North Korean Economy Watch

According to the Daily NK:

It has been reported that the North Korean authorities have declared a “Special Vigilance Period” and begun regulating civilian access to Pyongyang. The move looks like the start of preparations for the Delegates’ Conference of the Chosun Workers’ Party, which could begin as early as the end of next week.

An inside source reported the news in a telephone conversation with The Daily NK today, saying, “Since the 26th, they have been regulating access to Pyongyang for provincial residents at all the ‘No. 10 Checkpoints.’”

The General Security Bureau of the National Security Agency sets checkpoints at every major entry point into Pyongyang, and these are called “No. 10 Checkpoints.” They are used to regulate the floating population; at all checkpoints, vehicles and civilians have their documents checked.

There are approximately ten checkpoints, with Junghwa No.10 (Hwangju, North Hwanghae Province to Pyongyang), Seopo No.10 (Pyongsung, South Pyongan Province to Pyongyang), and Majang No.10 (Sariwon, North Hwanghae Province to Pyongyang) seeing the highest traffic flows.

The source added, “There is also a decree whereby all local cadres on business trips and others visiting Pyongyang on family business or for other reasons must leave Pyongyang by the end of this month.”

Special Vigilance Periods are a customary move when important events are held in Pyongyang on national holidays.

On Kim Il Sung’s and Kim Jong Il’s birthdays (April 15 and February 16), the founding day of the Chosun People’s Army (April 25) and the Chosun Worker’s Party (October 10), the four major national holidays, the Special Vigilance Period conventionally lasts for seven to ten days, while there is customarily a three or four day Special Vigilance Period when the Supreme People’s Assembly is sitting. Additionally, when international VIPs visit Pyongyang, access to the city is generally restricted for four to six days.

The only specific public evidence of the start date of the Delegates’ Conference came in the form of a June 26th Chosun Central News Agency dispatch, according to which, “The Politburo of the Central Party summons a delegates conference of the Chosun Workers’ Party at the beginning of September, 2010 to elect the leading apparatus of the Workers’ Party and reflect new demands for the revolutionary development of the Party, which is facing critical changes in bringing about the strong and prosperous socialist state and Juche revolutionary achievements.”

While the statement could mean any time between September 1st and 10th, considering September 9th is the founding day of the North Korean regime, the conference looks likely to be held between September 6th and 8th.

The Chosun Central News Agency (KCNA) also reported today that county delegates’ conferences have been held and provincial delegates’ conferences will be held soon. The latter will elect provincial delegates who will go forward to the main conference.

In another report, Chosun (North Korea) Central Broadcast (the state radio station) reported that Kim Jong Il had been voted in as a delegate for the North Korean People’s Army in a military party delegates’ conference held in the April 25 House of Culture on the 25th.

Read the full story here:
Pyongyang Getting Set for Delegates’ Conference
Daily NK
Yoo Gwan Hee
8/27/2010

According to the Joong Ang Daily:

Two men near the top of the North Korean power structure are competing against each other to become foreign investment czar for the cash-strapped country, according to sources with knowledge of North Korea.

North Korea experts say the contest could influence who eventually succeeds Kim Jong-il.

The sources told JoongAng Ilbo yesterday that Jang Song-thaek and O Kuk-ryol, both vice chiefs of North Korea’s National Defense Commission, are competing over who can attract more foreign investment to the North. The National Defense Commission, the country’s top state organization, is chaired by Kim.

“O Kuk-ryol dominated the foreign investment coming into the North because of his military power,” said one of the sources, “but he is in a hegemony struggle in that area with Jang Song-thaek, who thrust himself into foreign investment promotion later than [O Kuk-ryol].”

Jang is the husband of Kim Kyong-hui, Kim’s younger sister, and is one of Kim’s close confidants. Jang was also promoted to vice chairman of the National Defense Commission on June 7 at the Supreme People’s Assembly.

The sources said O, since being appointed a vice chairman of the National Defense Committee in February 2009, has capitalized on his position to expand his influence in attracting foreign investment.

O and his aides established Choson Kukje Sanghoe (Korean International Trading Company) as the organization solely responsible for foreign investment promotion and received approval for the organization from the presidium of the Supreme People’s Assembly on July 1, 2009.

Meanwhile, Jang named Park Chol-su, a Korean-Chinese businessman, president of Korea Taepung International Investment Group, which he re-purposed to attract foreign investment.

The company initially belonged to the cabinet, but Jang absorbed it into the National Defense Commission and announced the establishment of the re-purposed company in a January 20 report from the official Korea Central News Agency. The news report said Kim Jong-il issued an “order” that the state guarantee that Taepung be able to attract foreign investment.

“O Kuk-ryol is very displeased that Jang jumped into the foreign investment business that he led,” said the sources. “Currently, Choson Kukje Sanghoe and Korea Taepung International Investment Group are vying against one another.”

The sources said that the power struggle is already being watched with concern by the State Security Department, the North’s supreme intelligence agency.

The agency, the sources said, suspects that China is behind Taepung and is trying to control the North Korean economy by injecting capital through Park and the group. The sources said the agency is hesitant to report its suspicions to Kim, given his close relationship to Jang.

Jang has cultivated power through economic projects Kim has entrusted him with, such as a project to build 100,000 houses in Pyongyang. Since he was promoted to vice chairman last month by Kim, he is thought to have increased his political clout as well.

Ri Je-kang, a rival with Jang, also died in a mysterious, recent traffic accident.

“If a rivalry between Jang Song-thaek and O Kuk-ryol, both key axes of North Korean power, becomes a full-fledged power struggle, it could have a subtle effect on a North Korean succession scenario,” said Kim Yong-hyeon, professor of North Korean Studies at Dongguk University.

Read the full story here:
Bigwigs in North vie for power over investments
Joong Ang Daily
7/5/2001

Daily NK
Park Sung Kook
2/2/2010

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

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

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

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

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

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

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

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

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

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

As reported earlier this year by the Daily NK, Kim Jong il’s brother in law, Jang Song Taek, was leading an anti-corruption campaign in North Korea’s northern provinces along the Chinese border. Aside from controlling financial leakages, these efforts could be interpreted as attempts by Kim to gain control over military-owned trade companies. 

According to a past report:

The inspection group withdrew all trade certificates with exception of those certificates belonging to the families of anti-Japanese guerrilla fighters, and those certificates issued by the Ministry of Finance or the Shinuiju Municipal Administrative Committee.  Therefore, presently at Shinuiju Customs, all import items without trade certificates issued by the above mentioned three groups have to be sent back to China.

Jang’s efforts, though seemingly effective at reasserting financial control of the region, had apparently taken their toll on local commerce:

In Hyesan, Yangkang Province, markets have been significantly reduced in size and scope recently, due to the anti-socialist group’s inspections[.]

[T]he merchants were at unease when under inspection by the National Security Agency (NSA) and other governmental organizations which govern the jangmadang [markets].

For example, transportation of goods by traders has withered away since last year, as the authority of the People’s Safety Agency (PSA) [controlled by Jang] rose and [it] launched [] a strict crackdown on traders’ belongings.

The source explained the situation in Hyesan, that “Hyesan had become the city where Chinese goods were traded for the cheapest value because Chinese goods [enter the country] at Hyesan[.] [During] the (PSA) inspection period [goods] could not be transported inland due to the inspection of trains and cars. Lives of the common people became even tougher than before, since goods could not be circulated through the jangmadang in spite of their low prices.”

“The more stringent the regulation became, the more bribes cadres received and worsened were the lives of people,” the source added.

(NKeconWatch: I have “cleaned up” some of the grammar here to make it more readable.  If you want to see the original version, click here.)

And in Sinuiju:

The intensive inspection of Shinuiju, in which over 70% of Chinese-North Korean commercial traffic occurs, caused several aftereffects inside North Korea: commercial traffic passing through Shinuiju and Dandong decreased by half compared to the past, and the aftermath of the inspections in Shinuiju added fuel to the fire of price rises in jangmadang goods across the country.

For instance, sugar, which is a raw material for doughnuts or candies that are consumed the most by average civilians in the jangmadang, carried a price of around 1,500 won per kilogram before the inspections, but in mid-May, it rose to 2,100 won and vegetable oil hiked from 5,500 to 7,500 won per kilogram. Such an increase in prices also caused a significant threat to the survival of citizens who made a living off the jangmadang trade.

But the final result of the evaluation of the Shinuiju inspection, which caused quite a stir externally, has purportedly been negligible.

The source said, “The volume of trade has decreased over several months and the number of visitors to China has also been reduced by half. The results of the inspection have not produced too much difference, except for the execution of 14 corrupt officials.”

The source further noted, “The only change which has been visible to the eye is the rise in the cost of bribes offered to North Korean customs from 40 to 80 dollars per hundred kilograms of goods. There was a rumor that the loading volume carried into the North would be fixed at 120kg, from 360kg, but this has not been done yet.”(Daily NK)

The Daily NK now reports that in the wake of these developments, Kim Jong il’s National Defense Commission (NDC) has moved in and directly taken over the inspections—and economic conditions have improved:

[Markets] have become lively again in the past few days as inspections by the National Defense Commission (NDC) have gotten underway.

A source in North Korea reported to Daily NK on Friday that “Merchants in Hyesan these days are fish in water. They say that they would not mind at all going through such inspections for an entire the year!”

Part of the reason for the turn around has been a change in focus.  Whereas Jang’s work hit many “ordinary” North Koreans (particularly those working for the wrong trading companies), NDC inspections are focused on controlling the mid- to upper-level cadres.  It is entirely speculatory to ask whether Kim’s strategy was to unleash Jang to get control of the region and afterwards assert direct control himself, or whether complaints from locals forced the NDC to end Jang’s campaign.

Of course this is all unverified information from inside North Korea, so who knows how much of it is correct!  

Three weeks ago, the Daily NK specualted that preparations for North Korea’s political succession are leading to an end of “Songun” and a resurgence of the Korean Workers Party.  A recent story in the Donga Ilbo seems to be reinforcing this claim, noting that several assets in the military’s portfolio are being moved to various state institutions and ministries (where the Worker’s Party and probably Kim’s key supporters exercise more oversight).

Here is an excerpt from the story:

A knowledgeable source on North Korea said yesterday, “[Leader] Kim Jong Il has ordered the military to transfer its foreign operations to his cabinet and is implementing radical reform of military authorities.”

Kim ordered to reduce the number of executives and the size of the ruling Workers’ Party, government and military by 30 percent at the end of last year.

The source also said officers in the chain of command including the Ministry of the People’s Armed Forces, the National Security Council, the Ministry of State Inspection and the General Staff Department began retiring in January.

The North Korean leader is also reportedly streamlining troop distribution. The North’s Border Guard Brigade has removed regiments and the role of the minting agency has shrunk.

The Ministry of People’s Security, considered the North’s main police organization, is seeing its status rise. No longer under the control of the prosecution, the ministry can now probe corruption in the prosecution and civilian damage caused by the military.

An Anti corruption campaign and purges might also be a part of this transition. 

Read the whole story here:
N.Korea Changing ‘Military-First’ Policy
Donga Ilbo
3/12/2008