North Korean Economy Watch

Bradley Martin, author of Under the Loving Care of the Fatherly Leader, writes in the Global Post:

Now that food shortages reportedly have forced North Korea to reverse its crackdown on capitalist-style markets, more systematic reforms for its collapsed economy may not be far behind.

The markets policy reversal came May 26 in directives issued by the cabinet and the ruling Workers’ Party to subordinate organizations, according to a report by the Seoul-based newsletter North Korea Today, which gets its information from officials and ordinary citizens inside the North. “The government cannot take any immediate measures” to relieve a food shortage that is “worse than expected,” the newsletter quoted one of the directives as saying in explanation for the policy change.

The same authorities only late last year decreed a sudden currency revaluation that crippled the “anti-socialist” markets, where stallholders had been trading for individual profit, by confiscating the traders’ wealth. The new decrees bless and deregulate what’s left of the markets, which have shrunk and in some cases closed completely in the interim, in the hope that market trading will keep people from starving. And the directives instruct managers of state-run enterprises to pursue lucrative deals — especially in foreign trade — that could help feed their employees.

This could all turn out to be the big event that finally pushes the very reluctant leadership into a multi-year campaign of serious reforms of the sort that began decades ago in Vietnam and China, according to Felix Abt, a Swiss involved in North Korean joint ventures in pharmaceutical manufacturing and computer software.

“Given an industrial stock and an infrastructure beyond repair, and the impossible task of maintaining a huge army, economic reforms appear unavoidable in the very near future,” Abt, a former president of Pyongyang’s European Business Association, wrote in an email exchange.

“It looks intriguing and it reminds me of Vietnam’s history of reforms,” said Abt, who did business for years in Vietnam before going to Pyongyang and recently has moved back to Vietnam while maintaining his involvement in North Korea.

“The Vietnamese economic situation looked dire at the beginning of the 1980s,” he explained. “Nguyen Van Linh, party secretary in Ho Chi Minh City, favored moderate economic reforms. He tried too early, lost his job and left the political bureau in 1982.

“Le Duan, secretary general of the Communist Party, was categorically against any economic reforms. He died in 1986, the year of the five-year party congress which brought Nguyen Van Linh back and elected him as his successor. The new party secretary general immediately launched the Doi Moi policy — ‘reforms.’”

Abt ventured the lesson that triggering reforms “takes something big like the death of a leading politician” in Vietnam — or, in North Korea, a “ruinous” currency revaluation.

Not every foreigner who has had firsthand economic dealings with North Korea is convinced the recent events constitute that trigger. Some worry that U.S.-led sanctions could nip any flowering of capitalism in the bud.

“The problem is still U.S. Treasury’s attitude,” said one such foreigner, who asked not to be identified further. Treasury Department officials began working several years ago to take North Korea “out of the international banking system,” discouraging trade, he noted.

Some U.S.-sponsored sanctions subsequently were eased in an effort to persuade Kim Jong Il to negotiate away his nuclear weapons capability, but after those talks went nowhere — and especially after North Korea allegedly torpedoed a South Korean warship earlier this year — enthusiasm for compromise cooled. Recent reports say Washington is moving toward aggressively strangling cash flow into the country.

There is also the argument that Kim believes he cannot afford to reform the economy because it would let in information and influences that would undermine his family’s rule by letting his isolated subjects learn that the rival South Korean system works much better.

According to Abt, one answer to both concerns could be China, which “will provide all the support necessary to the DPRK party and government to enable economic reforms without regime change.” He used the abbreviation of Democratic People’s Republic of Korea, the country’s official name. “The DPRK may expect support from other quarters, for example, the European Union, too,” he said.

“I think the dilemma of the leadership — economic upsurge versus the inflow of ‘subversive’ system-destabilizing information and ideas, particularly regarding the South — can be overcome with the necessary Chinese support,” Abt said. “Though the division of Korea can only be compared with that of Germany before 1990, China’s division — capitalist Hong Kong, capitalist Taiwan — was a sort of challenge to Deng Xiaoping and successors, too, but they learnt to manage that quite well.”

Read the full the story here:
Analysis: Kim Jong Il, the reformer?
Global Post
Bradley Martin
6/24/2010

Institute for Far Eastern Studies (IFES)
NK Brief No. 10-06-14-2
6/14/2010

During the third session of the 12th Supreme People’s Assembly, convened on June 7, Kim Jong Il promoted his brother-in-law Jang Sung Thaek to vice-chairman of the National Defense Commission (NDC), named a new premier, and replaced several department heads and ministers. This appears to be an attempt to shore up the regime as it seeks to “open the door to a strong and prosperous nation” by 2012, the 100th anniversary of the birth of Kim Il Sung. Kim Jong Il made a personal appearance at this latest assembly meeting, unlike the SPA meeting held in April. The leader’s presence hints at the importance of the latest gathering.

This promotion of Jang Sung Thaek and shake up of Cabinet positions appears to be part of efforts to realize the quickly approaching goal of establishing a ‘strong and prosperous nation’ by 2012, assigning those most able to positions of responsibility, regardless of age or experience. Most notably, Jang, widely thought to be second-in-command in North Korea, was promoted to vice-chairman of the NDC. He was first appointed to the NDC at the first meeting of the 12th SPA in April 2009, making his climb to vice-chairman in a mere 14 months.

Before the latest promotion, Jang held the position of vice-director of the Workers’ Party of Korea, a newly created position that he was the first to hold. In this position, Jang oversaw national security offices, police, and the courts, putting him in a position of power difficult for anyone else to achieve. Having traveled to both South Korea and China, Jang Sung Thaek was likely promoted to present the image of a strong military and, at the same time, establish stable relations with the international community in order to ensure a smooth transition of power as well as to resurrect the economy by 2012. When Kim Jong Il led a delegation to China last May, the Chinese government treated Jang very well, ignoring standard protocol for someone in his position.

In addition, Choe Yong Rim was named the North’s new premier, and eight new vice-ministers were appointed. Regional Party secretaries were allowed to participate directly, allowing those who are most knowledgeable of local conditions to impact the decisions of the administration. Most of the new appointments were very experienced elites, including Choe Yong Rim (80) as premier, and Kang Neung Su (80), Kim Rak Hui (77), Ri Thae Nam (70), and Jun Ha Chul (82). The regime is promoting a number of veterans who are making their “last stand for the motherland” as part of the effort to ensure stable transformation of power after Kim Jong Il.

With Kim Rak Hui’s appointment as vice-premier and new appointments to the Ministry of Foodstuff and Daily Necessities Industry as well as the head of the Light Industry Ministry, North Korea seems to be pursuing the improvement of standards of living promised in the 2010 New Year’s joint editorial. Pyongyang Party officials appear to be attempting to reassert a centrally planned economy in the aftermath of botched currency reform efforts; however those witnessing regional economic conditions appear much more able to come up with appropriate economic policies. North Korea has been unable to make any significant progress in resolving its food shortages or its inability to provide daily necessities to the public, leading the regime to scapegoat some high-ranking officials. Now, many in and outside of North Korea are watching closely to see if the regime can launch economic efforts capable of successfully ‘opening the door to a Strong and Prosperous Nation’ in the next two years.

Writing in the Asia Times…

A few days ago, a new session of the Supreme People’s Assembly – North Korea’s rubber-stamp parliament – was convened in Pyongyang. In most cases, such sessions do not attract much attention outside a tiny circle of the full-time Pyongyang watchers: few people would be excited by the sight of monotonously and tastelessly dressed men and women sitting in rows and raising their hands to signal their unanimous approval of the laws and resolutions that – as everybody understands – seldom bear any relation to reality.

However, this time observers suspected that something unusual was going to happen. The assembly’s last session took place in April, and was not supposed to meet again so soon. As we learned on June 7, parliament was convened to authorize (with the expected 100% approval rate) a major reshuffle of the North Korean leadership – and, judging by the urgency of gathering, this reshuffle was seen as a pressing matter.

A few days earlier, on June 3, the official North Korean wire agency reported that one day before, Yi Che-kang, the first deputy chairman of the ruling Korean Workers’ Party, had been killed in a traffic accident. The victim of a car crash was, formally speaking, second only to Dear Leader Kim Jong-il in the party hierarchy.

This news had to be suspicious: North Korea’s traffic is arguably the thinnest in Asia, but the country has a long tradition of traffic incidents taking the lives of high officials. The first such incidents occurred in the early 1970s, during the transition of power from the country’s founding father Kim Il-sung to his son.

Nowadays, the new dynastic transition is unrolling. In early 2009, after long delays and much hesitation, Kim Jong-il decided that his youngest son, Kim Jong-un, would become the next great leader of the country. So far, no reference to the “Young General” has appeared in the open media, but one can come across accolades to his greatness and superhuman wisdom in classified materials that are published for the benefit of officials (and distributed widely).

The events of the past week allow us to surmise how the power structure of North Korea will look like in the first years after Kim Jong-il’s death. It seems that North Korean political heavyweights have finally begun to prepare for the unthinkable – the demise of the Dear Leader.

The choice of Kim Jong-un as a heir designate serves, above all, the interests of the North Korean elite, so one can even suspect that the choice was somehow pushed on Kim Jong-il by his entourage. The “Young General” really is young, being merely 27 or 28 years old. Even North Korean propaganda mongers find this embarrassing, so they insist General Kim is in his early 30s.

The choice of such an exceptionally young candidate serves, above all, the interests of the old guard, Kim Jong-il’s own entourage. A young crown prince has no power base and no allies. Thus, even if he technically becomes the supreme leader, he will have no choice but to follow the advice of his father’s entourage, that is, people who are running the country now. He is doomed to become a puppet – at least for some while.

However, a weak crown prince will require an able prince regent. For the past few years, most Pyongyang watchers agreed that the most likely candidate to take such a position is Jang Song-taek, a brother-in-law of Kim Jong-il.

Born in 1946, he is 64 and hence young by the standards of North Korea, where a majority of the top leaders are in their 70s and 80s. The recent Supreme People’s Assembly session confirmed these speculations. At the session, Jang was appointed vice chairman of the National Defense Commission. The North Korean constitution stipulates that the chairman of this body is head of the state, and Kim Jong-il runs the country exactly in this capacity. Therefore, Jang officially became the second-placed person in the country.

The car incident that killed Yi Che-kang was also timely for Jang Song-taek. Yi was widely believed to be a rival of Jang. Now, with Yi dead, Jang seems to have no serious rivals left. The recent assembly session also appointed a new head of the North Korean cabinet. In North Korea, the prime minister is essentially a top technocrat, but it is still significant that this position went to Choe Yong-rim, who is rumored to be close to Jang.

Jang’s position remains precarious: Kim Jong-il is still the supreme leader, and in North Korea even blood connections with the highest family do not always secure a person from august wrath. In the past, family members have been exiled a number of times, and in one case a young relative of the Dear Leader was assassinated in Seoul, where he had defected. A few years ago, Jang Song-taek disappeared from public sight for a year, and he is widely believed to have spent this time in exile.

At any rate, the North Korean elite – with at least tacit approval of Kim Jong-il – began to work on the architecture of a post-Kim Jong-il regime. It seems that the future power structure will consist of Kim Jong-un, a much extolled Star of Revolution and Shining Comrade (or whichever flowery titles they will invent) who will essentially be a powerless puppet while real authority will dwell with a council of technocrats and generals presided over by Jang Song-taek. In all probability, it means that the death of Kim Jong-il will not bring about much change: for a while the country will be steered by the same people who have been running it for the past two or three decades.

However, power transitions do not always go as intended. To start with, Kim Jong-un’s personality cult is still in its infancy, and it will take few years to develop it to the usual North Korean levels. We are yet to see pages of all newspapers filled with countless stories of the “Young General’s benevolence”. However, before the personality cult is developed enough, not only Kim Jong-un’s position but the entire system will remain insecure. We do not know whether Kim Jong-il and his old guard have enough time at their disposal: at the latest Supreme People’s Assembly session the Dear Leader did not look particularly well.

It is also possible that after Kim Jong-il’s death some cracks in the top leadership, now invisible, will lead to intense infighting and thus undermine the cohesion that is essential for the stability of the system.

And even if the transition goes smoothly enough, the resulting system will remain inherently unstable. Kim Jong-un might be young, inexperienced and compliant now, but he will get stronger and wiser, and in all probability will not be too happy about the control of the old dignitaries. Many young kings ended up challenging and removing their regents.

On the other hand, the likely members of the future regent council are quite old, with an average age of 75 or so, hence in a decade many of the present-day top dignitaries will be dead from natural causes (and, perhaps a car crash or two).

Finally, Jang Song-taek might be tempted into assuming all power for himself. Nasty things are known to have happened to young crown princes in the past – from food poisoning to riding incidents and, perhaps, even good old car crashes.

But, whatever happens, the first days of June saw the contours of post-Kim Jong-il North Korea emerge.

Read the full story below:
Son rising for a post Dear Leader era
Asia Times
Andrei Lankov
6/16/2010

Institute for Far Eastern Studies (IFES)
NK Brief No. 10-05-19-1
5/19/2010

On November 11, 2009, North Korea enacted a ‘Real Estate Management Law’ consisting of six sub-sections and 47 articles. The new law revised the terms for sale and use of real estate, banning the unapproved rental of property and allowing the state to collect a ‘usage fee’ (rent). In addition to the law on real estate management, immediately after the North’s currency reforms at the end of last November, the government enacted or revised a total of 11 laws related to the economy, including the Food Administration Law, Agricultural Law, Goods Consumption Standards Law, and the Labor Law. This raises the question of whether the regime is strengthening its economic control mechanisms.

According to the Socialist Property Management Law of 1996, only ‘enterprises, institutes, and groups’ were allowed the use of properties, but the latest Real Estate Management Law includes individuals as those allowed to use property.

North Korea’s KCNA reported the enactment of the new law on real estate in the middle of last December, but only revealed that “basic issues of real estate’s registration and inspection, use and collection of rents are regulated,” while the more detailed contents were revealed in a three-part series of articles on the Real Estate Management Law that ran in the Minju Chosun, which was published by the Cabinet and Presidium of the Supreme People’s Assembly between March 17 and April 3.

In North Korea, where all real estate is property of the government, the sale or rent of properties between individuals or groups is, on principle, not possible, but after the July 1, 2002 Economic Management Reform Measure, the regime’s inability to provide housing led to significant growth in the size of the black market for real estate.

On a related note, during the 4th session of the 11th Supreme People’s Assembly, which opened in April 2006, a campaign to assess properties throughout the entire country and establish a system of rent was revealed, after which ‘property usage fees’ were included in the annual national budget.

Ultimately, the enactment of this law on real estate strengthens the state’s control over the socialist economy and over the country as a whole. From South Korea’s perspective, it appears the integrated land tax, property tax and other similar systems are North Korea’s attempt to prepare an important legislative precedent for expansion of the state coffers.

However, the portion of the newly-enacted Real Estate Management Law that really catches the eye is the authorization of ‘individuals’ to rent real estate. While it takes on the form of property leasing, it is also an expanded measure in that it permits individuals to use socialist property. Giving individuals the right to use real estate increases productivity and helps ease the North’s current economic woes.

According to the Minju Chosun, the new law “says one must not buy and sell real estate, and the nature and use of property cannot be changed without permission from the management authorities, so that property cannot be handed over to or lent to other organizations, enterprises, groups or individuals.”

The law also stipulates that a property rents will be paid to a ‘State Pricing Establishment Organization’, and that the intended use for the property must be registered, after which rents will be set in either goods or currency, and if rents are not paid in currency, they can be paid in kind.

In particular, this law stipulates, “Land is not to be abused or used in a way that makes it barren,” and that any historic or revolutionary landmark, or idolation of Kim Il Sung or Kim Jong Il must be thoroughly protected.

Through a special measure by the Cabinet, a National Real Estate Management Committee was established, and management offices and chains of command were established for the cabinet.

According to Yonahp:

North Korea will open its rubber-stamp parliament for the second time in less than two months, a session analysts say is likely to be joined by leader Kim Jong-il who recently returned from a trip to China amid rising tension on the Korean Peninsula.

The communist state’s official media reported Tuesday the Supreme People’s Assembly (SPA) will convene on June 7, exactly a month after Kim returned from his summit meeting with Chinese President Hu Jintao in Beijing.

The last session, which was skipped by Kim, convened on April 9.

The 687-member assembly has not opened twice in one year since 2003. Even then, each session was held by a separate group of representatives, a Unification Ministry official here said.

“The (South Korean) government will closely monitor the upcoming session,” the official said, asking not to be named.

“This should be seen as an extraordinary session at an extraordinary time,” Paik Hak-soon, a North Korea researcher at the Sejong Institute, said. “Kim will likely be present to oversee it.”

Paik was referring to heightened tensions between the divided Koreas since a South Korean warship sank on March 26 near the western sea border with North Korea.

A ranking South Korean defense official said Tuesday investigators have found evidence that points to a North Korean attack on the 1,200-ton Cheonan. Forty-six of the ship’s crew members died when the ship split in half.

“The parliament will also declare its support for economic cooperation projects Kim has brought from China,” Paik said, adding that North Korea fears sanctions on it will tighten if Seoul and Washington conclude Pyongyang is to blame for the ship sinking.

Baek Seung-joo, a researcher from the Korea Institute for Defense Analyses, said Kim is likely to call for support for a power succession that has been secretly underway in Pyongyang.

“This will be much focused on domestic politics,” Baek said, discounting the significance of the meeting between the North Korean and Chinese leaders.

“We may see clear moves that indicate Kim’s third son is rising up the ladder,” he said, adding the ship sinking is unlikely to be a major topic as Pyongyang has already denied any link to the incident.

Pyongyang held its first session of the newly elected SPA last year, reappointing leader Kim Jong-il to another five-year term as head of the National Defense Commission, the highest seat of power.

A member of the 13-man commission was retired earlier this month due to his age, and Baek said that opens up room for a cascade of reshuffles that can help pave the way for a power transfer.

The coming session also comes as North Korea remains reluctant to return to stalled six-party talks on its nuclear weapons programs.

Pyongyang says it will rejoin the aid-for-denuclearization talks only if Washington agrees to launch separate talks toward a peace treaty to formally close the 1950-53 Korean War and the United Nations lifts its sanctions on the country.

The six-nation talks include the two Koreas, the U.S., China, Russia and Japan. Kim pledged to work with China to create “favorable conditions” for their resumption in his summit meeting in China, but Seoul and Washington say it depends on the outcome of the investigation into the ship sinking.

Cho Myung-chul, a North Korea researcher at the Korea Institute for International Economic Policy in Seoul, said the SPA may issue a statement denouncing any South Korean or U.S. moves linking the sinking to the North.

He noted that the U.S. Senate last week passed a resolution calling for a thorough probe of the incident, while South Korea will announce the results of a multinational investigation later this week.

“The SPA may announce measures and warning against South Korea and the United States,” Cho said.

Read the full story here:
N. Korea unexpectedly calls rubber-stamp parliament into session
Yonhap
Sam Kim
5/18/2010

According to KCNA:

Report on Implementation of 2009 Budget and 2010 Budget
 
Pyongyang, April 9 (KCNA) — Deputy Pak Su Gil, vice-premier and minister of Finance, delivered a report on the results of the implementation of the DPRK state budget for last year and its state budget for this year at the 2nd Session of the 12th Supreme People’s Assembly held on Friday.

According to the report, the state budget for last year was successfully implemented and, as a result, the state budgetary revenue was overfulfilled 1.7 per cent, an increase of 7 per cent over the previous year.

Ministries, national institutions, management bureaus and complexes overfulfilled the national plans for budgetary revenue and all provinces, cities and counties across the country also overfulfilled their plans for local budgetary revenue.

Last year’s plan for state budgetary expenditure was carried out at 99.8 per cent.

An investment from the state budget was focused on the development of metal industry while a huge financial allocation was made for the power and coal industries and the railway transport.

8.6 per cent more funds than the previous year were spent for capital construction and expenditure was increased for agriculture and light industry.

A 7.2 per cent greater financial disbursement than the previous year was made for the field of science and technology, surpassing the level of the latest science and technology in domains of space technology, nuclear technology and CNC technology and putting the key industries of the national economy on a high scientific and technological basis.

A large amount of fund went to the field of cultural construction and 15.8 per cent of the total state budgetary expenditure was spent for national defence.

The reporter said that the scale of revenue and expenditure in the state budget for this year has been set on the principle of improving the people’s standard of living to meet the requirements of the policy of the Workers’ Party of Korea on conducting a great offensive to bring about a decisive turn in the above-said work.

This year’s plan for state budgetary revenue is expected to grow 6.3 per cent over last year. The revenue from the profits of state enterprises, the main source of state budgetary revenue, is expected to go up 7.7 per cent over last year, that from the profits of cooperative organizations 4.2 per cent, that from the fixed asset depreciation 2.5 per cent, that from real estate rent 2 per cent and that from social insurance 1.9 per cent.

This year’s plan for state budgetary expenditure is expected to show an 8.3 per cent increase over last year.

The spending for the light industry is expected to go up 10.1 per cent, that for agriculture 9.4 per cent and that for metal, power and coal industries and railway transport 7.3 per cent as compared with last year.

The expenditure for the machine-building industry is expected to go up and an 8.5 per cent bigger financial allocation will be made for scientific researches and the introduction of new technologies.

A 6.2 per cent bigger financial disbursement than last year is expected to be made to more successfully enforce the popular policies, a proof of the advantages of Korean-style socialism centered on the popular masses.

15.8 per cent of the total state budgetary expenditure for this year is expected to be spent for national defence.

It is expected that a large amount of educational aid fund and stipends will be sent for the children of Koreans in Japan this year, too.

In order to successfully implement this year’s state budget, all domains and units of the national economy should work out enterprising and realistic business strategy and management strategy and tenaciously carry them out by relying on a high degree of mental power of the producer masses and thus fulfill the plans for budgetary revenue without fail, stressed the reporter.

And according to the Choson Ilbo:

North Korean leader Kim Jong-il can freely dispose of 20 percent of his country’s budget, a former secretary of North Korean Workers’ Party has said that. Hwang Jang-yop told the Asahi Shimbun, “Only 30 percent of the budget is spent on public services, while 50 percent is earmarked for military spending.” Hwang defected to South Korea in 1997.

Hwang was interviewed by the daily during his visit to Japan on April 4-8. “Kim Jong-il’s dictatorship is 10 times worse than his father’s. People have a painful life,” he said.

Asked if the North is likely to abandon its nuclear weapons program, he said, “There is no such possibility. But the North won’t use the weapons. They’re a means to maintain the regime.”

To the question why Kim’s eldest son Jong-nam was passed over for the succession, he said, “At first, Kim Jong-il thought of choosing his eldest son as his successor. But he seems to have changed his mind as he fell in love with Ko Young-hee, the mother of Jong-un, his third son, after Jong-nam’s mother Song Hye-rim died.”

Commenting on the North’s bizarre abductions of Japanese citizens in the 1970s and 80s, he said, “The North needed native Japanese to train agents who would work in Japan.”

Read the full story here:
Kim Jong-il ‘Gets 20% of N.Korea’s Budget for His Own Use’
Choson Ilbo
4/12/2010

Institute for Far Eastern Studies (IFES)
NK Brief No. 10-04-12-1
4/12/2010

As inflation and food worries continue to grow in North Korea, social unrest is palpable. According to the group ‘Good Friends’, North Korean officials slashed prices on all goods to 1/100th of their going rate in an effort to ease the public. Considering the fact that North Korea revalued its currency by the same ratio on November 30, it appears that Pyongyang is effectively acknowledging the reform’s failure.

The Good Friends newsletter reports that the Korean Workers’ Party cabinet had handed down an order to reduce the price of all goods by a factor of 100:1, while the people of North Korea were told during local meetings that currency was revalued at 100 to 1, but not in order to reduce the sale of goods by 100 to 1, as well.

It also stated that at the first cabinet meeting in March, there was discussion on the fact that it was rumored that prices had climbed several times higher than official prices, and would continue to rise. It was decided that, at first, people thought of the currency reform as a 100-fold increase in prices, and that the same was true of management in state-run organizations. Later, at the second meeting of the cabinet, it was decided that a ‘100 to 1 Price Plan’ would be distributed to each city and town.

Now, People’s Committees and security forces in each city and town are enforcing the ‘100 to 1 Price Plan’ while the central Party’s 100:1 commerce committee has distributed a class syllabus in support of the price modifications, which was lectured on throughout the country from March 16-18. This indicates that the government is again controlling all prices throughout the country.

With no goods or aid flowing in from outside, it is likely that the price and exchange rates will continue to climb. On December 9, rice sold for 23 won, but the value of the new currency falls daily, and starvation is striking people in several areas throughout the country. Anger over government policies and general feelings angst are not hard to find in families and labor groups. The government is trying to control the prices of daily necessities, but if it is unable to do so, this situation cannot avoid becoming explosive. The central government has also sent officials out to different areas of the country to enforce a rice price of 25 won/Kg. This is the highest rice sold for in markets prior to the currency reform. Enforcing the same price throughout the country is an attempt to stabilize markets, and is a temporary measure to try to keep residents’ tempers from flaring.

The November currency reform was the first currency revaluation in 17 years, and was part of a set of strong measures to restrict markets, along with market closures and bans on foreign currency. However, since last February, the inflation sparked by the currency revaluation has grown severe and internal unrest has increased, leading authorities to reopen markets and set price caps. Now, the price of rice in North Korean markets appears to have stabilized at 400 won per kilogram, but due to the unrest over the last 100 days, many middle-class residents have fallen into poverty.

UPDATE 1: Here is what KCNA had to say:

SPA of DPRK Meets

Pyongyang, April 9 (KCNA) — The 2nd Session of the 12th Supreme People’s Assembly of the DPRK was held at the Mansudae Assembly Hall Friday.

It was attended by deputies to the SPA.

Officials of Party, armed forces and power organs, public organizations, ministries and national institutions and those in the fields of science, education, culture and arts, public health and media attended it as observers.

The session discussed the following agenda items: “1. On the work of the DPRK Cabinet in Juche 98 (2009) and its tasks for Juche 99 (2010)”, “2. On the results of the implementation of the DPRK state budget for Juche 98 (2009) and its state budget for Juche 99 (2010)”, “3. On the adoption of the ordinance of the DPRK Supreme People’s Assembly ‘On revising some provisions of the DPRK Socialist Constitution'” and “4. Organizational matter”.

Deputy Kim Yong Il, premier of the Cabinet, in a report on the first agenda item said that last year the indomitable mental power of all the people of the country and production potential were fully displayed and, as a result, the gross industrial output value markedly grew as compared with that in 2008. This year the Cabinet will boost the production of consumer goods and grain by leaps and bounds by putting spurs to the development of light industry and agriculture once again and reenergize the overall production by giving definite priority to the production of electricity, coal, iron and steel and railway transport and, at the same time, energetically organize and conduct the campaign for a great surge with main emphasis on stepping up the technological upgrading and modernization of the national economy, he added.

Deputy Pak Su Gil, vice-premier of the Cabinet and minister of Finance, in a report on the second agenda item said that last year’s state budget revenue was overfulfilled 1.7 percent and the state budgetary expenditure was implemented at 99.8 percent.

He noted that the plan for state budgetary revenue for this year is expected to increase 6.3 percent over last year while the plan for state budgetary expenditure is expected to grow 8.3 percent.

Speakers at the session pointed out that the Cabinet’s work last year and the implementation of its state budget were properly reviewed and summed up, this year’s tasks were clearly laid down and its state budget was correctly shaped. They expressed full support and approval of them.

They manifested their resolution to successfully put into practice the Party’s intention and idea of augmenting the country’s political and military potentials in every way and bringing about a dramatic turn in improving the people’s standard of living in this significant year marking the 65th anniversary of the founding of the Worker’s Party of Korea.

The session adopted the decision of the SPA of the DPRK “On approving the report on the work of the DPRK Cabinet and the results of the implementation of the DPRK state budget for Juche 98 (2009)” and the ordinance of the SPA of the DPRK “On the DPRK state budget for Juche 99 (2010).”

Also adopted there was the ordinance of the DPRK Supreme People’s Assembly “On revising some provisions of the DPRK Socialist Constitution”.

Deputy Pyon Yong Rip was elected secretary general of the Presidium of the SPA to fill vacancy and Deputy Jang Pyong Gyu was appointed as director of the Supreme Public Prosecutors Office at the session.

ORIGINAL POST: We still don’t know exactly what happened, but  below is some information from the meeting.

According to the New York Times:

North Korea’s rubber-stamp legislature convened Friday in the capital, Pyongyang, offering few hints of a major policy shift despite a growing desperation for economic recovery.

The country’s ailing leader, Kim Jong-il, did not show up at the Supreme People’s Assembly, igniting speculation about his health and whereabouts. His absence from the assembly, although not unusual, followed some unconfirmed news reports in South Korea in the past week that he might already have embarked on a clandestine trip to China to win needed aid. South Korean officials questioned those reports, though they had earlier predicted that he might soon visit China, the North’s last remaining major ally.

Outside analysts have been closely monitoring Mr. Kim’s absences or appearances in major state affairs since his 2008 stroke fueled speculation on how long he could stay in power. Mr. Kim, 68, is now struggling with North Korea’s deepening economic woes while preparing to hand over power to a son.

On Friday, the legislative session adopted a second constitutional revision in a year, the country’s state-run news agency, KCNA, reported without providing details. The South Korean news agency Yonhap speculated that the amendment might be intended to help the transfer of power from Mr. Kim to his third son, Kim Jong-un, 27.

Others doubted it.

“I think it may have more to do with the economy or a minor readjustment of the Constitution,” said Kim Yong-hyun, a North Korea expert at Dongguk University in Seoul.

The gatherings of legislators in the North provide outside officials and analysts with a rare opportunity to seek clues to North Korean policies and any changes in its leadership hierarchy.

Kim Jong-il, who is also a legislator, has often skipped the sessions. But he used the meeting last year to demonstrate that he was still in charge despite having suffered a stroke in 2008. After months of being out of sight, he entered the parliamentary hall to the thunderous applause of loyal members, though he looked gaunt and limped slightly.

At the time, the assembly approved the first constitutional revision in 11 years to make one of Mr. Kim’s several official titles — chairman of the National Defense Commission — the supreme ruling post in North Korea. The move reconfirmed his already absolute grip on power.

Analysts had said that the session this year was most likely to focus on reviving North Korea’s moribund economy, a goal the nation had set at the start of the year.

On Friday, KCNA reported that the session passed a budget for the year that promised a 10.1 percent increase in spending for consumer goods industries and a 9.4 percent increase for agriculture.

North Korean reports on Friday’s session made no reference to the country’s tricky relations with South Korea and the United States. But the country’s Foreign Ministry reiterated that the North would continue to build and modernize nuclear weapons.

An unidentified spokesman of the ministry told KCNA that North Korea was willing to “denuclearize the Korean Peninsula” — but only if the United States abandoned its “hostile policy” toward the North.

According to AFP (via Asia One):

North Korea’s rubber-stamp parliament at its annual meeting Friday will focus on ways to improve living standards after a bungled currency change sparked widespread public anger, analysts said.

Members of the Supreme People’s Assembly (SPA) are effectively chosen by the ruling communist party, and they endorse the bills it puts forward without serious debate.

But the day-long session indicates the secretive regime’s priorities and any changes to the line-up among the ruling elite.

Yang Moo-Jin of Seoul’s University of North Korean Studies said legislators would approve institutional and personnel changes to bolster leader Kim Jong-Il’s power and prepare for the eventual succession of his third son Jong-Un.

The North is apparently moving to put the national police agency under the direct control of the National Defence Commission headed by Kim, he said.

It was unclear whether the leader would attend the meeting, as he did last year – looking frail and gaunt after a reported stroke.

Since then the regime has been grappling with serious food shortages and tougher UN sanctions imposed to curb its missile and nuclear ambitions.

The currency revaluation last November 30 wa

According to the Daily NK:

In recent days there has been a sudden decrease in both food prices and the North Korean won-dollar exchange rate, so people are looking at the activities of middlemen wholesalers, the lynchpin of the North Korean market economy, in more detail.

These wholesalers, who had been watching the market situation and waiting for the new currency to stabilize, are now making their move. The markets reopened in February, and restrictions on foreign-currency use have been eased. Rice prices, which had skyrocketed to more than 1,300 won per kilogram in late February, have reportedly fallen back below 600 won as the food which these wholesalers were hoarding entered circulation.

Meanwhile, the North Korean authorities’ plan, to take back control of the economy, came to nothing as they faced a hyperinflationary spiral. Currently, the economy seems to have simply returned to the pre-redenomination period, with markets providing most of the needs of the people, and wholesalers providing products for the market.

Until the early 1990’s, commercial distribution in North Korea was managed by executive fiat. The Ministry of Commerce of the Cabinet commanded the supply chain across the whole country via the works of the National Planning Commission. There was a central wholesale center, a commercial management center and a district wholesale center in each province, and a commerce management center in each district. The state maintained a pyramid control system beneath which each district managed its own commercial spaces.

According to size, these were classified into stores and booths, and into “general” and “special” according to the items sold.

However, after the famine of the 1990’s, state distribution ceased and North Korea’s national commercial network lost its capacity to function. From then on, North Korean people started obtaining their food and basic necessities through private distribution networks, and the jangmadang was spontaneously born.

This private distribution network soon came to include a small quantity of consumer products, so called “August 3 products,” produced in small industrial enterprises and circulated in the jangmadang, and foreign, mostly Chinese, products imported with the profits of trade.

Then, after the July 1st Economic Management Reform Measure of 2002, provincial factories that produced consumer goods started bartering between themselves. During this process, the distribution system expanded and the number and scale of the wholesalers expanded with it.

A cornucopia of items, from welding rods to belts, cotton yarn to copper wire, bearings and the nuts and bolts needed in factories and enterprises were traded through these wholesalers. A paper mill which needed 10kg of welding rods, for instance, could barter 20 notebooks for them. In order to exchange soap for 10kg of welding rods, 10 bars of soap were required. In the case of soju, a traditional liquor in both Koreas, two or three liters was needed.

Provincial factories also traded their production in order to earn the necessary funds to purchase needed materials and run the factories. This was done with the approval of the state through the five percent of booths in the markets allocated to factories after the July 1st Measure. Also, it was possible because the authorities permitted the by-products of regular production to be used for handicraft production, and factory workers to sell 30 percent of production in the market.

Under the changes, the wholesalers were classified into larger ones, called “vehicle traders,” smaller ones called “runners,” and retailers representing booth merchants. They shouldered the burden of providing North Koreans all over the country with their basic necessities.

These middle men wholesalers, known colloquially as “big hands,” get their stocks through trade with foreign currency-earning enterprises. They sell the products to “runners” or directly to stores. Big hands are mostly overseas Chinese, Korean Japanese and the families of those working in foreign currency-earning businesses.

Members of the Party administrative apparatus are another kind of middle wholesaler. It is impossible for them to officially run a business in the markets, so they earn money through middle wholesale after work. They make a huge amount of profit by buying products from factory enterprises at the state price and selling them at the market price. They also sell products accumulated through bribery.

“Runners” who obtain products from the wholesalers travel the different regions of North Korea and sell them to booth retailers. Making a profit through market price differences between regions, they sell those products to retailers at a price 30 percent to 40 percent higher than the price they paid.

One defector, who ran a “runner” business between Chongjin in North Hamkyung and Sinuiju in North Pyongan, bought fabric from traders in Chongjin and sold it in Pyongsung in South Pyongan. With the money earned in Pyongsung, he bought products and sold them in Sinuiju. He went along this same Sinuiju-Pyungsung-Chungjin route back and forth. He was like an 18th century Korean peddler.

Talking of his experiences, he said, “When travelling by train, I could usually make a 30 to 40 percent profit. But there wasn’t much left after paying the necessary bribes.”

When he bought fabric in Chongjin, he paid about 500 to 550 won (in old currency) per meter. When he sold that fabric to retailers in Pyongsung market, they paid him about 800 won per meter. He made about 300 won per meter, but he spent half the money on bribes paid to gatekeepers; for documents, to army troops in charge of trains, and to train inspectors during the process of issuing travel certificates or riding the train. He also had to pay for his board and lodgings, so the final profit he made was less than 100 won per meter, he explained.

Runners like that, going between North Pyongan and North Hamkyung, usually distribute things like fabric for shoes that traders bring across the border or in through Rasun. A runner usually carries between 150 and 200 kilograms of products. When travelling on the train, one person can only carry one or two backpacks-full, because anyone carrying too much baggage will be the target of inspection and have to pay bigger bribes.

Products transported by runners are sold to retailers in the markets. Retailers sell those products at a price 20 to 30 percent higher than the original price. Therefore, the fabric Kim conveyed was sold to the final consumers at approximately 1,000 won per meter.

It seems that the figures North Korean authorities wanted to eradicate via the redenomination were these middle wholesalers, the big hands. For primary producers, paying them with adequate rations and money alone could have wrestled back state control. Retailers, meanwhile, could be controlled by locking up the markets. However, the persistent viability and energy of the middle wholesalers was uncontrollable. This is primarily because low and middle-ranking authorities are working in total collusion with them.

Now, middle wholesalers who survived the carpet bombing of the North Korean authorities, such as the 100:1 currency exchange rate, the exchange limit of 100,000 won and the restriction on usage of foreign currency, are getting ready again. The second round between the North Korean authorities and middle wholesalers with the market as its stage is about to begin. It will be interesting to see how those middle wholesalers who have grown strong will react to the actions of the North Korean authorities.

Wholesalers at Forefront of Market Battle
Daily NK
Yoo Gwan Hee
3/27/2010

According to the Daily NK:

Yun Gi Jeong, the 82-year old former Finance Director of the old Administration Council (now known as the Cabinet), has apparently been charged with resolving the crisis in the chaotic people’s economy.

Her elevation may represent an attempt to steady the ship following the disastrous currency redenomination and rumored execution of former economic boss Park Nam Ki.

The chair of a people’s unit in a neighborhood of Shinuiju told The Daily NK on Tuesday, “Prices have been fluctuating since the redenomination, but now a notice has been handed down from the Cabinet saying that they will be stabilized by April 1. It says the Cabinet will deal with this confusion in the people’s economy.”

He said that Yun Gi Jeong, who resigned her office in the Administration Council some years ago, had been brought back to the Cabinet to bring order to the chaos.

“Upon her return to the Cabinet,” the source added, “the rice price started dropping. It was over 1,500 won early March, but has now settled at around the 600 won level.”

According to his explanation, the North’s authorities intend to try and cap rising prices by April 1. The authorities released official price ceilings on February 4th; rice was 240 won and corn 130 won per kilogram, but these rapidly proved unrealistic.

Another source from North Hamkyung Province told the Daily NK yesterday, “When the rumor that they would restart distribution as normal came out, rice prices dropped drastically. As the news of Yun Gi Jeong came out, rice prices and exchange rates also went down. However, people still feel frustration at the fluctuating exchange rate.”

Yun Gi Jeong was born in Seoul in 1928 and served as the Finance Director of the Administration Council for almost 20 years from April, 1980. After her resignation in 1999 she became the President of the National Economic Institute, and is now an honorary professor at Kim Il Sung University, a member of the Party Central Committee and a delegate to the 12th Supreme People’s Assembly.

One defector who was a high official in North Korea explained to The Daily NK today, “Yun Gi Jeong is a person who Kim Il Sung was in favor of. After he died, she stepped back from the economic field.”

He added, “She tends to stick to her principles and is known to be a workaholic. Kim Jong Il presumably asked her to solve the economic problems because she is an old hand in the economic field.”

Read the full article here:
Old Guard Returns to the Economic Fold
Daily NK
Jung Kwon Ho
3/24/2010