North Korean Economy Watch

Joong Ang Daily
Jin Se-keun
8/27/2007

A U.S. orchestra may visit North Korea while Pyongyang sends its own orchestra to the United States, an official of a Hong Kong-based company said yesterday.

Bae Kyeong-hwan, vice president of Daepung Investment Group, told the JoongAng Ilbo that his company has been authorized by the North’s Culture Minister, Kang Neung-su, to schedule and plan the events.

“We contacted the New York Philharmonic orchestra first, but if its schedule does not permit, the Boston Philharmonic or the Philadelphia Philharmonic could be an option,” Bae said.

The New York Philharmonic earlier confirmed that it has been invited to visit North Korea, but has not yet made an official decision.

After a performance in Pyongyang, the U.S. orchestra may return via South Korea, crossing the inter-Korean border at Panmunjeom Village, Bae said.

The North’s National Symphony Orchestra will then return the visit by going to the United States for a performance, according to Bae.

He claimed that negotiations for these reciprocal visits have been worked out by Christopher Hill, Washington’s chief negotiator to the six-party talks, and his North Korean counterpart Kim Gye-gwan.  

North invites the New York Philharmonic
Joong Ang Daily
Brian Lee
8/16/2007

It’s up to the New York Philharmonic orchestra to decide whether it will accept an invitation to perform in North Korea, a U.S. State Department spokesman said Tuesday.

“We’ll consider it,” Eric Latzky, the orchestra’s director of public relations, told Agence France Press. “We received an invitation to perform in Pyongyang through an independent representative on behalf of the ministry of culture of North Korea.”

Latzky said the request, which had just been received, was “unusual” and that the orchestra would consult with Washington before making any decision. Furthermore, Latzky said, any such visit would come as part of a tour in the region.

The Philharmonic is scheduled to play in China in February 2008.

When asked whether such a visit was feasible, U.S. State Department spokesman Sean McCormack said, “I think it’d be fully up to them whether or not they accept such an invitation. As for the details of being able to go there and whether there’s any compensation, that sort of thing, those are probably technical details.”

Financial sanctions and restrictions regarding arms, missile and nuclear technology are in place under a United Nations resolution adopted last year in the aftermath of a nuclear test by the North, but there are no restrictions on travel to the North by ordinary U.S. citizens.

But despite the symbolic meaning the orchestra’s visit could have, McCormack said he suspected it would only play for Pyongyang’s elite. “Whether or not your average North Korean gets an invitation if the New York Philharmonic’s in Pyongyang, I have my doubts about that.”

North Korea interested in inviting New York Philharmonic
Korea Herald
8/13/2007

North Korea has shown interest in inviting the New York Philharmonic to perform in its capital, Pyongyang, apparently as part of its efforts to improve ties with the United States, sources here said Sunday, according to Yonhap News Agency.

During a meeting of six-party nuclear disarmament talks in Beijing in July, U.S. envoy Christopher Hill met his North Korean counterpart, Kim Kye-gwan, and proposed that the two countries start civilian exchanges as part of confidence-building measures, said the sources who spoke on condition of anonymity.

Kim responded positively, saying that his government has already thought about such exchanges and would be interested in inviting the New York Philharmonic, according to the sources.

Eric Latzky, spokesman for the New York-based philharmonic, told Yonhap News Agency that he was unaware of any invitation by the North but said discussions were under way with South Korea for a performance tour there.

Yonhap
Sohn suk-joo
8/22/2007

North Korea’s most powerful organization is leading efforts to clean up damage from heavy floods and restore the country’s infrastructure, the North’s state media reported Wednesday.

The National Defense Commission (NDC), the highest decision-making body under the communist country’s constitution that was revised in 1997 to reflect its “songun” or military first policy, supervises relief operations involving military forces and equipment.

“We’ve achieved recovery and restoration by appealing to party, government and labor officials to go out to damaged areas under the guidance of the National Defense Commission,” Kim Kyong-san, a senior official of the Pyongyang Railway bureau, said in an interview with Radio Pyongyang.

According to North Korea watchers, North Korea’s cabinet has usually spearheaded flood relief efforts in the communist country in the past. The NDC’s involvement signifies the extent of the damage and is also meant to speed up restoration ahead of the summit between President Roh Moo-hyun and North Korean leader Kim Jong-il, who leads the commission, they said.

Meanwhile, North Korea is in the final stages of restoring the railway line in Pyongyang.

“The Pyongyang railway line is fundamental in connecting the country to the east and west. All workers have labored hard and are urged to do more at the final stage,” Kim Kyong-san said.

Devastating floods are believed to have destroyed a revised 14 percent of the North’s farmland, South Korean officials said. South Korea, other countries and international agencies are extending a helping hand to the North.

The number of dead and missing is estimated at more than 300, with the homeless numbering about 300,000. An estimated 46,580 homes of 88,400 families were destroyed or damaged, according to the North’s media.

This year, South Korea is providing 400,000 tons of rice to the North, while it plans to send 7.1 billion won (US$7.5 million) worth of relief goods to North Korea.

On Tuesday, Pyongyang requested more help from the South, and South Korea is considering what to offer in response to the North’s plea for construction materials and heavy equipment.

The severe flood damage caused the two Koreas to postpone their second-ever summit, originally scheduled to be held late this month, until early October. Their leaders are to meet Oct. 2-4 in Pyongyang.

According to North Korean officials, the expressway linking Pyongyang and Kaesong has been damaged by heavy flooding, interfering with transportation. Roh plans to travel to Pyongyang via the overland route, and South Korean officials expressed hope that the expressway will be restored before the summit takes place.

Yonhap
8/22/2007

Kimberly-Clark Corp., one of the world’s biggest makers of health care and sanitary goods, is considering opening a factory in a South Korean-built industrial zone in North Korea, according to the company’s senior executive on Wednesday.

Moon Kook-hyun, chief executive officer of Yuhan-Kimberly Ltd., Kimberly-Clark’s South Korean unit in Seoul, recently told reporters that the company’s “sewing plant” in China may take part in slots of the industrial complex in the North Korean border city of Kaesong.

“First of all, I plan to sign a preliminary contract (to take part in the Kaesong industrial complex) and then will persuade our head office,” Moon said.

Moon and Thomas Falk, chairman of Kimberly-Clark, visited the Kaesong industrial park in February.

Currently, state-run Korea Land Corp. is receiving bids from foreign companies which want to set up factories in Kaesong, located just 70 kilometers north of Seoul.

“If Kimberly-Clark applies to receive land for the Kaesong industrial park, there will be no difficulty,” said an official at Korea Land.

South Korea began building the industrial park in 2003 on a trial basis with the hope of creating a model for eventual reunification of the Korean Peninsula.

Currently, 26 South Korean plants employ about 16,000 North Korean workers who produce garments, kitchenware and a number of other goods.

If the industrial zone becomes fully operational by 2012, more than 350,000 North Korean workers will work there, according to the South’s Unification Ministry.

In a free trade agreement signed last month, the U.S. government said it would recognize the Kaesong-made goods as originating in South Korea.

Moon’s remark also came as optimism has been building over progress in resolving the North’s nuclear standoff.

North Korea has shut down its key nuclear facilities at Yongbyon under a February agreement, which was also signed by South Korea, the U.S., Japan, China and Russia.

It now has to disable the Yongbyon facilities and declare all of its nuclear programs in exchange for 950,000 tons of heavy fuel oil or equivalent aid.

Korea Times
Andrei Lankov
8/19/2007

Sometimes even Stalinist propaganda tells the truth. When the North Korean newspapers occasionally told grossly exaggerated horror stories about South Korean inflation, they stressed that nothing like that could possibly happen in North Korea. This was the case indeed. For nearly half a century, from the late 1950s to the late 1980s retail prices in North Korea remained essentially unchanged. One kilogram of rice cost 0.08 won in 1960. It was still the same price in 1990.

This was possible because almost nothing was actually “sold’’ in North Korea. Communist states often rationed goods distributed through retail trade, but in most cases it was only a handful of most prestigious goods that were subjected to rationing _ like, say, cars. North Korea went much further: by the early 1970s, retail trade in the North ceased to exist, being completely replaced by an elaborate public distribution system. Rations depended on a type of work performed, but also on one’s position within a complicated hierarchy of social groups, as well as one’s place of residence (inhabitants of major cities, and Pyongyang in particular, enjoyed much better rations than those in the countryside).

There were some markets, of course, barely tolerated by the government. But until the late 1980s markets were small, with their trade volume being almost negligible. It seems that most people were reasonably satisfied with what they could get from the state distribution system _ of course, it helped that they knew next to nothing about the situation in other countries, so they could not compare.

The situation began to change around 1990 when the old distribution system collapsed under the pressure of an economic crisis. From 1993-94 there were increasing problems with rations, and from around 1996 rations pretty much stopped altogether. Some food was still distributed in major urban centers, but even there the distributed amount was so meager that nobody could survive on rations alone. A large-scale famine ensued, with at least half to one million dead (the oft-cited figure of three million victims seems to be an exaggeration).

People turned to trade and handicrafts, and with this arrival of a market economy inflation became a North Korean phenomenon as well. Even in the 1980s market prices exceeded the official prices in the state shops. By the mid-1990s, the difference was much greater. In theory, rice still cost 0.08 a kilo, but by 2000 its price on the market reached 45-50 won. Official wages remained unchanged, however, so around 2001 the average salary was approximately 20 times less than the income necessary for physical survival. People had no choice but to augment their income.

The government understood that there was no way to restore the old system: a decade of economic crisis had undermined the basic machinery of distribution and obviously the system was beyond repair. Thus, in 2002 the much trumpeted “July 1 Reforms” were introduced.

It’s difficult to describe these measures as “reforms”–the government simply gave official recognition to the situation which had existed for quite a few years.

The distribution system (long defunct) was curtailed. There was a dramatic increase in the retail prices of basic goods and services _ obviously in an attempt to approximate the prices of the market. Thus, that one-kilo of rice which cost 0.08 won since July cost 44 won.

Wages increased as well. Obviously, the wage increase was not even, and some groups have gained _ or lost _ more than others. It was estimated that the average increase in wages has been approximately 2500 percent (that is, 25 times). At the same time, prices have increased 3000-4000 percent (that is, 30-40 times). This necessitated the issue of 1000 won bills _ the largest denomination in North Korean financial history since the 1959 currency reform. Later, 5000 won bills were issued as well.

But the measures had another effect. The increase in salaries meant that the market was instantly flooded with cash. Needless to say, the only outcome could be inflation. Some people speculated that this was the intention of the Pyongyang leaders who hoped to kick-start the economy in such a way. Perhaps. But I would not be surprised if in 15 or 20 years down the track we learn from interviews and talks with the planners of this reform that they did not really expect inflation. Pyongyang economic managers have not had much exposure to market theory, and are sometimes very naive in their understanding of these questions.

Indeed, by October 2002 the market price of rice had increased to 120 won per kilo. In 2003, the price doubled to 250-300 won, and now it is about 1000 won. Inflation has become a part of North Korean life.

What will happen next? Will the North Korean leaders manage to stabilize the situation, or will a new wave of economic crisis wipe out the entire North Korean system? We do not know yet. But it is clear that there is no return to old days when a kilo of rice could be had for 0.08 won _ that is, if you were lucky enough to live in an area where they distributed grain rations in rice, not in maize.

Click the picture to see it on YouTube.

Guinness Certificate Awarded to “Arirang”
KCNA
8/16/2007

A certificate of the Guinness World Records was awarded to the grand gymnastic and artistic performance “Arirang”.

It was handed to Song Sok Hwan, vice-minister of Culture, by Wu Xiaohong, representative of the Guinness World Records Ltd., on a visit to the DPRK at the May Day Stadium on August 15.

The record of largest gymnastic and artistic performance in the world was created in Pyongyang, the capital of the DPRK, the certificate says.

Conveying the certificate, the representative said the grand gymnastic and artistic performance “Arirang” could be successfully created thanks to the wise leadership of Kim Jong Il, and expressed deepest respect to him.

Warmly haling the registration of the performance in the Guinness World Records, the representative hoped that “Arirang” would successfully go on in the future.

More than 7 million Koreans in the north and the south and overseas and foreigners have watched the performance which has taken place over 180 times.

Extravaganza “Arirang” Praised
KCNA
8/16/2007

The grand gymnastic and artistic performance “Arirang” participated in by 100,000 persons is the most successful work both in its scale and ideological and artistic value.

Wu Xiaohong, representative of the Guinness World Records Ltd. on a visit to the DPRK, said this after appreciating the performance now going on in Pyongyang with great success.

I have never seen such peculiar work as the grand gymnastic and artistic performance “Arirang” in any other countries, she said, and went on:

What impressed me very much is that it is fantastic and conspicuous.

I marveled at the might of the unity of the Korean people while watching the performance.

It is my view that such extravaganza can be created only in the DPRK wisely led by Kim Jong Il.

It is something worth boasting before the world that such peculiar performance is going on in the DPRK.

The Guinness World Records Ltd. recognized the grand gymnastic and artistic performance “Arirang” going on at the May Day Stadium in Pyongyang, the capital of the DPRK, as the largest one in the world.

The Guinness Book of World Records published by the company is distributed to at least 100 countries.

I would like to express my sincere thanks to the Korean people for having created “Arirang” as a great masterpiece of the world.

It is my hope that the performance will prove successful in the future, too.

South Korean Ministry of Unification
Serial No.851 (July 30 to August 05, 2007)

Internal Affairs

• According to the report by the Central Broadcasting Station on July 30, North Korea held the Election of Deputies to the Provincial (Municipality Directly under Central Authority), City (District) and County People’s Assemblies of the DPRK on July 29 and announced the result through the report by the Central Election Guidance Committee.
• According to the reports by the Central Broadcasting Station from August 1 to 4, Chairman Kim Jongil inspected a sub-unit of KPA Unit 4318, the Unit 136, and the Unit 273.
• The Central Broadcasting Station reported on August 2 that cooperative farms in Dahungdan-gun, Yanggang-do, are focusing on potato farming.

Inter-Korean Affairs

• According to the reports by the Central Broadcasting Station and Pyongyang Broadcasting Services on August 3, the spokesperson of the Committee for the Peaceful Reunification of the Fatherland announced a statement on August 2 to criticize the U.S.-ROK joint military exercise Ulchi Focus Lens from August 20 to 31.
• The Rodong Daily reported on August 4 that on the occasion of the 10th anniversary of Kim Jong-il’s work “Let Us Carry out the Great Leader Comrade Kim IL Sung’s Instructions for National Reunification,” North Korea held a Pyongyang city report session on August 3 and published a commemorative editorial on August 4 on the Rodong Daily.

Foreign Affairs

• The standing committee chairman of the Supreme People’s Assembly Kim Young-nam made a formal visit to Algeria, Egypt, and Ethiopia from July 24 to 31.
• North Korean delegates led by Minister of Foreign Affairs Pak Ui-chun visited the Philippines to attend the ASEAN Regional Forum from July 28 to August 2.
• With the U.S. House’s adoption of the resolution on comfort women, North Korea is continuously criticizing Japan, maintaining Japan’s raising the abduction issue is causing trouble in the six party talks.
• North Korean Minister of Foreign Affairs Pak Ui-chun met South Korean counterpart Song Min-soon during the ASEAN Regional Forum and reaffirmed that the abolition of the U.S. hostile policy against North Korea should be the precondition of the implementation of the second step of February 13 Agreement. 

Institute for Far Eastern Studies (IFES)
8/1/2007

INTER-KOREAN RELATIONS

Following two days of talks between economic representatives of the two Koreas at the Kaesong Industrial Complex, South Korea announced on July 7 that it would begin shipping raw materials to the North in exchange for DPRK natural resources. South Korea shipped 800,000 USD of polyester fabric on July 25, and is set to send the rest of the materials by the end of November. North Korea accepted South Korean prices for the goods, and will pay transportation, cargo working, and demurrage costs, as well. South Korea will pay for shipping, insurance, and the use of port facilities. On 28 July, a South Korean delegation left for the North in order to conduct on-site surveys of three zinc and magnesite mines. The team will spend two weeks in North Korea.

It was reported on 17 July that North Korea proposed a joint fishing zone north of the ‘Northern Limit Line’ dividing North and South territorial waters to the west of the peninsula. Seoul turned down the offer.

Inter-Korean military talks broke down early on 26 July after only three days of negotiations as North Korea insisted on the redrawing of the Northern Limit Line.

North Korea demanded on 27 July that workers in the Kaesong Industrial Complex be given a 15 percent pay raise. The North Korean workers will not work overtime, weekends or holidays beginning in August unless the raise is granted.

It was reported by the Korea International Trade Association on 26 July that inter-Korean trade was up 28.6 percent in the first six months of 2007, totaling 720 million USD.

RUSSIA-DPRK INVESTMENT

It was reported on 19 July that Russia and North Korea have agreed to connect Khasan and Najin by rail, enlisting investment from Russian oil companies interested in an inactive refinery at Najin Port capable of processing up to 120,000 barrels per day. The project is estimated to cost over two billion USD.

MONGOLIA-DPRK RELATIONS

During a four-day visit to Mongolia by Kim Yong-nam beginning on 20 July, the two countries signed protocols on cooperation on health and science, trade and sea transport, and labor exchange issues. This follows on the heals of an agreement to allow South Korean trains to travel through North Korean territory on to Mongolia in route to Russia and Europe.

JAPAN-DPRK PROPAGANDA

Japan took one step further to recover abductees in North Korea this month when the government began broadcasting propaganda into the DPRK intended for Japanese citizens. The broadcasts are made in Korean and Japanese (30 minutes each) daily, and updated once per week.

U.S.-DPRK PEACE PROSPECTS

U.S. Ambassador to the ROK Alexander Vershbow stated that Washington was prepared to negotiate a permanent peace regime on the Korean Peninsula by the end of the year if North Korea were to completely abandon its nuclear ambitions.

EGYPT-DPRK INVESTMENT

The Egyptian company Orascom Construction Industries announced a 115 million USD deal with North Korea’s state-owned Pyongyang Myongdang Trading Corporation to purchase a 50 percent state in Sangwon Cement. To put this in perspective, the deal in worth more than four times the amount of frozen DPRK funds that had caused six-party talks to break down and delayed the implementation of the February 13 agreement.

NORTH KOREAN SOCIETY

The Economist reported on 7 July that, according to foreigners living in the North’s capital, concern for petty law appears to be weakening. Citizens are reportedly smoking in smoke-free zones, sitting on escalator rails, and even blocking traffic by selling wares on the streets.

It was reported on July 11 that a letter sent earlier in the year by the North Korean Red Cross indicated severe shortages of medical supplies. The letter stated that North Korea would accept any medicine, even if it was past expiration, and accept all consequences for any problems that arose from using outdated supplies. The (South) Korea Pharmaceutical Manufacturers Association had no choice but to reject the request.

Events were held on July 11 in North Korea in order to promote women’s health and well-being issues. Marking World Population Day, a North Korean official stated that the DPRK has cooperated with the UN Population Fund since 1986, and is now in the fourth phase of cooperation.

Seeing entertainment venues as a “threat to society”, North Korean security forces have been implementing a shutdown of karaoke bars and Internet cafes. These venues mainly cater to traders in the northern regions of the country.

It was reported on July 13 that construction of North Korea’s first all-English language university was nearing completion. The Pyongyang University of Science and Technology, funded largely by ROK and U.S. Christian evangelical groups, will hold 2600 students and offer undergraduate and post-graduate degrees in business administration, information technology, and agriculture.

Local elections were held on 29 July for DPRK provincial, city, and country People’s Assemblies. 100 percent of 27,390 candidates were approved with a 99.82 percent turnout reported.

Bloomberg
Bradley K. Martin
7/26/2007

To make painkillers and antibiotics in his factory in Pyongyang, Swiss businessman Felix Abt needs reagents, chemicals used to test for toxic impurities. Abt can’t get them now — because the world refuses to sell North Korea a product that is also used to manufacture biological weapons.

Such sanctions on trade with the regime of Kim Jong Il — some dating back to the Korean War — may be the next diplomatic battleground after North Korea bowed to pressure last week and shut down five nuclear facilities at Yongbyon.

North Korea said July 16 that ending sanctions, and its removal from a U.S. list of countries that sponsor terrorism, are prerequisites for further progress in the negotiations to end its nuclear weapons program. The U.S., meanwhile, says the next step is for North Korea to disclose all its nuclear capabilities, followed by a permanent dismantling of Yongbyon.

North Korea is playing a “tactical game,” said David Straub, a Korea specialist at Johns Hopkins University’s School of Advanced International Studies in Washington. After shutting down Yongbyon and receiving a pledge of 950,000 tons of oil, the reclusive nation will try to “force the U.S. and others to lift sanctions,” Straub said in an e-mail exchange.

While many of the post-Korean war sanctions were lifted between 1994 and 2000 by President Bill Clinton, Americans are prohibited from exporting “dual-use” products or technologies, a wide range of items that might have military as well as civilian applications — including reagents and even aluminum bicycle tubing, which might be used to make rockets.

UN Sanctions

Much of the world joined the sanctions regime after North Korea tested an atomic device last October. The United Nations called on member states to stop trade in weapons, “dual-use” items and luxury goods. Japan went further, stopping used-car exports and banning port calls by North Korean vessels.

Now that North Korea has shut its facilities at Yongbyon and allowed in international inspectors, the haggling will begin on the next steps. If its demands aren’t met, North Korea could kick out the inspectors and restart the plants, as it did in 2002.

“The Bush administration must choose between settling for a temporary closure of the nuclear sites and taking a strategic decision to coexist” with North Korea, said Kim Myong Chol, Tokyo-based president of the Center for Korean-American Peace, who for three decades has encouraged foreign reporters to consider him an informal North Korean spokesman. “Otherwise, the agreement will break up, leaving the U.S. with little to show.”

‘Contentious Issue’

Sanctions represent “a multiplicity of issues that could become contentious,” said economist Marcus Noland, North Korea specialist at the Peterson Institute for International Economics in Washington, in an e-mail exchange. China has already called for the lifting of the UN sanctions imposed Oct. 14.

North Korea agreed with the U.S., South Korea, Russia, China and Japan on Feb. 13 to close its Yongbyon reactor, which produced weapons-grade plutonium, and to eventually declare and disable all of its atomic programs. Working groups will meet in August before another round of talks in September.

If the U.S. insists on a list of all the country’s nuclear facilities without starting to negotiate on sanctions, North Korea might consider that “a spoiler” for the talks ahead, Kim Myong Chol said.

Swiss businessman Abt said that in the past he could get around U.S. sanctions for his North Korean pharmaceutical factory by buying supplies from other countries. The UN sanctions shut off those sources.

Using Old Stocks

“Luckily, we have enough stock of reagents, but when it runs out we would not be able to guarantee the safety of our pharmaceuticals any longer,” he said.

Abt, 52, is president of Pyongsu Pharma Joint Venture Co., an enterprise with ties to the Ministry of Public Health that makes painkillers and antibiotics for humanitarian organizations in North Korea. He is also president of Pyongyang’s European Business Association.

“The same is true in many other civilian industries,” said Abt, who moved to North Korea from Vietnam five years ago. Gold mines are affected too, he said: “If they cannot import cyanide, they can’t extract the gold.” Cyanide is another “dual-use” product, part of the process for making some chemical weapons, he said.

All this has “a highly negative impact” on the economy at a time when the regime has announced it wants to focus on development, Abt said. Foreigners are showing “more and more interest in doing business here,” Abt said, predicting that North Korea will eventually be regarded as a successor to Vietnam as “the newest emerging market.”

Daily NK
Kim Young Jin
7/24/2007

The North Korean government, with the approaching Provincial People’s Assembly delegate elections on the 29th of this month, stepped-up one level the management of citizens and regulation of cell phones.

Kang Ki Ok (pseudonym), a civilian of Hyesan in Yangkang Provicne, said in a phone conversation with the reporter on the 20th, “Nowadays, I am afraid to turn on my cell phone. The People Safety agents and the National Security agents inspect us with fury in their eyes. People who use cell phones during the election season are punished, so there are people who bury their phones by putting them into jars.”

The North Korean government, when the People’s Assembly election season comes around every four or five years, concentrates on regulating the society by observing the movement of citizens and examining the registration cards.

The members of the elections preparations committee, composed of National Security agents, chairmen of People’s Units, and head officials of each provincial unit, are ordered to strictly investigate illegal acts occurring in their regions and to control them. Illegal acts are punished at the end of the elections.

According to Mr. Kang, the outflow of information has been secured at the border region with the upcoming delegate elections, so concentrated cell phone regulation were carried out. Further, the control of the border has been toughened recently, so the escape fee has skyrocked to the North Korean currency of 1 million won (approx. US$1,075).

Another source relayed, “Safeguarding Kim Il Sung, Kim Jong Il statues and research offices have been toughened by inspection units composed of each organ and enterprise farming laborers. Further, they are making sure that historic places and vestiges of battle are not destroyed.”

This source said, “Youth Leagues have also organized inspection units and are regulating unemployed persons and are strictly making sure that juveniles do not watch South Korean dramas and listen to illegal CDs and South Korean songs.”

On one hand, related to election preparation, each city, district, and county candidates were posted at the election site and citizens over 17 have gone into preparations such as conducting voter registrations through the election committee.

The source also relayed that the People’s Safety Agency have actively stepped up inspections by summoning civilians who have gone out to foreign sites to catch clam and mine gold for survival.

When the movement of the North Korean authorities to strengthen the solidarity of the regime was presented through this election, the citizens, in fear of being punished as trial cases, have produced a cautious atmosphere.”

At the time of the Supreme People’s Assembly elections in 2003, when thefts or acts of violence occurred, perpetrators were stringently punished regardless of whether or not they were members of the Workers’ Party. Further, in the case that teenagers got into fist fights, the parents were disciplined and jointly held responsible.

Mr. Kim, who defected in 2006, said, “At the time of the 1991 provincial elections, in the province where we were living, teenagers got into a fist fight. One of the gangs who started the fight accused the opponent of “stirring a political event destroying elections” and went to the parents and got compensation for damages by threatening them.”

Institute for Far Eastern Studies (IFES)
NK Brief No. 07-7-23-1
7/23/2007

North Korea is calling for training for financial specialists in order to protect against the pitfalls of credit transactions and currency exchanges. In a recently acquired copy of the latest issue of the North’s economic journal, “Economy Research”(2007, no.2), ‘bank risk’, the term applied to the hazard of potential losses, was explained in detail, stating, “In order to strengthen the improvements made in foreign currency trading, an important issue is that banks, such as the Trade Bank, dealing with overseas debts identify and thoroughly resolve potential threats.”

It is especially exceptional that the North Korean journal fully introduced the bank risk involved in financial transactions within a market-based economic system. This issue also reported on the events of May 20, when movement toward a resolution to the issue of frozen DPRK accounts in the Delta Banco Asia took place.

The journal divided ‘bank risk’ into three categories, ‘finance risk’, ‘credit risk’, and ‘management risk’. Finance risk was defined as, “the risk that a variety of changes within capitalist financial markets could carry with them adverse effects”. Further on, finance risk was divided into ‘foreign exchange risk’ caused by fluctuations in exchange rates, and ‘interest risk’ driven by changing interest rates.

In addition, “Economy Research” also carried pieces on rational management of the banking management system, subjective evaluation of bank risk, and establishing a strategy for preventing bank risk. “The outcome of [strategy for] prevention of bank risk rests entirely on the quality, skill, and roles of workers responsible for bank administration.”

The journal also stressed that even though quality information resources and materials on financial data are available, “if the quality and skill of workers in the banking sector cannot be raised,” then bank risk cannot be understood, analyzed, or evaluated, and an appropriate strategy cannot be implemented. “When workers constantly improve their quality and turn their attention to preventing bank risk…then an appropriate strategy can be set up.”

In one article, training in international financial transactions was called for, with the journal printing, “Even though today’s workers know how to use modern information resources and include financial experts with foreign language skills, they need to be well versed in the changing modern banking sector and international financial transactions.” From the 2002 “Foreign Investor Banking Law’ to last year’s ‘Commercial Banking Law’, established to stimulate private-sector financial transactions, North Korea continues to tweak its financial system.