Archive for the ‘Finance and Accounting Department’ Category

Rungra 88 Trading Company

Thursday, October 16th, 2014

According to the Daily NK:

Neungna 88 [Rungra 88],  Trading Company, located in Suncheon, South Pyongan Province, has been a popular workplace for women, offering jobs in clothes manufacturing. It is one of the companies tasked with earning foreign currency for the North, but recently, with the wages standing at a mere 10th of individually employed workers, more people are leaving their posts, the Daily NK has learned.

“Workers employed by breweries or bakeries receive roughly 200,000 KPW a month,” a source in South Pyongan Province reported to Daily NK on Tuesday. “But at Neungna 88, workers on the clothing line only make 20,000 KPW even though they work in unsatisfactory environments.”

The trade company falls under the Chosun Workers’ Party’s Finance and Accounting Department and exports to China everything from coal and iron ore to medicine, alcohol, clothing, and health supplements, earning back foreign currency. The profits are offered up to the Department or are used to procure holiday gifts for Party cadres under Kim Jong Eun’s name.

Neungna 88 in Suncheon is a branch of the headquarters in Pyongyang, and focuses on exporting clothes in collaboration with China, meaning the company brings in the yarn, fabric, and designs from China, and then exports the final products back. It also runs a restaurant serving pizza to procure additional funds. Increasing foreign food availability is the latest method employed by these foreign-currency organizations to encourage resident spending, encouraged by the increased demand. For foreign currency-earning enterprises to extend their activities domestically is indicative of the increasing purchasing power of the middle-class.

“If you get to Daedong River in Sunchon, you’ll see a big sign on a three-story building that reads Neungna 88 Trading Company,” the source explained. “The first floor is a pizza place, and on the second and third stories, there are some 150 women making clothes.”

Their monthly wages are 20,000 KPW [2.3 USD], which is almost seven times higher than other state-run companies, but the lowest among trading companies.There are no standards as to how much these trading companies have to pay their employees, and each company decides based on the profits and amount of work allocated.

Unlike men, it is very rare for women in their teens or 20s to work for a trading company. Despite this fact, some women work on garment manufacturing lines because of the regular food rations and extra benefits offered on national holidays, regardless of the low wages.

However, recently more people have been quitting their jobs, as those who are hired by private businesses are able to receive up to a ten-fold increase in wages and work in a more pleasant environment, the source explained. This portends a growing number of women who are seeking more than a low wage with rations and instead looking for better employment opportunities.

With this trend, the company has been trying to hire more women with experience at state-run apparel factories, but not many are willing to due to the low salary. “Because of this, unless Neungna 88 raises its wages it will create obstacles for exports, not only due to technical difficulties, but also low morale,” she concluded.

Read the full story here:
Women Leaving Low Paying Trade Co. Jobs
Daily NK
Seol Song Ah
2014-10-16

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North Korea’s Cabinet and Worker’s Party decide to enhance economic cooperation

Thursday, November 15th, 2012

Institute for Far Eastern Studies (IFES)
2012-11-15

The Choson Sinbo, a Japan-based pro-North Korean newspaper, reported on November 9 that the role and the authority of the North Korean cabinet are increasing, especially in the planning and implementation of North Korea’s economic policies.

“North Korea is establishing new order and actions to maximize the potential of its national economy. The cabinet-government system and the cabinet-oriented system are being strengthened as economy-related matters are decided in cooperation with the cabinet,” the newspaper said.

The newspaper also commented that many North Korean news outlets are reporting on DPRK Premier Choe Yong Rim’s activities in detail, including his frequent visits to economic units, saying that “the central and regional party committees are committed to provide support and encouragement to the cabinet and various administrative and economic institutions so the workers can assume responsible roles in the economy.”

Putting the cabinet in charge of the economic sector is a major break from the past, where the Workers’ Party of Korea (WPK) enforced strict restrictions and control over all administrative and economic institutions.

In addition, the news also suggests that the recent economic revitalization efforts are being stressed at a different level than in the past. The report also mentions that North Korea is promising to “boldly go forward with all projects beneficial to the people of North Korea.”

Many high ranking economic officials from the cabinet are quickly moving in to take high-ranking positions in the WPK. Typically, economic experts remain in the cabinet for many years to develop their expertise.

However, this is quickly changing, as can be witnessed from recent appointments in the WPK. Han Kwang Bok, the former vice premier and minister of electronics industry was recently appointed as a director in the central committee of the WPK. Kwak Bum Ki, who was the vice premier of the cabinet (from September 1998 to June 2010) was recently promoted to the position of party secretary and director of the WPK’s Finance and Planning Department (since this past April’s Party Conference).

These recent promotions in the economic departments of the WPK show that people are being replaced by high-ranking and experienced officials from the cabinet, particularly in the departments of light industry, finance and planning, and science and education.

These changes and promotions of economic experts suggest that heavier emphasis is being placed on economic development and improvement of the people’s livelihoods.

North Korea’s recent changes in the cabinet and the WPK — although limited only to the economic sector — indicates a major shift in the decision-making process. The WPK normally creates policy and the cabinet executes it. However, by placing officials equally across these two bodies, it appears as though efforts are being made to minimize the friction between the two organizations and increase the effectiveness of the economic policy through cooperation.

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Room (Bureau) 38 allegedly restored

Wednesday, June 23rd, 2010

According ot the Choson Ilbo:

North Korea in March restored a special department in the Workers Party codenamed Room 38 which manages leader Kim Jong-il’s coffers and personal slush funds, it emerged Monday. The North last fall merged Room 38 with Room 39, which manages party slush funds.

“Rooms 38 and 39 were merged to simplify Kim Jong-il’s slush funds,” said a North Korean source. “But when it became difficult to secure hard currency due to international sanctions, Room 38 seems to have been restored because there was a feeling that Room 39 alone can’t meet the need.”

Room 38 is reportedly led by Kim Tong-il, who heads three regional departments in charge of earning hard currency.

Room 39 tries to maximize earnings from gold and zinc mining and farming and fisheries. It also manages stores and hotels exclusively for foreigners in Pyongyang. Room 39 seems to have suffered badly due to the recent suspension of inter-Korean trade. “Taesong Bank and Zokwang Trading, which received remittances from Mt. Kumgang tourism, are both controlled by Room 39, and is also in charge of the exports of agricultural and fisheries products,” said a government source.

Kim Jong-il needs dollars to maintain the party elite’s loyalty to him and his heir presumptive. He is said to have told party bigwigs in February, “From now on I will judge your loyalty based on the amount you contribute to the fund.” His son Jong-un is also said to be amassing separate slush funds for his own use.

But international sanctions on exports of weapons, counterfeit dollars, fake cigarettes and drugs remain in place, and the United States is pushing ahead with additional financial sanctions over the North’s sinking of the South Korean Navy corvette Cheonan in March. Pyongyang was dealt a heavy blow in 2005 when the U.S. froze US$25 million in the Banco Delta Asia in Macao which was apparently for Kim’s personal use.

Kim earlier this year appointed his high school friend Jon Il-chun head of Room 39. Jon was also named chairman of the National Development Bank, established early this year with a view to conducting normal international financial transactions to induce foreign investment. “North Korea seems to be planning to divert part of foreign investment to Kim’s slush fund,” said a government official.

NK Leadership Watch has more

Read the full story here:
Kim Jong-il Restores Special Department to Swell Coffers
Choson Ilbo
6/24/2010

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The effects of the DPRK’s currency revaluation

Thursday, June 10th, 2010

The New York Times published a lengthy article on the DPRK’s currency reform effort launched last year.  Excerpts below:

Like many North Koreans, the construction worker lived in penury. His state employer had not paid him for so long that he had forgotten his salary. Indeed, he paid his boss to be listed as a dummy worker so that he could leave his work site. Then he and his wife could scrape out a living selling small bags of detergent on the black market.

It hardly seemed that life could get worse. And then, one Saturday afternoon last November, his sister burst into his apartment in Chongjin with shocking news: the North Korean government had decided to drastically devalue the nation’s currency. The family’s life savings, about $1,560, had been reduced to about $30.

Last month the construction worker sat in a safe house in this bustling northern Chinese city, lamenting years of useless sacrifice. Vegetables for his parents, his wife’s asthma medicine, the navy track suit his 15-year-old daughter craved — all were forsworn on the theory that, even in North Korea, the future was worth saving for.

“Ai!” he exclaimed, cursing between sobs. “How we worked to save that money! Thinking about it makes me go crazy.”

North Koreans are used to struggle and heartbreak. But the Nov. 30 currency devaluation, apparently an attempt to prop up a foundering state-run economy, was for some the worst disaster since a famine that killed hundreds of thousands in the mid-1990s.

(more…)

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DPRK market price of grains stabilizing

Thursday, June 10th, 2010

According to the Daily NK:

rice-price-6-7-2010.jpg

Today, the North Korean markets seem to have returned to the days before the currency redenomination. The price of rice appears to be rather stable, especially when compared with that of February or March. Especially, following Kim Jong Il’s trip to China, rumors indicating that food would be imported began to circulate, and this has made declining prices even more marked.

According to inside sources, the price of rice in Hoiryeong, North Hamkyung Province is now 480 won per kilo (June 4th), 420 won in Sinuiju (June 7th), 360 won in Sunam-district of Pyongyang (June 2nd), and 380 won in Sariwon (June 7th). The price of corn is approximately 50% that of rice, although recently in Hwanghae Province, households using corn as feed for pigs drove an unusual situation where the corn price reached almost 70% that of rice.

The exact nature of Chinese support for North Korea cannot be confirmed officially, however, the North Korean regime’s encouraging foreign currency earning enterprises to import food from China since March seems to have contributed to rice price stabilization.

One inside source added that the “reactivation of food smuggling on the border between North Korea and China” has also helped.

However, the main overall reason for the failure of the initial prediction, “When the farm hardship period comes in May and June, food prices will skyrocket” appears to have been the normalization of the market.

The source commented, “Compared with the situation prior to the currency redenomination, trading in industrial goods has decreased slightly, however, it is close to its previous condition. Since buyers and sellers can access that market any time, price volatility is not that great anymore.”

That being said, the opening hours of the market have been reduced since the authorities handed down a “rice planting battle order” in early May which stated, “Everyone must participate in the rice planting battle. The market should only be used for the purchase of food, side dishes and those necessities required for the day.”

The source explained, “Markets everywhere now open between 2 and 4 P.M. and close at sunset,” adding that there are small differences depending on the particular market. In North Hamkyung Province, the market normally closes at sunset; however, markets in Hwanghae Province and Pyongan Province, which are under heavier pressure due to the rice planting, close earlier, at around 6 P.M.

But concerns about food will not be solved even if the price of rice remains stable. Merchants are still watching prices with a concerned look since rumors constantly assert that food prices will increase again in July. The North Hamkyung Provincial Party Committee held a cadres meeting last May in which it released news that food distribution for the months from July to October must be prepared by each unit individually, meaning that the central authorities have no plans to assist.

The agricultural situation is one concern. North Korea has been suffering from a severe fertilizer crisis since the beginning of spring farm preparations. After Kim Jong Il’s visit to China, Chinese fertilizer was imported which temporarily alleviated the situation, but the rumor is that fertilizer for the summer has yet to arrive.

Recently, Kim Jong Il visited a domestic fertilizer production facility, Namheung Youth Chemical Works in Anju City, South Pyongan Province. There, he complimented factory management, saying, “It is a relief to know that fertilizer is being produced in Namheung.” The incident displays North Korea’s concerns about fertilizer.

Other factors which destabilize food prices are the icy inter-Korean relationship and international community sanctions.

Recently, around the North Korean market, the number of street vendors, so-called ‘grasshoppers’ has greatly increased. One source explained, “This situation has been caused by the middle class being demoted to the lower classes due to the big damage they incurred during the currency redenomination.”

Sharply decreasing trade in higher priced goods like home appliances and furniture is derived from the same source.

The tumbling credibility of the North Korean currency is another ongoing worry, as is a lack of small denomination bills. One source explained, “If you purchase a 30,000 won jumper from Sungyo Market in Pyongyang, the cost is $30 (market exchange rate, the equivalent of 27,000 won on the day), but it is 30,000 won if you pay in North Korean currency.” That’s a ten percent mark-up for people using local currency, the material representation of a lack of trust in the won.

In areas of Pyongyang, Wonsan, Sariwon, and Haeju, dollars and then Euros are preferred over won, but in Jagang Province, Yangkang Province, and North Hamkyung Province, Yuan are preferable to dollars. Places where all four; U.S. dollars, Yuan, Euros and won are being used are Sinujiu and the port city of Nampo on the west coast. One source explained that due to this situation, high-priced products like televisions, DVD players and refrigerators are being sold only for U.S. dollars or Yuan.

Also, he added, “There is a shortage of small bills which is causing some inconveniences in market trading.”

At the time of the currency redenomination, North Korea displayed 7 kinds of small bills and coins; 1 chon, 5 chon, 10 chon, 50 chon, 1 won, 5 won, and 10 won. The source explained that demand for the ‘chon’ unit coins is practically non-existent; the problem is that 1 won, 5 won, and 10 won are frequently used in market trading but a shortage of bills is causing inconvenience. Merchants are setting the price of goods mostly in increments of 10 won and 50 won as a result.

Read the full story here:
Everything Is Stable, But for How Long?
Daily NK
Park In-ho
6-9-2010

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North Korea: Changing but Stable

Sunday, May 16th, 2010

Nautilus Institute Policy Forum
Policy Forum Online 10-027A
5/12/2010

Alexander Mansourov

North Korea is not static and inflexible. Indeed, there tends to be a very dynamic picture once you look below the surface. Change is a constant but, as in almost any state or society, it brings about tension. However, there is little or no sign that current tensions, caused by changes in the distribution of power within the leaderships’ core cadre, positioning for succession, or economic reforms are eroding the overall strength of the regime. While such tensions may spill over into society, there have been no signs that they have risen to a level that significantly weakens the regime or have made it feel that drastic action is needed.

Contrary to the popular view, North Korea is not being torn apart by an epic battle between the state and markets. The two have over time established an uneasy but symbiotic relationship. The state still considers the markets as parasites and vice versa, but each has learned to exist with the other. The popular argument that the reopening of markets in the North after their alleged (but unverified) closure is a sign of government capitulation before their power is not persuasive.

Much of the “evidence” we have for the latest uptick in internal tensions following the currency redenomination consists of recycled stories from unproven or unreliable sources relating anecdotes from small slices of the country. These publicly available sources for North Korea are very subjective and come through the lens of defector groups and humanitarian non-governmental organizations that, quite frankly, have their own agendas. Corroborating these reports is often impossible. Separating speculation from rumor and fact is difficult. The best we can do is to strip back some of the speculative veneer and establish hypotheses we can test over time.

What is Really Happening?

In spite of recent speculation in the New York Times and other Western media about North Korea’s growing economic desperation and political instability, Pyongyang is, in fact, on a path of economic stabilization. Last year’s harvest was relatively good-the second in a row-thanks to a raft of developments including favorable weather conditions, no pest infestations, increased fertilizer imports from China, double-cropping, and the refurbishment of the obsolete irrigation system. Thanks to the commissioning of several large-scale hydro-power plants which supply electricity to major urban residential areas and industrial zones, North Korea generated more electricity in 2009 than the year before, although losses in the transmission system remain significant.

According to China’s Xinhua news agency, industrial production in North Korea grew by almost 11 percent last year and 16 percent in the first quarter of 2010, compared to the first quarter of 2009. That positive development was facilitated by two nationwide labor mobilization campaigns-the “150-day campaign” and “100-day campaign” as well as growth in extractive industries, construction, a revival of heavy industries, modernization of the consumer-oriented industries and the expansion of the high-tech sector, especially, information and biotechnology.

Despite a decline in inter-Korean commerce and international sanctions imposed after the North’s missile and nuclear tests in early 2009, foreign trade did not contract in any meaningful way thanks to burgeoning ties with China. Moreover, Beijing seems to be committed to dramatically expanding its direct investments in the development of the North’s infrastructure, manufacturing, and service sectors.

There is no question that, for ideological, political, and national security reasons, North Korea’s macroeconomic policy has always been oriented towards the needs of domestic producers. The requirements of large-scale munitions and heavy industries have been the top priority, an orientation that has handicapped the development of domestic consumer-oriented industries. Since the collapse of the government-run, public food distribution system in the 1990s, Pyongyang has largely neglected the interests of individual consumers. It has allowed inflation to eat away at their disposable income, leaving them with only a few possible coping strategies. Those strategies have included pilferage of state assets, official corruption and participation in emerging retail markets where quasi-private merchants have been trading mostly in domestic agricultural produce and Chinese manufactured goods.

As the state-owned economic sector began to recover in the past two years, it had to confront labor shortages, rising production costs, and a powerful competitor-China. Whereas the extractive industries (especially coal and ore mining) benefitted from skyrocketing global raw materials prices as well as proximity and access to the ever-hungry Chinese market, the manufacturing industries hit the “Great Chinese Wall” of cheap consumer goods and industrial products that flooded the country. The competition was killing North Korea’s domestic manufacturers, who had barely begun to recover from two decades of depression.

At the same time, the North’s consumers-always conscious of rampant inflation-dodged mandatory savings requirements and began to increase consumption. They started to develop a clear preference for spending their meager disposable incomes on foreign-made goods in the newly emerging farmers’ and general industrial markets rather than in state-owned stores. Insensitive to the plight of the domestic industries, consumers voted with their purses for better quality, albeit more expensive, imports.

In addition, this development helped drain liquidity from the state banking system. Since the post-July 2002 economic reforms, salaries and money earned by private merchants were rarely deposited in bank accounts and returned to regular state banking channels. Instead, they circulated in emerging markets, were stored in kimchi jars, buried underground, or exchanged for renminbi or euros and taken out of the country by foreign (mostly Chinese) traders. Despite the Central Bank’s proclivity to print more money to increase the supply needed for state investment (which in turn fueled inflation), industrial producers were confronted with increasing difficulty in procuring investment funds from the state banking system, which was running short on previously mandatory individual bank deposits.

Rationale for Current Macroeconomic Stabilization Measures

In formulating the current round of measures, the authorities had to figure out how to cut a political, economic and social Gordian knot. Their options were restricted by an uncertain leadership agenda, ideological confines, political biases, lack of extensive macroeconomic stabilization experience, and scarce resources.

First, they had to reconcile the interests of domestic producers, very well represented by senior managers of state-owned enterprises at all levels of state power, otherwise known as the red directorate, who pressed the government to lower their rising production costs and to protect them from foreign (Chinese) competition. At the same time, consumers, asserting themselves through the nationwide structures of people’s committees and public organizations, sought higher salaries and alternative employment in the non-state sector, with a preference to consume higher quality imports.

Second, they had to reconcile the interests of state bankers-who were urging modernization and re-capitalization of the state banking system in the throes of an unprecedented credit squeeze-with those of the general population worried about inflation, mistrustful of the system, and reluctant to keep their savings in banks.

Third, they needed to find a way to repay the people’s life bond funds “borrowed” from the population in 2003 while also mobilizing additional funds for future capital investment even through confiscatory measures.

Fourth, they probably wanted to restore public confidence in the national currency and must have been motivated by a desire to combat inflationary expectations as well as to signal that inflationary days were over.

Fifth, they probably wanted to curb the growing influence of the new moneyed class demanding fewer restrictions on its businesses and foreign exchange transactions, while placating the regime loyalists, who still believed official propaganda and defended the advantages of the socialist economic system.

Sixth, they wanted to restore the credibility of the state-centered economic management system as demanded by the anti-market neo-conservatives from the party establishment. At the same time, policy-makers wanted to restrain the ever-present bureaucratic class seeking to control, license, and regulate anything and everything, which gave rise to rampant official corruption.

Finally, they wanted to re-assert monetary sovereignty since growing foreign currency substitution was undermining the central bank’s control over the money supply. The loss of monetary sovereignty would have become an insurmountable practical obstacle to building a “strong and powerful state” by 2012, North Korea’s publicly stated objective, and could not be tolerated politically, especially during a leadership transition period.

In an interview with Kyodo News on April 18, 2009, Ri Ki Song, economics professor at the Economic Institute of the Academy of Social Sciences, a North Korean government think tank, pointed out that “redenomination was intended to curb inflation, enhance currency values and create a favorable environment for economic management, and it was also aimed at stabilization and improvement of the people’s livelihood by supplying goods through a systematic national distribution system.”

Outlines of the New “Package Deal”

The currency redenomination began to unfold in late 2009. In November, the Supreme People’s Assembly (SPA) Presidium issued a decree “On Issuing New Currency.” At the same time, the Cabinet of Ministers promulgated two decisions entitled “On Stabilizing People’s Livelihood” and “On Establishing Proper Order in Economic Management System.” These were quickly followed by a series of new regulations issued by the Central Bank, Ministries of Finance and Commerce, Price Regulation Bureau, General Bureau of Customs, and other government agencies.

The purpose of these initial steps appears to have been two-fold. First, the North wanted to reinvigorate domestic production of consumer goods. That would be done through import substitution as well as rebuilding the purchasing power and stabilizing the living standards of the mass of budgetary employees. The livelihood of these people-who constitute the overwhelming majority of the workforce, are employed at institutions such as state-owned industries, hospitals and schools and are paid out of the state budget-had been gradually eroded by marketization and high inflation. Second, the reform was designed to encourage savings as well as induce cash flow from proliferating black markets to the state banking system, which had been rapidly losing its handle on money in circulation.

While this move has been portrayed in much of the Western media as a “failure” that has caused significant tensions inside the North, in fact, it is too early to declare these measures either a failure or success. Such redenominations are almost always a source of tension when they are carried out in any country and often need to be adjusted or implemented again before achieving the intended results. North Korean economist Ri Ki Song admitted that “Price adjustments and other related measures were not implemented quickly enough, and there was a situation where [North Korea] could not open the market for several days.” But he took issue with “some Western reports that did not reflect what actually happened.” Ri noted that “In the early days immediately after the currency change, market prices were not fixed, so markets were closed for some days, but now all markets are open, and people are buying daily necessities in the markets.”[1] If inflation is eventually tamed and the currency exchange rate stabilized in the long run-the verdict is still out on both accounts-then these measures may eventually be viewed as a partial success.

As always, there were winners and losers but, once again, the reality appears to be somewhat less clear-cut than has been assumed by the Western media, economists and other analysts. In view of the ongoing preparations for the leadership succession, the redenomination could be viewed as a populist measure aimed at inflicting pain on less than 10 percent of the population through wealth redistribution in order to win support from more than 90 percent of the population who still live on state salaries and have not seen any improvement in their life despite burgeoning market activities. North Korea is still fundamentally a socialist society, and Kim Jong Il’s regime probably won some measure of support from the vast majority of North Koreans for its crackdown on corruption and abuses by rich traders and corrupt government officials who benefitted the most from bustling activity in black markets.

Private merchants may have felt some pain (although likely had stored their wealth in goods, commodities or foreign exchange rather than the old North Korean currency). But the heaviest losses appear to have been suffered by corrupt low and mid-ranking officials from the “power organs” (People’s Security and State Security officers as well as officials from courts and prosecutors’ offices) and government bureaucrats who wielded licensing, auditing, or controlling authority at the county and provincial levels. They had allegedly accumulated substantial savings through bribes and abuse of power and kept their ill-gotten gains in kimchi jars and under the mattresses at home. As a result, these officials could not find a way to get these stacks of old banknotes exchanged for new ones. According to a knowledgeable South Korean source, it is their money that was reported floating in sacks down the Yalu River after redenomination, not the traders’ capital. In short, the currency move may have ended up as more of a strike against corrupt officials and local elites rather than private traders. With markets re-opening and private trade resuming in late January, the latter rebounded fairly quickly, whereas it is likely to take a long time for the corrupt mid-level bureaucrats to recoup their losses through a new round of bribes and extortion.

In Ri Ki Song’s judgment, “an unstable situation occurred temporarily and partially after the currency redenomination,” but, “it did not lead to social chaos at all, and the unstable situation was quickly brought under control.”[2]

Following the currency redenomination, the next government move was to reset the official prices for commodities, such as grains, meats, and fuel, manufactured goods including textiles and daily necessities, and real estate use and utility fees to the pre-2002 level. Salaries of employees in the state sector of the economy were also adjusted, but at a much higher level. Reportedly, those who previously were paid up to 3,000 old won per a month saw an average 8 percent raise in their salaries, whereas those who used to receive a salary of more than 3,000 old won per month saw a decrease on the average of 10 percent per month. Farmers in the cooperative sector were reported to have received a one-time cash payout from 50,000 to 150,000 won in new money. These economic measures initially increased the purchasing power of most consumers in the country, especially those who depended solely on state salaries and wages for their income.

Even according to the Seoul government, the DPRK’s market prices and currency exchange rate appear to be stabilizing after predictable fluctuations from the surprise government-led currency redenomination last year. In its latest report on North Korea submitted to the National Assembly’s foreign affairs committee, the Unification Ministry said that market prices in the country were on a “downward path” following recent measures by the authorities. A kilogram of rice, which cost around 20 DPRK won immediately after the revaluation, soared to 1,000 won in mid-March but dropped to the 500-600 won range in early April, according to the ministry.

Furthermore, the North Korean government released another broadside of legislation in December and January: the Presidium of the Supreme People’s Assembly revised a number of laws pertinent to economic management ranging from those governing real estate management and commodities consumption to general equipment import, labor accounting, agricultural farms, water supply, sewage, and ship crews. These measures were aimed at bringing the existing regulatory framework in line with the new realities of an emerging market economy, where a growing number of corporate and private interests compete for access to and use of public assets. For example, the Real Estate Management Law is aimed at restructuring existing regulations for the use of public lands, especially for corporate and private purposes, and strengthening the ability of the state to collect real estate taxes and land use fees. It also stipulates the new right to grant “long-term land leases” to foreigners, which is especially important in promoting foreign investment in special economic zones such as Rason and Kaesong.

In January, the North’s Foreign Trade magazine unveiled the contours of the new tariff system established in accordance with the latest revisions in the regulations for the implementation of the DPRK Customs Law and the provisions of the Customs Law. In addition, late last year Kim Jong Il reportedly authorized the restructuring of the foreign trade management system, expanding the prerogatives of general trading companies and upgrading the status of special economic zones, in hopes of boosting domestic production of the export-oriented goods, encouraging import substitution, and attracting foreign investment in the consumer goods sector.

Also in January, the North Korean authorities revealed their intention to seek foreign investment and to reform the state banking system by establishing the second tier of quasi-commercial banks-the State Development Bank, Export-Import Bank, and State Science and Technology Fund-backed partially by the Central Bank and partially by foreign capital.

The stated goals behind this innovation in banking policy are to create favorable financial conditions for the implementation of a 10-year economic infrastructure development plan and five-year science and technology development plan, as well as to facilitate further expansion of foreign trade. The first plan envisions the implementation of six major projects-the development of food production, modernization of railways, construction of roads, expansion of ports, modernization of electric power grid, and development of the energy sector-within the next ten years, to be funded outside the regular state budget channels, primarily relying on Chinese venture capital. The five-year plan stipulates an increase in the state’s investment in science and technology as one of the pillars for a “prosperous, powerful nation,” with a focus on information technology, nano technology and bioengineering.

The notion that all of the measures announced in December 2009 and January 2010 were a hurried response to negative public reaction to problems in the currency revaluation is a little hard to accept. More likely, these were part of a longer-term development strategy of which the currency measures were only one component.

To sum up, North Korea is changing. The latest demonstration of the government’s desire to facilitate change is the new package of economic adjustment measures. Those measures seek to displace imports, restore self-reliance, and consolidate state control over the economic system at the expense of the newly emerging proto-markets in retail trade and the small private merchant class that may create political headaches for the regime down the road.

Subsequently, we may see the establishment of a new-more protectionist and statist-equilibrium in the relationship between domestic producers (industrial factories and plants), importers (trading companies), financiers (state bankers and foreign capital), and consumers (state retail industry and private markets). This might involve the government’s efforts to further control the demand, regulate the supply of imported goods through selective protectionist tariff measures, raise funds for new infrastructure and facility investment, boost the supply of domestically manufactured goods and make them more competitive and affordable.

How this will all work out remains to be seen. Whether the new equilibrium will facilitate economic growth and contribute to increasing production, trade, and consumption, or end up in economic failure causing social chaos and political instability is obviously the core question. Contrary to the rampant, often inaccurate speculation in the Western media, it’s much too soon to tell.

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DPRK looking for Chinese investors in Taebong gold mine

Tuesday, May 4th, 2010

According to the Daily NK:

The chairman of North Korea’s State Development Bank, Jeon Il Chun visited China on April 8, reportedly to try and bring Chinese investment to Daebong Mine, located near Hyesan, Yangkang Province.

Daebong Mine is one of North Korea’s major gold mines, managed under the auspices of the No. 39 Department of the Central Committee, a special department charged with raising funds for Kim Jong Il’s personal use. Jeon Il Chun is the person in charge of the No. 39 Department.

Attempts to sell shares in a gold mine directly controlled by the 39 Department, Kim Jong Il’s own private safe, to China seem to indirectly imply that Kim is suffering from a debilitating foreign currency supply crisis.

One Daily NK source in China who is well-acquainted with North Korean affairs reported that while Jeon was in China, he met with the management of three or four Chinese enterprises which already have investments in North Korea, and suggested investment conditions under which the North could transfer some of its mineral rights to them and receive capital investments in return.

The source said, “For now, as far as I know, executive managers of the No. 39 Department have been in contact with Chinese enterprises. Since the Workers’ Party is trying to sell shares in a gold mine, it seems the funding of the Party might be serious.”

“It is not clear whether or not this attempt was done on Kim Jong Il’s instructions, but attracting foreign investment in a gold mine is not a commonplace affair,” the source pointed out, adding that an investor has not yet been put in place.

What is the Daebong Mine for?

The Daebong Mine is a relatively large gold mine on the border of Woonheung and Gapsan in Yangkang Province. Until 2001, a Yangkang provincial foreign currency earning enterprise and the foreign currency earning department of the People’s Safety Agency jointly managed it. However, in May, 2002, it became a No. 39 Department affiliated enterprise.

The No. 39 Department has been raising private funds for the leader and Party operations under the Finance and Accounting Department of the Central Committee since the mid-1970s. According to defectors, it has the highest authority and the largest funds of all North Korea’s foreign currency earning enterprises. Especially, it has the ability to mobilize tremendous financial resources since it manages and controls supplies of gold and silver and rare non-ferrous metals.

A source from Yangkang Province explained, “According to Chongjin University of Mining and Metals and Kim Chaek University of Technology, the purity of the gold from the Daebong Mine is more than 76 percent, while production from Hoichang and Eunsan in South Pyongang Province is 63 percent and 61 percent respectively. More than 150kg of solid gold is produced annually, so this mine is known as the ‘loyalty mine’.”

“People say that the government earns four or five million dollars a year through this mine. Neither Yangkang Provincial Committee nor Hyesan Municipal Committee is involved with the business of the mine.”

The source added, “Since the No. 39 Department deals with the mine, only those discharged soldiers with good family backgrounds are dispatched there by the Central Committee. In October of last year, around 200 discharged soldiers with good family backgrounds came to the mine.”

Almost all the gold produced in the Daebong Mine is stored in Swiss and Austrian banks in gold bars.

A Chinese company had a contract with the DPRK’s Musan Mine which has been canceled for an unknown reason.

Click here to see what I believe is the mine’s location.

Read the full article here:
No. 39 Department Hawking Shares in Key Gold Mine
Daily NK
5/3/010
Lee Sung Jin

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