

1. Rason City shall become a municipality.

2. The DPRK Cabinet and relevant organs shall take practical measures to implement the decree.

Without seeing any additional information it seems that what has actually happened is that the municipalities of Rajin and Sonbong have been dissolved, merged, or been made subject to a newly created Rason municipal government which controls both cities.  So Rajin-Sonbong is dead.  Long live Rason.

So why would the North Korean government do this?  Here is one theory: Since the district was under the direct control of Pyongyang (not the provincial government of North Hamgyong), the DPRK government simply thought that two municipal governments in the special economic zone were one more than was necessary.  So this could mean something significant–in terms of the DPRK’s intent to increase foreign trade–or it may not.

If anyone else has a better idea please let me know in the comments.

UPDATE:

1. Here is a decent story in the AFP which interprets the change as a significant policy signal.

2. Here is a decent story in the Daily NK which offers lots of additional information.