North Korean Economy Watch

KCNA
3/21/2007

Kim Chaek University of Technology has developed a new kind of water quality improver.   The machine is made with the application of the cutting-edge science and technology such as nano technology.  The kernel of the improver is a filter bar. A bar is capable of refining 2,500 liters of water as “spring water”.

The filter bar, made with nano materials, consists of a layer for removing floating matters and microorganism, a layer for deodorizing smell, a layer for absorbing heavy metals and two physical filter layers. 

The new improver is superior to other kinds of water purifiers in various points.  It eliminates heavy metals, floating matters and microorganism harmful to the human body.  The water purified by the improver is clean and low in chemical combination. It supplements microelements to and improves the digestion function of the human body, thus effectively preventing various diseases.

Daily NK
Han Young Jin
3/20/2007

(UPDATE: On Oct. 23, [2008] the State Department blacklisted two North Korean companies, Korea Mining Development Corp. and Korea Taesong Trading Co., for violating U.S. bans on the sale of equipment used in building missiles or other weapons of mass destruction to Iran and Syria. Citation: “North Korean Plane Was Grounded at U.S. Request “, Wall Street Journal, Jay Solomon, 11/1/2008 )

Daesung Trading Company and Maebong Company, Two Pillars of North Korea’s foreign currency

In the 80~90’s, the aim of the People’s Army of North Korea was to make foreign currency and consequently, each division of the government began to operate trading companies. However, there were many kinds of trading companies.

The Maebong Company under the General Staff which was established in the 80’s, Birobong Trading Company, Yongsung Trading Company, Manpoong Trading Company and Danpoong Trading Company founded in the 90’s, all under the top 5 trading companies in North Korea. Of these, Maebong Company is the most well-known; once also known as Kwangmyung Trading Company until 2000.

Following “Military First Politics,” Maebong Company became one of North Korea’s active traders with Daesung Trading Company belonging to the Worker’s Party Division 39.

One of the reasons that the military became directly involved in foreign currency came from the fact that the nation was unable to acquire the necessary war supplies itself due to the economic crisis. Further, as the Soviet Union and the East European bloc collapsed, trade was changed from bartering goods to dollars and hence, North Korea was in a dire state of insufficient currency.

Presently, the Maebong Company’s main office is in Pyongyang with branches throughout the country such as the border districts of Shinuiju, Haesan and Hoiryeong.

In order to attract powerful Chinese traders, Maebong Company only appoints those who have experience with foreign money as regional directors such as North Korean citizens with relatives in China. After giving the title of regional director, a permit is given. Though the regional director is registered as a tradesman for the military, actually he/she is in fact not a soldier.

With a certificate which states their position of foreign tradesmen, regional directors have the privilege of freely entering and exiting China.

Trading branches in each city, trading with Japan in the opensea

Trading partners are mostly China and Japan. Traders from Maebong Company dealing with China exchange goods such as second hand cars, medicinal herbs, silk cocoons and seafood.

With copies of Kim Jong Il’s orders distributed by Maebong Company, trading partners are able to transport secured goods supplied by foreign currency directors as far as the border regions without much difficultly from security posts.

One defector from Shinuiju said “In 1995, hundreds of trading companies were established in Shinuiju… Maebong Company was one of these companies which served as a shabby storage factory stocking 10tons of flour and medicinal herbs in which people could exchange for aluminum. At that time, these people who were called foreign currency directors wore overcoats made of dogs fur and rode second hand bicycles made in Japan.”

At one point, Maebong Company illegally sold second hand cars along the border region and gained considerable income. Nowadays, medicinal herbs and minerals are more popular and whereas more of the traders from the West Coast export seafood such as shells and razor clams to China, expectedly, export seafood to Japan occurs mainly on the East Coast.

Conceal illegal foreign currency, smuggling of gold prohibited

In 1997, authorities conducted a thorough investigation against traders in order to straighten the chaotic mess created by border tradesmen. After the investigation, Kim Jong Il ordered every trading company to be merged under the control of each agency. As a result, trading companies which had once been organized by the military divisions were disintegrated and became incorporated as part of the Maebong Company, now an integrated trading group.

After becoming a director for Maebong Company in Hoiryeong, “Kim” who had once lived a tough life is now known to be one of the richest people living in the area, frequently traveling to China.

According to one defector who had worked under the Korea Service Bureau of Workers’ Party division 16, there were 6 employees at the Hoiryeong Maebong Company located in Manghyang, which planned to earn $100,000 annually. Also, additional funds are kept in celebration of national events such as Kim Il Sung and Kim Jong Il’s birthday.

There is a great number of Maebong Company employees who engage in corrupt activity and ultimately are defaced. There is a saying in North Korea, “earning foreign currency is educational punishment,” meaning that though earning foreign currency is an occupation preferred by the many, it does at the same time involve greatest risk. In 1997, an investigation was made targeting central authorities. Many of these directors in charge ended up receiving severe punishment.

Once, “Park” a director of Shinuiju Maebong Company was convicted under the suspicion of depositing foreign currency into a Chinese bank and while undergoing the preliminary hearing was known to have attempted self-injury by swallowing a spoon. On another occasion, ‘Kim’ of Chongjin Maebong Company was known to have been executed for being involved in a case of smuggling gold.

Daily NK
Kim Min Se
3/19/2007

Today, a rich person in North Korea is someone who can spend roughly US$100~$500 (300,000~1.5mn North Korean won) a month. This amount is so large, that it is a figure unfathomable to the average North Korean.

Nowadays, a small number of lower class North Koreans sell noodles at the markets and earn 1,500~2,000won a day. On average, this equates to 50,000~60,000won a month. Additionally, the living costs of a family of 4 in Pyongyang normally costs about 50,000~100,000won.

While a laborer with a stable job earns about 2,000~3,000won (approx. US$0.66~1) a month, spending more than 100,000won (approx. US$32.2) a month is an extravagant figure. Simply put, it has become difficult to live only on selling noodles.

Anyone who spends more than 100,000won a month is probably eating rice and can afford to eat nutritious vegetables. This is the middle class of North Korea today.

The distinctive nature of this middle class is the disparity of the work as well as their past background being rather simple. This class has naturally appeared simply because of their genuine skills. These people know exactly the flow of the market and know how to make money. The only thing important to them is finding the opportunity to make money. In all, they have come to an understanding that money is needed in order to buy goods and live a life to the envy of others.

This middle class is closely linked to power. If a person only takes pride in the sense that he/she can money, then that person will be hit with a severe fall. It is a characteristic of North Korean society that power is critical in living a life making lots of money without trouble.

With money, these people are earning even more by buying the supervision of low ranking safety and security agents and local administrative officers. Simply put, the small amount of money invested as bribery in securing a good location at the markets is petty compared to the income reaped. In other words, whenever a new market is established at a village, a person can be confident in having the best spot by winning over the person in charge. For example, the bidding for the best spot at the Sunam Market, Chongjin is 900,000~1.5mn won (approx. US$290~$490).

Entrepreneurs may become the rich after regime reform

In 2002, the North Korean government passed the July 1st economic reforms which gave more freedom to marketers with less control by authorities and hence, trade became more active.

The mindset of the middle are so fixated on money, that they believe that money can solve anything even if a war was to break out the following day or North Korea was to be completely overturned. Though these people conspire with those in power in order to make money, they are unconcerned with what happens or rather does not happen to the Kim Jong Il regime.

There is a definitive difference between the middle class who are rubbing hands and the central class just in case the Kim Jong Il regime did collapse, compared to the upper class. The middle class are not from any particular special background, but with the skills and guile of making wealth, they are confident that there will be no problems irrespective of regime change.

People from this class even have the freedom to save and keep some food and daily necessities in preparation of this incident. Furthermore, currency is undoubtedly being saved, this also being foreign currency such as dollars. This, they call emergency relief in preparation for the time the North Korean regime does collapse, as well as a safe deposit to use whenever trade needed.

In addition, with the change of the North Korean regime, this class will be able to celebrate and radically transform from being an entrepreneur to the newly-rich with all the wealth acquired during the Kim Jong Il regime.

Daily NK
Kim Min Se
3/18/2007

In socialism, the laborer and the peasant dominate the nation and society. However, since the late `60’s, the role of the laborer and peasant has decreased with the bureaucracy taking power, to the extent that a country can no longer remain in traditional socialism.

Currently, North Korea’s leader Kim Jong Il with a minority of the central class surround this core power. In North Korea, the laborers and peasants are rather subject to extortion.

Amidst a North Korean market economy, a middle class is being established. The middle class comprises of people who have assets that the average citizen cannot afford and own medium-sized businesses or engage in wholesale trade.

Undoubtedly, this group of people are dominating the middle class as well as playing a vital role in the lifeline of North Korean citizens and market, a fact that could not have been fathomable in North Korea’s past.

Until the 80’s, North Korea’s economy was a planned economy. Supply and demand of goods was distributed according to the national plan. However, in the late-80’s, small holes began to emerge in the socialist planned economic system and with a lack of daily necessities, people began to rely on the black market.

Arising from the major cities, goods were secretively traded in the black market and eventually the majority of North Koreans acquired their needed goods through this system. This system operated evading the control and regulation of North Korean authorities, but when caught, a person was condemned to severe punishment and the goods confiscated.

However, the mass food crisis of the mid-90’s completely collapsed the remnants of a socialist planned economy that had subsided unto the time. What had happened was the end of the national food distribution system.

In particular, the collapse of the food distribution meant the death sentence. Tens and hundreds of thousands of North Koreans began to die of starvation and as a means to live, people became active in the market and trade began to emerge in different regions of North Korea.

Mass starvation which created expert tradesmen

The immobilization of a socialist planned economy activated Jangmadang (North Korea’s integrated markets) which then led to the formation of a new class within North Korea’s own expert tradesmen. North Korean authorities who had no other countermeasures had little choice but to comply as the lives of the citizens were now left to the hands of trade.

In the mid-90’s, North Korean authorities approved personal trade to occur between North Korea and China and then permitted markets to exist along the border districts. Simply put, the mass food crisis created a new class which actually gave North Koreans an opportunity to trade.

At first, people would sell goods that they already had such as household appliances, television, recorder and bicycle. Furthermore, any type of stock accessible, particularly clothing, candy and other foods coming from China such as rice, flour and corn were also traded.

As people gained more experience and came to know the basics of marketing, tradesmen became more specialized. People who sold rice, only sold rice, whereas people who traded fabric only sold fabric.

North Koreans began to realize that specializing in a particular field was the way to make money and the people who were unable to assimilate to this culture broke away penniless.

Accordingly, the market gradually became a center for specialized tradesmen to provide goods and daily necessities. The goods sold by these tradesmen eventually became the mark for the middle class merchant. During this time, stabilized distributors began to dominate the market and more individualized entrepreneurs surfaced.

People skilled at cooking, baked decorative and delicious bread in their homes and then sell them at the markets. In addition, candy distributors have made a mark at the markets with candy making having become an advanced skill. People who once made candy in their homes now brag that they have been able to produce a small-scale sugar factory. In particular, clothes making and candy making has become enterprises leading to great money.

Today, 50% of candy, home-made clothing and 30% of uniforms, sold at North Korean markets are products made from home. Through goods such as these, Chinese merchants, tradesmen and the middle class are earning money through North Korea’s markets supplying the customers, the majority of the lower class.

Asia Times
Sunny Lee
3/14/2007

North Korea is well known for its nuclear ambitions. But it is relatively little-known fact that the country is a hidden outsourcing mecca for the international animation industry, producing such well-known movies as The Lion King.

Even while North Korea has been under US-led sanctions that include a ban on commercial trade, several US animated films have allegedly been outsourced to the country, according to Beijing-based businessman Jing Kim, who says he was involved with American animation producer Nelson Shin’s filmmaking business in the Stalinist pariah state.

Shin, a 67-year-old Korean-born American, is best known for the television cartoon series The Simpsons, which was actually drawn in Seoul by a team of animators led by him since its premiere in 1989.

Shin and Kim first met in Singapore in 1999 at an international animation film fair, where Kim led the North Korean delegation. There, Shin asked Kim to help him to connect with the North Korean animation industry, Kim said.

China-born Kim, 47, has been doing business with North Korea for nearly 20 years and owns a restaurant in Pyongyang. Through his company in Singapore, where he holds a resident permit, Kim used to sell North Korean products to South Korea during a period when direct commerce between the two ideologically opposed neighbors was not possible.

After seven years of cooperation with North Korea’s state-owned SEK Studio, employing as many as 500 North Korean animators out of its staff of 1,500, and 18 visits to the country, Shin finally completed Empress Chung in 2005, a famous Korean folk tale about a daughter who sacrifices herself to a sea monster to restore her blind father’s eyesight. It was the first cartoon jointly produced by the two Koreas.

Apparently, however, according to Kim, Empress Chung was not the only film made by North Korean cartoonists. Shin, who heads Seoul-based AKOM Production, a unit of KOAA Film in Los Angeles, allegedly outsourced to North Korea part of the animation contracts that his firm had originally received from the United States.

On one occasion, for example, North Korean animators employed by Shin came to Beijing from Pyongyang to work exclusively on several US animation movies, staying there for months, according to Kim.

When asked whether any of the movies were actually broadcast in the US, Kim said, “Oh, a lot, a lot. The ones that I participated in were as many as seven.”

But Kim declined to name the US films, citing the sanctions imposed on North Korea. “If the names of the US companies are known, they will be screwed,” said Kim.

Kim said “many people will be hurt” if he went into details, adding, “We worked very carefully.”

When asked whether the US film companies involved actually knew that their cartoons had been made by North Koreans, Kim said: “They don’t want to know. If they knew, it wouldn’t be fun. After they make contracts with the South Koreans, they just assume that it is made there. They only care about the delivery [of the products] and their quality. It is too much for them to ask where they were actually made. We don’t have the obligation to tell them, either. The only thing they claim is the copyright.”

However, Nelson Shin denied the allegation. “There were no American cartoon movies made in North Korea,” Shin said from Seoul. “As far as I know, there were some Italian and French movies made in North Korea. But I am not aware of any American cartoons made in North Korea.”

Shin also noted the technical difference of production origination between “made in” and “made by”. He took the example of The Lion King. “It’s a Disney film. However, if Disney Europe, not the Disney company in the US, gave North Korea the production order, then it is not a deal placed by an ‘American’ company.”

Kim in Beijing, however, said his cooperation with Shin led them to employ eight North Korean animators in 2005 to come to Beijing, where the North Koreans stayed for six months, from June 10 to November 18. That was followed by a second group of North Korean animators, who came to Beijing and stayed for much of 2006, returning to Pyongyang on December 27-28, according to Kim.

When it was noted that Kim mentioned all these dates without referring to any written memo, he tersely said: “That’s how I make my living.”

Kim said he didn’t pay the North Korean artists in person for their work. Rather, he wired US$170,000 to North Korea directly for their 2006 assignments.

Kim said most North Korean animators are highly educated, including graduates from the prestigious Pyongyang College of Arts.

Animation involves the grueling job of grinding out tens of thousands of drawings for a single 22-minute cartoon. “They worked without complaint,” Kim said, while also praising the quality of their work. He said hiring North Korean artists meant that the usual company benefits, such as medical insurance, welfare and overtime, did not need to be provided.

“It’s a system that is doable,” Kim said.

North Korea’s cartoon industry has become quite sophisticated as a result of its cooperation with France and Italy in their animation projects since 1983. North Korea’s animation skills now rank among the world’s best, experts say.

“They are highly talented. That’s something I can say,” said Shin in Seoul.

South Korea itself was once the largest supplier of television animation in the world during its peak in the 1990s, churning out more than 1,000 half-hour episodes. However, its status has since declined with the rise of labor costs there, pushing animation companies to find alternatives such as India, the Philippines and North Korea. The Chronicles of Narnia, for example, used Indian animators for some characters. It’s unclear how much North Korea contributes to the world animation market today.

Meanwhile, when asked about the similarity of cartoon characters between Empress Chung and the ones seen in recent US animation movies, Shin said, “It’s inconvenient to talk about it on the phone.”

However, Shin said he is working on a new joint North-South Korea animation movie called Goguryeo, the title a reference to an ancient Korean kingdom that existed until AD 68. He expects it will take about two years to complete.

KCNA
3/13/2007

The United Nations Development Program recently announced that it would suspend its country program for the DPRK and, accordingly, withdraw the staff members of its office from Pyongyang.

A spokesman for the DPRK Ministry of Foreign Affairs Tuesday answered the question raised by KCNA in this regard.

The responsibility for this abnormal thing that happened in the cooperative relations between the DPRK and the UNDP, which have favorably developed for the past several decades, rests with the U.S. and Japan and some circles inside the organization, who took this discriminative action against the DPRK only, yielding to the pressure of the above-said two countries, the spokesman said, and continued:

The U.S. has spread sheer lies about the DPRK’s “diversion of UNDP’s program fund” since the outset of the year in a bid to tarnish the international image of the DPRK. Taking advantage of this, Japan has pressurized the UNDP to suspend its country program for the DPRK. It wooed some member states of its executive board to reopen the discussion on the already passed country program for the DPRK.

Some officials of the UNDP tried to cancel the country program of developmental nature for the DPRK contrary to its mission under the pressure from outside and adjust it into a country program of humanitarian nature and has unilaterally closed or cancelled the ongoing project.

As regards this discriminative step taken against the country program for the DPRK only, it demanded the UNDP explicitly explain and clarify the step. The UNDP, however, has kept mum about the demand, deliberately avoiding its answer.

The DPRK does not care about whether it receives small assistance from the UNDP or not but it will not tolerate even a bit any foolish attempt to hurt its dignity.

It is the firm stand of the DPRK not to receive any politically motivated assistance seeking a sinister aim in the future, too.

KCNA
3/13/2007

General Secretary Kim Jong Il provided field guidance to the Pakchon Silk Mill in North Phyongan Province. 

He went round the monument to the on-the-spot instructions given by President Kim Il Sung and the monument to his on-the-spot guidance standing in the compound of the mill. 

He said that the Pakchon Silk Mill turned into a modern silk producer thanks to the wise guidance and meticulous care of Kim Il Sung, underscoring the need to bring about a leap forward in production, always bearing his behests deep in mind. 

He made the rounds of various production processes. 

The WPK has strictly subordinated all problems arising in economic construction to improving the standard of the people’s living, he said, adding that to settle the problem of clothing is one of the two major important tasks as it is as essential as the food problem. 

It is an important work directly linked with the issue of improving the standard of the people’s living to increase the production of quality clothing materials and blankets, he noted, stressing the need to direct big efforts to producing silk to bring about a turn in settling the problem of clothing. 

The producers should acquire technical skill now that the mill has been furnished with new type technological equipment, he said, calling upon all the officials and workers to strive to acquire advanced science and technology. 

He expressed the expectation and conviction that the officials, workers and technicians of the mill would display creative ingenuity and patriotic devotion to boost the production of quality silk and blankets for the people and thus successfully discharge an honorable mission and duty as genuine servants for them. 

He was accompanied by Kim Phyong Hae, chief secretary of the North Phyongan Provincial Committee of the WPK, Pak Nam Gi, department director of the WPK Central Committee, and Ri Jae Il, first vice department director of the WPK Central Committee.

Daily NK
Kim Song A
3/12/2007

Inter-Korean Economic Cooperation “Motive on driving a stable complex”

A claim has been made suggesting that North Korea will reallocate 3,000 workers from Pyongyang to Kaesung Industrial Complex.

Representative Kim Kyu Chul of the Citizen’s Solidarity for Inter-Korean Economic Cooperation revealed on the 11th, “North Korea’s Guidance Bureau for Developing Central Special Economic Zone informed the plan to the South Korean government and enterprisers who are moving in the zone and asked them to provide employees with accommodation.”

Representative Kim informed “In the past, the North has employed workers from other regions to maintain stable human resources… For the first time, workers from Pyongyang will be employed at Kaesung Industrial Complex. These people will be amongst the 18,000 skilled workers already working at Kaesung.”

Furthermore, Representative Kim disclosed his opinion, “The motive behind the North’s recent plan is its determination to establish a more stable Kaesung Industrial Complex and to minimize insecure business aspects related to human resources.”

In response, a South Korean governmental official said “The issue of worker’s accommodation has been a case continuously faced by the North” and added “We cannot know the North’s specific intentional plan for human resources but we will keep in contact to discuss these practical affairs.”

Presently, 11,740 North Korean and 689 South Korean full-time employees are working at Kaesung Industrial Complex. In the case a 3,305km square of factories site on the first phrase is completed as scheduled for this year, then 300 or so companies will be able to lease the area. Consequently, the number of North Korean workers needed at Kaesung Complex will exceed 80,000.

In addition to this, the Korea Industrial Complex Corporation announced that apartments approx. 22.5km square would be on the market until the 14th, for 40 or so companies interested in the factory complex. The Korea Land Corporation will also begin inspections next month in order to find a location for a 1,752km square factory site.

Daily NK (Part 1)
Han Young Jin
3/10/2007

The reason North Korea’s regime can persevere is because of the central class’ fear of regime collapse.

As a result of this perseverance, North Korea has been able to resist isolation and pressure for more than half a century, with the system even defeating the “March of Suffering” where tens and thousands of people died of starvation.

Today, powers maintaining the North Korean system are the hierarchical upper class including the North Korean Workers’ Paryy, the National Security Agency, the National Protection Agency, prosecutors and adjudicators.

Overall, there are about 4 millions members in the North Korean Workers’ Party (statistics as of 1995), this being roughly 20% of the population. Retrospectively, these people control the 23mn North Korean citizens.

The central class incorporating junior secretaries to the party, training officers, novice elites, generals from the army, safety and protection agents use their power position to control directly the North Korean people.

The most of these people have strong loyalty for the regime. In particular, military generals or party officials especially fear punishment and the thought that their privileges may be removed. Though they may be leaders, it is not one’s own desire to escalate in power but fear of retaliation from new powers.

Local party officers, security agents and protection agents directly control, inspect and punish civilians. In essence, they absolutely control the North Korean people and hence fear direct retaliation from the people. The collapse of the regime, also means that they may become jobless and troublesome.

In the 80’s, there was an incident where the Kangkye Munitions Factory incurred an explosion. The people who thought that a war had risen killed the security agent in charge and threatened to evacuate the country regardless of war or not. The people armed with weapons even raided the home of the security agent in charge, with stones and batons. As this rumor spread, security officers throughout the country felt the tension and were all on alert. Hence, control forces even to the lowest rank have become the trustworthy pillar to the North Korean regime.

Since the early stages of the regime, North Korea trained members of anti-Japan protestors and their families, Mankyungdae Revolutionary Academies and distinguished servicemen from the Korean War. As a result, the mindset of North Korea’s central class is relatively high in societal class awareness, as is their loyalty to Kim Jong Il.

Ideology amidst the central class and brainwashed passion

These people believe that the survival of the North Korea system is directly connected to their lifeline. They fear that they will not be able to receive the same privileges given by Kim Jong Il, if the current North Korean regime were to collapse. They believe that Kim Jong Il’s fate is their fate.

The North Korean regime is currently strengthening the multiple control system for their central class so that the ideology of the class is not shaken and the principals of Kim Jong Il kept intact.

In North Korea, every position and decision is focused around Kim Jong Il and his every single word is glorified. In one sense, it is a specialty of the dictatorial regime, but in reality it is a way to force the upper class to stand in awe and even dread the grand Kim Jong Il. Some defectors, once members of North Korea’s elite say that people work having no conscious awareness of their heavy duty or how to modify words spoken by Kim Jong Il.

Educational jobs by the central class are different to that of the common citizen. As the former Soviet Union and Eastern European bloc was merging in the 90’s inflicting collapse to the regime, elite officials internally passed video tapes on the end of Romania’s former President Nicolae Ceausescu to calm other comrades but in the end stirred greater fear.

Recently, it is said that tapes on the Iraq situation have been televised for commanders and military elites to see. The aim of this viewing, to plant into the minds of the commanders that compromises to the protection of the system means death.

The Kim Jong Il regime gives privileges to inspire the people supporting them. For example, people who work for the Central Committee systems department or the elite propagandists, receive a Mercedes Benz with the number plate ‘2.16’ symbolizing Kim Jong Il’s own birthday, and depending on the position, the car series is upgraded.

Other elites from the Central Committee and figures in key military posts are provided with luxurious apartments in Pyongyang. The apartment blocks are built and located separately to the average house. Soldiers guard the homes, even restraining relatives from entering the apartment premises. These homes are furnished with electrical goods, sofas, food and goods made in Japan, as well as being accompanied with western culture.

As Military First Politics was implemented in the late 90’s, private nurses, full-time house maids, private apartments and country residences, private cars, office cars, as well as “recreational clubs” with beautiful women, were granted as privileges to the head military and provincial officers.

Every Lunar New Year, expensive foreign gifts are presented to the core central class. However, across the bridge, local and system secretaries, public control officers await common goods that can be found in South Korea’s supermarkets such as mandarins, apples, cigarettes and alcohol. Nonetheless, people who work for North Korea’s local offices are more than happy to receive these gifts are it distinctly segregates them from the common North Korean citizen.

OK to Capitalist Goods But NO to Capitalist Regime
Daily NK (Part 2)
Han Young Jin
3/11/2007

The higher the class, the closer one is to the 2nd and 3rd tier network. If a person is discovered to be in opposition to the regime they will be brutally punished and so a person is cut off early if they are found to show any signs of anti-Kim Jong Il.

The people who inflict the greatest control are the military high commanders. North Korea’s military can be seen as a branch of national politics that really does represent half of the regime. Political elites from the military closely control high commanders with under cover spies whose job is to specifically tattle on suspicious officers to the Party. Then, the protection agency in command contacts an expert who equipped with bugging devices carefully monitors the high commander’s every move, 24 hours a day.

In addition to this, control over university students who are being trained to become North Korea’s next elite group is also severe. In order to intensify regulations on university students, the protection agency initiates secret movements. Protection agents and even information staff are grouped to control the student’s movement with one information staff in charge of monitoring every each 5 students.

Even amidst the Workers’ Party and the ministries, national safety agents are dispatched to monitor the elite.

“Capitalist goods are good, but reform is unacceptable”

Though envious of South Korea’s economic development, North Korea’s upper class are opposed to growth and reform.

There is a popular story of an elite North Korean official who visited the South and frankly revealed “Though we may crawl and be worn, we cannot follow South Chosun’s economy.” It is also a well known fact that elite officials preferred Samsung digital cameras and showed interest in Hyundai cars at a South-North Cabinet talks and Aug 15th event in Seoul. Nonetheless, when it comes to acknowledging the need for capitalist reform, North Korea’s central class discards it with a wave of the hand.

The reason that capitalist goods are preferred but reform rejected is a result of the ideology that their individual power will be lost with change to the regime. Those who have loyally followed authorities have no mindset nor special skills that will enable them to survive a capitalist system. Rather than confronting a competitive society, they prefer their current position and the glory that comes with it.

The central class is also well aware of the restraints on North Korea’s economy. Every year as the harvest season arrives, they see citizens march onto the fields malnourished and underfed. They know that the economic policy implemented by authorities has failed and is incoherent. Yet, ultimately they are unwilling to let go of the small privileges they are endowed upon by the preposterous and unreasonable regime.

These people have become accustomed to their power which is utilized to gain them their privileges and tyranny. Even if North Korea enters a famine, they need not worry about food or clothing.

For example, in the case of an official factory secretary, he/she satisfies ones own personal needs by selling factory goods. Using the excuse that factory profits are being raised, he/she orders the workers to engage in more work, on the side. This is how tyranny occurs with the factory secretary manufacturing personal gains. Yet, these officials are not punished with any legal sentences.

Newly-rich dualism, collaborative relationship with official powers

Following the July 1st economic measures in 2002 trade became legal and North Korea experienced a sudden boom in newly rich elites. What led this new rich class to accumulate so much wealth was the fact that they had introduced an enterprise system which allowed trade with China.

The newly rich have a great interest in reform and development, and are well aware that the North Korean regime will not be able to solve the economic issue without facing reform.

However even this class of people are disinterested in bringing an end to the regime. They have already accumulated their wealth and feel no onus in the poverty stricken situation in North Korea. Whether capitalism or the current North Korean regime, as long as they can sustain a living, these people can continue to remain in a dualistic mindset.

While North Korean authorities are strengthening control over this new class, they are in another sense, receiving money and bribes to protect them. Where investigations are involved, authorities are risking their own identities being revealed and hence often ignore the illegalities of the people, even going to the extent of passing on information.

It is a fact that North Korea’s central class is acting as the forefront in sustaining the regime, but then again, these people have greater educational standard than the average commoner and they have had more opportunities to experience Western civilization. Hence, they can compare the North Korean regime with the outside world. Though the majority of this class accommodates to the North Korea regime, the possibility that a fraction of the elites may have some sort of antagonism against the Kim Jong Il regime and the odds that these people may just act upon these feelings cannot be discarded.

In addition, as North Korean society continues to decay, the organization of its systemic corruption may just be hit with danger. As corruption deepens and a crack appears in the regime, authorities will try to control this leak but while doing so, it is possible that endless punishment may just incite some elites to secede.

Particularly, the more information about foreign communities flow into North Korea and the people’s animosity against Kim Jong Il increases, even the elite will not be able to completely suppress feelings of antipathy.

International Herald Tribune
Donald Greenlees
3/8/2007

Last August, Colin McAskill, a British businessman, agreed to buy a small bank in North Korea. On the face of it, Daedong Credit Bank was not a brilliant investment.

The agreement that McAskill signed with the management of Daedong Credit at a hotel in Seoul came as the bank was caught in the grip of financial sanctions that had virtually cut off North Korea from the global financial system.

Financial institutions around the world were shunning any links to North Korean banks, making it almost impossible to transact business.

Daedong Credit was using couriers to carry cash in and out of the country in amounts as high as $2.6 million because it could not make electronic transfers to other banks.

Since September 2005, Daedong Credit had also been fighting to recover $7 million that had been frozen in a Macao bank as part of efforts by the United States to put a financial squeeze on North Korea over alleged illicit financial transactions. This was a big sum for Daedong Credit. When McAskill had examined the bank’s books, its total assets were just $10 million.

None of this has deterred him. He said during an interview in Hong Kong that he planned to execute the sale agreement within the next two weeks and take full control of the only foreign-managed bank in North Korea. The Hong Kong- based Koryo Asia, chaired by McAskill, will take control of the banking license and a 70 percent stake owned by British investors through a Virgin Islands company. The remaining 30 percent is held by the state-owned Daesong Bank. “I think it’s a magnificent deal,” McAskill said, although he would not disclose the purchase price. “The bank has been running for 12 years. It is trusted and it has been profitable since day one.”

Despite McAskill’s optimism, the future of Daedong Credit has been under a cloud since the imposition of the U.S.- orchestrated banking embargo on North Korea 18 months ago and the viability of the business remains precarious.

Even amid signs of a thaw in relations between Pyongyang and Washington, the start of a bilateral dialogue that began in New York on Monday and an agreement in six-nation talks in Beijing on Feb. 13 to start to denuclearize the Korean Peninsula, analysts say banks in North Korea will struggle to restore contacts with the global financial system.

The trigger for the financial embargo of North Korea was a declaration by the U.S. Treasury Department under section 311 of the Patriot Act that the Banco Delta Asia, based in Macao, was a “primary money laundering concern” because of its links to a number of North Korean banks, individuals and companies alleged to have engaged in product and currency counterfeiting, drug trafficking and weapons proliferation.

The U.S. and Macanese authorities began separate investigations into Banco Delta Asia and the bank was placed under Macao government supervision.

Along with about 50 North Korean banks, trading companies and individuals, Daedong Credit had its account frozen. The total amount put into “suspense accounts,” according to Banco Delta Asia, was about $25 million, with Daedong Credit accounting for the largest share. Since then, almost all foreign banks that had correspondent relations with Daedong Credit have severed contact for fear of being excluded from the U.S. financial system.

Jack Pritchard, president of the Korea Economic Institute in Washington, said it was unlikely that the United States would send an explicit signal to the financial community to resume trading with North Korea, regardless of whether Pyongyang starts to address concerns about its foreign financial transactions.

He said that although a portion of the frozen money was likely to be released soon, there would not be a “100 percent reversal” of the American stance on financial transactions with North Korea.

Daedong Credit is likely to be one of the first North Korean account holders in Banco Delta Asia to get its money back from the Macao Monetary Authority where it has been earning no interest.

In recent months, McAskill has circled the globe from his home in London acting under a mandate from Daedong Credit to persuade officials in Washington and Macao to release the account. At 66, McAskill has spent 28 years doing business with North Korea, including as a consultant to North Korean banks on debt negotiations and helping to operate North Korean foreign gold sales. He said that at no stage in his meetings with officials from either the U.S. or Macao governments had he seen any specific reason for freezing the Daedong Credit money or been told of any specific allegation about its origins.

McAskill has produced what he calls a “dossier of proof” to establish the identity of all the customers whose money is frozen and the sources of the money. Since it was founded by the failed Hong Kong finance group Peregrine in 1995, Daedong Credit has filled a valuable niche serving the foreign community in Pyongyang. It has about 200 customers among foreign-invested joint ventures, foreign relief organizations and foreign individuals, according to McAskill. The biggest single amount frozen in Macao is $2.6 million belonging to British American Tobacco, which owns a cigarette plant in North Korea.

“We irrefutably established that the money was legal,” McAskill said. “The U.S. Treasury have been going around the world saying to banks ‘close this account, close that account’ but not offering any proof of wrongdoing.” He said his due diligence of Daedong Credit had convinced him that it was a “fully legal, legitimate operation” that did not manage state accounts or had ever been connected to illicit practices.

One of the Treasury’s main allegations against Banco Delta Asia is that it facilitated the spread of counterfeit $100 bills. But McAskill said Daedong Credit had put $49 million into Banco Delta Asia in 2005 and all that money had been forwarded to HSBC for verification.

Only three of the $100 notes belonging to Daedong Credit were confiscated because they were “suspect,” he said.

McAskill has charged the Treasury with harassment after two correspondent banks — one in Vietnam and the other in Mongolia — informed Daedong Credit late last year that they would immediately close accounts because of pressure from the United States.

But it is likely to prove difficult to persuade banks, nervous about the effect on Banco Delta Asia of the long- running Treasury investigation, to take the risk of dealing with a North Korean counterpart, regardless of the pedigree of its shareholders and board.

Last week, at a meeting in Macao, McAskill was finally told by the head of a government-appointed committee supervising Banco Delta Asia, Herculano de Sousa, that it was likely that the money in Daedong Credit would be returned by the end of March.

In the meeting, McAskill told de Sousa that once the funds were freed, Daedong Credit intended to leave the money in Banco Delta Asia and resume operating its old account.

But Banco Delta Asia has informed the U.S. Treasury that as part of its cleanup both the administrative committee and the shareholders were adamant that they no longer would do business with any North Korea entities. In doing so, the bank hopes to avoid the United States making good on a threat to ban Banco Delta Asia from having any correspondent relationships with U.S. banks.

Still, McAskill insisted that Daedong Credit has not broken any law in Macao or elsewhere and that there were no grounds for it to be forced to close its account.

“I am not going to take my money back and cut and run,” he said.