North Korean Economy Watch

UPDATE: With a big hat tip to Korea Beat, I have located the new Majon Hotel in North Korea.  See a satellite picture of it here.  Here are some pictures  of the inside c/o the Choson Ilbo.

ORIGINAL POST:

According to the Choson Ilbo:

North Korea on Monday celebrated the completion of what it has hailed as a “world-class” hotel in the Majon resort area in Hamhung, South Hamgyong Province, North Korean Central Broadcasting reported Tuesday.

The broadcast said the Majon Hotel “is equipped with top-class accommodation and recreation facilities such as an indoor swimming pool, a steam sauna, a public bath, and even a beach resort.”

Although it did not specify the size, the broadcast called the hotel a “creation that illuminates the era of the Korean Workers’ Party,” suggesting it is relatively luxurious.

The completion ceremony was attended by key leaders of the party, the government and the military, including People’s Armed Forces Minister Kim Yong-chun, party Secretaries Kim Ki-nam and Choe Thae-bok, and Prime Minister Kim Yong-il.

In a congratulatory speech, Kim Ki-nam said the hotel was “another proud creation built thanks to leader Kim Jong-il’s love of the people in the military-first era.”

The Majon resort area where the hotel is located is famous throughout North Korea. It has a sandy beach park 6 km long and 50-100 m wide along the east coast and 16 recreational buildings, 13 public buildings, and a boy scout camp — all on an area measuring some 3 million sq. m.

Here is the official KCNA press coverage:

Majon Hotel Completed

Pyongyang, July 28 (KCNA) — Modern Majon Hotel sprang up at the Majon recreation ground in Hamhung City, a good destination of holiday makers.

The hotel has all modern cultural and welfare facilities such as bedrooms of various sizes and styles, restaurants, indoor swimming pool, saunas and bath facilities. It has also a bathing resort. This is another edifice to be proud of in the era of Songun, a product of General Secretary Kim Jong Il’s love for the people as he has always worked hard to provide people with better conditions for their recreation.

A ceremony for the completion of the hotel was held on the spot on Monday.

Present there were Premier Kim Yong Il, Minister of the People’s Armed Forces Kim Yong Chun, Secretaries of the Central Committee of the Workers’ Party of Korea Choe Thae Bok and Kim Ki Nam, department directors of the C.C., WPK, officials concerned and employees of the hotel.

Kim Ki Nam in his speech at the ceremony underscored the need for the staff of the hotel to steadily improve the service so that Kim Jong Il’s boundless love may reach people as quickly as possible.

At the end of the ceremony the participants looked round the interior and exterior of the hotel.

Here is the location of the beach.  Some travelers have been there, but photos of the area remain scarce.  If anyone comes across a photo of the hotel, or can identify the exact location, please let me know.  Parts of the beach and surroundings are still not in high resolution on Google Earth, so this also complicates the discovery of the hotel’s location.

Read the full stories here:
N.Korea Completes ‘Luxury’ Resort Hotel
Choson Ilbo
7/29/2009

KCNA

Vanity Fair has published a lengthy article about the DPRK’s mysterious Bureau 39 which is allegedly behind a number of illicit activities such as counterfeiting US currency and cigarettes, smuggling drugs and bilking western insurance companies with fraudulent claims. The full article is worth reading here.  (h/t DPRK Studies)

Of immediate interest, here is the supposed location of Bureau 39 just south of the Grand People’s Study House:

Hamer’s three-year investigation—code-named Operation Smoking Dragon—began not with supernotes but with counterfeit cigarettes, which were being shipped by freight container from China into California ports by the millions. These, too, says Asher, originated in North Korea, and were the subject of a report by the Coalition of Tobacco Companies, one of whose investigators made an undercover visit, posing as a buyer, to North Korean factories in Pyongyang and the northeastern city of Rajin. These turn out fake Western brands, such as Marlboros, in such quantities that they generate as much as $720 million in gross revenue each year. Hamer set up a number of front operations to get inside the cigarette-smuggling business, and soon had many contacts who dealt with him as if he were a smuggler, too. In the spring of 2004, Hamer and his colleagues were asked by F.B.I. headquarters to see if they could acquire North Korean supernotes. One of Hamer’s best customers, Chao Tung “John” Wu, who eventually pleaded guilty to smuggling counterfeit currency, cigarettes, and narcotics, as well as conspiring to broker a deal for Chinese-made, shoulder-fired missiles, but died before he was sentenced, promised he could supply them with the help of a man who was a frequent visitor to North Korea—Wilson Liu. The notes were so good, Wu said at a secretly recorded meeting, “you can even go to Las Vegas and slide them into the machines—they take them right away.”

In December 2008 this blog discussed how the DPRK’s Korea National Insurance Corporation (KNIC) received USD$58 million from several European reinsurance companies in a legal settlement.

Well, the Washington Post offers an update on how the money is being moved and even highlights the story of a defector who claims to be involved in the DPRK’s insurance racket:

For Kim Jong Il’s birthday, North Korean insurance managers prepared a special gift.

In Singapore, they stuffed $20 million in cash into two heavy-duty bags and sent them, via Beijing, to their leader in Pyongyang, said Kim Kwang Jin, who worked as a manager for Korea National Insurance Corp., a state-owned monopoly.

Kim said he helped arrange the shipment and watched in February 2003 as the cash was packed. After the money arrived, Kim Jong Il sent a letter of thanks to the managers and arranged for some of them to receive gifts that included oranges, apples, DVD players and blankets, Kim said.

“It was a great celebration,” he said.

The $20 million birthday present and the gratitude of its recipient, who is known as the Dear Leader, were annual highlights of a sophisticated global insurance fraud that North Korea has concocted to provide its communist leadership with hard currency, said Kim, who spent five years as an executive of the state insurance company in Pyongyang and worked for a year at its banking subsidiary in Singapore before defecting to South Korea.

The British court ruled the way it did [NKeconWatch: this might be an error as the court did not rule on the case–it was settled] because the reinsurance companies contractually agreed to be bound by the North Korean court system (which to nobody’s surprise systematically rules in favor of domestic agencies and firms).  Since the western reinsurance firms could not prove that the DPRK was committing fraud, they had to pay up.

And how does this program work?

While working for North Korea’s insurance monopoly, Kim Kwang Jin said, he and other managers had a tightly focused mission: to find reinsurance companies and brokers in different parts of the world who would accept high premiums to reinsure KNIC’s policies.

Those policies, he said, usually covered losses from common North Korean disasters such as mining accidents, industrial fires, transportation crashes and crop losses due to floods.

“The major point of the reinsurance operation is that they are banking on disaster,” he said. “Whenever there is a disaster, it becomes a source of hard currency.”

According to Kim, KNIC would target a different potential disaster and a different reinsurance company each year. “We pass it around,” he said. “One year, it might be Lloyd’s; the next year, it might be Swiss Re; and the next, Munich Re.”

In London, the expert on the insurance industry familiar with the helicopter case echoed Kim’s assessment of how KNIC operated. He spoke on the condition of anonymity because he was not authorized by reinsurers to talk about the case.

“They pay good premiums, and they are very sophisticated, very clever,” he said. “They would divvy business up into very small bites and use different brokers in different places. The division of losses was such that it would never be apparent to a prospective reinsurer just how bad the business was.”

The North Koreans were known in the reinsurance industry for their capacity to prepare meticulously documented claims, speed them through puppet courts in Pyongyang and demand quick payment from international reinsurers. The North sometimes restricts the ability of reinsurers to dispatch investigators to verify claims.

The North Korean insurance monopoly sometimes took advantage of the geographical and political ignorance of brokers and reinsurers, according to the London-based insurance expert. Some brokers and companies, he said, thought they were dealing with a company from South Korea, while others were unaware that North Korea is a secretive totalitarian state with one of the world’s worst human rights records.

…

When he worked at KNIC, Kim said, annual revenue from North Korea’s reinsurance claims was about $50 million to $60 million. Most of that money, he said, was used to scout out potential disasters inside North Korea, to buy more reinsurance on the global market and to pay premiums.

“The remaining hard currency should have been used to help people recover from disasters and accidents, but it was not used that way,” Kim said. “It is just going into the pocket of Kim Jong Il.”

He said cash shipments of $20 million arrived yearly in Pyongyang, usually in the week before Feb. 16, which is Kim Jong Il’s birthday and a national holiday. In his six years at KNIC, Kim said, bags of cash arrived in Pyongyang from Singapore, Switzerland, France and Austria.

The money, he added, was delivered to an entity called Bureau 39 of the Korean Workers’ Party Central Committee. It was created by Kim Jong Il in the 1970s to collect hard currency and give him an independent power base, according to defectors, Seoul-based analysts and published reports. These sources agree that Bureau 39 spends foreign currency on luxury goods for the North Korean elite, components for missiles and other weapons programs.

With Bureau 39 skimming off hard-currency earnings returned to North Korea by KNIC’s global operation, Kim said, claims to disaster victims had to be paid in won, North Korea’s currency.

“That money is nearly worthless at present, because the economy has collapsed,” he said. “This means that little is done to help people recover from fires or whatever.”

But Kim Jong Il has been pleased with the state insurance company, Kim said.

“It brings him large amounts of hard currency,” Kim said. “Working in insurance is one of the best professions in North Korea. Many people want to do it.”

Mr. Kim is working in the Washington DC area this year with the Committee for Human Rights in North Korea.

Read the full artocle here:
Global Insurance Fraud By North Korea Outlined
Washington Post 
Blane Harden
6/18/2009

Yale Global
Bertil Linter
6/11/2009

BANGKOK: The global economic meltdown has claimed an unexpected victim: North Korea’s chain of restaurants in Southeast Asia. Over the past few months, most of them have been closed down “due to the current economic situation,” as an Asian diplomat in the Thai capital Bangkok put it. This could mean that Bureau 39, the international money-making arm of the ruling North Korean Workers’ Party – which runs the restaurants and a host of other, more clandestine front companies in the region – is acutely short of funds. Even if those enterprises were set up to launder money, operational costs and a healthy cash-flow are still vital for their survival. And, as for the restaurants, their main customers were South Korean tourists looking for a somewhat rare, comfort food from the isolated North of the country. The waitresses, all of them carefully selected young, North Korean women dressed in traditional Korean clothing, also entertained the guests with music and dance.

But thanks to the global economic crisis, not only has the tourist traffic from South Korea slowed, the fall in the value of won has also reduced their buying power. The South Korean won plummeted to 1,506 to the US dollar in February, down from 942 in January 2008. No detailed statistics are available, but South Korean arrivals in Thailand – which is also the gateway to neighboring Cambodia and Laos – are down by at least 25 percent.

Though staunchly socialist at home, the North Korean government has been quite successful in running capitalist enterprises abroad, ensuring a steady flow of foreign currency to the coffers in Pyongyang. North Korea runs trading companies in Thailand, Hong Kong, Macau and Cambodia, which export North Korean goods – mostly clothing, plastics and minerals such as copper – to the region. At the same time, they import various kinds of foodstuffs, light machinery, electronic goods, and, in the past, dual-purpose chemicals, which have civilian as well as military applications. Those companies were – and still are – run by the powerful Daesong group of companies, the overt arm of the more secretive Bureau 39.

North Korea embarked on its capitalist ventures when, in the late 1980s and early 1990s, the country was hit by a severe crisis caused by the disruption in trading ties with former communist allies. More devastatingly, both the former Soviet Union in 1990 and China in 1993 began to demand that North Korea pay standard international prices for goods, and that too in hard currency rather than with barter goods. According to a Bangkok-based Western diplomat who follows development in North Korea, the country’s embassies abroad were mobilized to raise badly needed foreign exchange. “How they raised money is immaterial,” the diplomat says. “It can be done by legal or illegal means. And it’s often done by abusing diplomatic privilege.”

North Korea’s two main front companies in Thailand, Star Bravo and Kosun Import-Export, are still in operation. In the early 2000s, Thailand actually emerged as North Korea’s third largest foreign trading partner after China and South Korea.

Bangkok developed as a center for such commercial activities and Western intelligence officers based there became aware of the import and sale of luxury cars, liquor and cigarettes, which were brought into the country duty-free by North Korean diplomats. In a more novel enterprise, the North Koreans in Bangkok were reported to be buying second-hand mobile phones – and sending them in diplomatic pouches to Bangladesh, where they were resold to customers who could not afford new ones. In early 2001, high-quality fake US$100 notes also turned up in Bangkok and the police said at the time that the North Korean embassy was responsible as some of its diplomats were caught trying to deposit the forgeries in local banks. The North Korean diplomats were warned not to try it again.

The restaurants were used to earn additional money for the government in Pyongyang – at the same time, they were suspected of laundering proceeds from North Korea’s more unsavory commercial activities. Restaurants and other cash-intensive enterprises are commonly used as conduits for wads of bills, which banks otherwise would not accept as deposits.

For years, there have been various North Korean-themed restaurants in Beijing, Shanghai and other Chinese cities. But the first in Southeast Asia opened only in 2002 in the Cambodian town of Siem Reap. It became an instant success – especially with the thousands of South Korean tourists who flocked to see the ancient ruins of Angkor Wat. It was so successful that Pyongyang decided to open a second venue in the capital Phnom Penh in December 2003. A fairly large restaurant in the capital’s Boulevard Monivong, which offered indifferent Korean staple kimchi and other dishes and live entertainment by North Korean waitresses, closed earlier this year for lack of business.

In 2006, yet another Pyongyang Restaurant – as the eateries were called – opened for business in Bangkok. It was housed in an impressive, purpose-built structure down a side alley in the city’s gritty Pattanakarn suburb, far away from areas usually frequented by Western visitors but close to the North Korean embassy and the offices of its front companies in the Thai capital. This was followed by an even grander restaurant in Thailand’s most popular beach resort, Pattaya, which was also housed in a separate building with a big parking lot outside for tour buses. A much smaller Pyongyang restaurant opened in Laos’s sleepy capital Vientiane, but that one became popular not with South Korean tourists, but with Chinese guest workers and technicians. The Vientiane restaurant may be the only North Korean eatery that is still in operation.

After years of watching North Korea’s counterfeiting and smuggling operations, the United States began tightening the screws on Pyongyang’s finances in September 2005. This occurred after Banco Delta Asia, a local bank in Macau, was designated as a “financial institution of primary money-laundering concern.” The bank almost collapsed, and North Korea’s assets were frozen. The money was eventually released as part of an incentive for North Korea’s concession in the Six-Party talks and returned to North Korea via a bank in the Russian Far East. But, coupled with UN sanctions, the damage to North Korea’s overseas financial network was done – including the ability of Pyongyang’s many overseas front companies to operate freely. For example, the two-way trade between Thailand and North Korea peaked at US$343 million in 2006 – but then began to decline. It was down to US$100 million in 2007, and US$70.8 million in 2008.

Now with North Korea conducting a second nuclear test and firing off missiles, Washington has raised the possibility of the re-listing of North Korea as a state that supports terrorism. If that were to happen, many private companies would become hesitant to deal with Pyongyang and its enterprises for fear of being blacklisted by the US Treasury.

With its various money-making enterprises coming unstuck, Pyongyang is increasingly under pressure. The worldwide financial crisis has already put North Korea in a tight corner. There was never anything to suggest that the money earned by North Korea’s economic ventures abroad were to be used for social development at home, or to be spent on basic necessities such as putting food on the tables of the country’s undernourished people. Now, there won’t even be food for sale to South Korean tourists in the region.

Daily NK
Yoo Gwan Hee
5/18/2009

In North Korea, the Korean Workers’ Party (KWP) cell is the lowest ranked organizational unit. The KWP is composed of the Central Committee, provincial committees, city and county committees, primary party committees, sectional party committees, and the party cell at the lowest level. The party cell, as the fundamental unit, carries out the Party’s aims and implements its decisions.

Every member of the Party is officially affiliated with a party cell. In principle, even the “Great Leader” Kim Il Sung and the “General” Kim Jong Il are included in the party cell structure and must carry out their roles and responsibilities such as reporting to the party cell secretary, undergoing reeducation sessions, and strictly adhering to party rules.

The rules and regulations of the KWP stipulate, “The party cell is the basis of life in the Party and, as such, concentrates the masses on the Party and is the combat unit of the Party which directly implements the party line and policies.”

The party cell has between 5 and 30 members; units with 31 or more members form a primary party committee with further cells beneath.

General meetings of the cells, as the leading organization of the Party, must be held at least once a month. The party cell secretary is an unpaid official.

The rules and regulations also delineate the duties of party cells as follows: ▲ establish the one-ideology system among the party members and the working masses; ▲ expand the lower ranks; ▲ enhance the party involvement of the members; ▲ strengthen the ideological education of both newly-admitted and candidate members and working masses; ▲ accept the requests of the working masses and combat counterrevolutionary elements; ▲ strengthen the societal organization of the working masses; ▲ embody the Cheongsan-ri spirit and the mindset of anti-Japanese guerillas in all business activities; ▲ toughen the Worker and Peasant Red Guard and prepare for mobilization; and ▲ report the party expenditures of the members and the candidate members to the party committees.

For the purpose of strengthening the party cells, the first party cell secretaries competition was held in the Pyongyang Gymnasium in March 1994. The second such competition was held 13 years later over a two-day period on October 27 and October 28, 2007 at the April 25 Cultural Hall.

In 1990, after the Chosun Central News Agency’s (KCNA) No. 5 Bureau No. 2 Cell members sent a letter pledging their utmost devotion to Kim Jong Il, the “Party Cell of Loyalty” concept was launched.

To stimulate the “Party Cell of Loyalty” idea, meetings, recitals of official speeches, decisions and decrees and research discussions were emphasized upon.

In this year’s New Year’s Editorial, the party cell was designated as the advance offensive vanguard unit and it was demanded that party members and workers collectively stir up reform.

Institute for Far Eastern Studies (IFES)
NK Brief No. 09-1-20-1
1/20/2009

It was revealed by Open Radio for North Korea on January 19 that DPRK authorities had handed down a decree to begin enforcing a ban the sale of imported goods in markets across the country on January 20. On January 3, North Korean authorities announced a measure to the Sinuiju Citizen Association and in the Chaeha Market banning the sale of imported goods, telling traders in the market to get rid of imported goods they had with them.

According to the report, the market management office in Sinuiju (operated under the control of the City People’s Committee) posted the decree at the entrance to the Chaeha Market, emphasizing that goods manufactured overseas were banned, while goods made domestically with imported materials were allowed to be sold. The report added that among goods banned from sale, those made in South Korea would be cracked down on especially hard.

Authorities are clamping down not only on markets in the city, but are also strengthening crackdowns on homeless vagrants, known as kotjebi, or literally, ‘flower swallows’. The report stated, “The Party, security office, trade association, youth association, and other organizations in Sinuiju are at the forefront of a coordinated crackdown on Kotjebi,” and, “As the crackdown is currently underway, between 20 and 30 vagrants, on average, are caught each day…those captured vagrants at the jail are sentenced to around 6 hours of forced labor in quarries or farms outside of the city, and must work hard before being given food.”

This same source reported that due to the Beijing Olympics last August, security on the border between North Korea and China had been tightened, and as winter rolled around and the river froze, this security was further strengthened, and, “recently, due to strengthened blockade of the border, the price of bribes to cross the river have more than doubled.”

In October 2008, the number of guards along the border near Hyesan was increased, and the distance between guardposts was halved from 200 to 100 meters. In addition, not only were military border patrols dispatched to the area, civilian patrols were also set up, increasing surveillance. This led to the cost (bribe) of a river crossing to jump from 1,000-2,000 Yuan (150-300 USD) in 2008 to as much as 4000-5000 Yuan (approx. 600-800 USD) this winter.

——–
Some immediate thoughts:

1. This is the kind of information that should be posted on the leaflets South Koreans are sending across the DMZ.

2. The Daily NK recently posted the “Top Nine” most popular goods list in the North Korean markets.  Many of these are imported.

3. Lets hope that these restrictions are as difficult to enforce as the previous directives.  As we all know, banning a product does not make it go away—even in North Korea.  It raises the price to the final consumer and enriches smugglers at the expense of the state and party organs (though individual party members and security personnel benefit as smugglers).

4. These trade restrictions, if enforceable, effectively amount to an import substitution policy….a policy that has pretty much been thoroughly discredited.

5. According to this IFES article, markets are controlled by a local “Market Management Office” which is in turn subordinate to each “City People’s Committee.”  According to the Worker’s Party organizational chart (view here), Each City People’s Committee is subordinate to a Provincial People’s Committee (PPC).  All PPCs are subordinate to the Central Committee of the Workers Party.  I am skeptical, however, that this is the only channel of authority.  Are the DPRK’s markets part of any ministry’s portfolio?

UPDATE 3: According to numerous media sources, Choe Sung Chol has been shot (h/t Marmot). Read more here: Bloomberg, Reuters, Korea Times.

UPDATE 2: According to the Joong Ang Daily:

North Korea’s point man on South Korea, who was earlier said to have been sacked for misjudgment, is said to be undergoing what sources called “severe” communist training at a chicken farm, sources here said yesterday.

Choe Sung-chol, once a vice chairman of the Asia-Pacific Peace Committee, the North’s state organization handling inter-Korean affairs, was reported to have been dismissed in early 2008 for what sources called his lack of foresight on South Korea’s new conservative administration under President Lee Myung-bak.

Political dissidents in North Korea are said to often undergo training on the communist revolution. This includes hard labor in harsh environments, such as mines or in labor camps.

Choe, 52, became better known to South Korean officials and the public in 2007, when he escorted then-President Roh Moo-hyun throughout his visit to Pyongyang for a summit with North Korean leader Kim Jong-il.

He is also known to have played a key role in arranging the summit.

Officials in Seoul have acknowledged the dismissal of Choe, but could not confirm his whereabouts or why he was sacked.

“He has been undergoing training for about a year now, so it really is hard to tell whether he will be reinstated or not,” another source said, also speaking on condition of anonymity.

(UPDATE 1) Shortly after the DPRK’s ministerial and leadership changes were dscovered, the DPRK announced the Supreme People’s Assembly will be recomposed in March.  According to Reuters:

The reclusive North’s official media said in a two-sentence dispatch the election for deputies to its Supreme People’s Assembly would be held on March 8, without offering details.

North Korea wants to promote economic elite to the assembly to help lay the groundwork for the next generation of its leadership, a think tank affiliated with the South’s intelligence service said in a report in December, Yonhap news agency said.

However, analysts cautioned against reading too much into the leadership changes, saying Kim Jong-il and his inner circle hold the real power while ministers and other government officials have almost no influence in forming policy.

The assembly session that typically meets in April each year is a highly choreographed affair focused on budget matters where legislation is traditionally passed with unanimous approval.

North Koreans can vote only for the candidates selected by supreme leaders who allocate assembly seats to promote rank-and-file officials and purge those no longer in favor.

“Even if we know that someone was replaced, everything related to it is pure speculation because we have no clue as to the individual inclinations of these people,” said Andrei Lankov, an expert on the North at the South’s Kookmin University. (Reuters)

The Joong Ang Ilbo provides some additional facts:

The election is also a mere formality in the North because the candidates are hand-picked by the Workers’ Party and then approved by North leader Kim Jong-il.

The five-year terms of the 687 representatives, selected in 2003, were supposed to end last September. North Korea watchers have speculated that Kim’s health was linked to the election delay. According to intelligence sources in Seoul, Kim suffered a stroke in August.

North Korea watchers said Kim’s appearance at a polling station will put an end to speculation about his health. Kim had cast ballots in the 1998 and 2003 elections, according to past North Korean media reports.

With the upcoming election, Kim’s regime will enter its third term. The newly formed legislature will, on paper, form a cabinet, devise a national budget plan and conduct foreign policy.

Following former leader Kim Il Sung’s death in 1994, the Supreme People’s Assembly did not meet for four years. At that meeting, it elected the younger Kim as the National Defense Commission chairman and officially launched his regime. At the time, the legislature also amended the Constitution and undertook a dramatic cabinet shakeup.

ORIGINAL POST
According to the Joong Ang Daily:

Yu Yong-sun, a 68-year-old Buddhist leader, has become North Korea’s senior South Korea policy maker, a top Seoul official told the JoongAng Ilbo yesterday.

Choe Sung-chol, deputy director of the United Front Department of the North Korean Workers’ Party, was in charge of Pyongyang’s South Korean affairs until early last year. After he lost the job, Yu, head of the Korean Buddhists Federation, was appointed to the post, the source said.

“Yu succeeded Choe in March last year,” the source said. “Choe was once deeply trusted by [North Korean] leader Kim Jong-il, but he stepped down because he had failed to accurately assess the outcome of the 2007 presidential election in the South, the Lee Myung-bak administration’s North Korea policy and the outlook for inter-Korean relations.”

The source also said corruption scandals involving the overseas North Korean assistance committee under the United Front Department played a role in Choe’s sacking.

Choe played a crucial role in arranging the second inter-Korean summit between the president of South Korea at the time, Roh Moo-hyun, and Kim in 2007.

Yu, the successor, is not an entirely new face in inter-Korean affairs. Since 2000, he represented the North in several rounds of inter-Korean ministerial talks. He has led the Buddhist group since May 2006.

“We’ve also obtained intelligence that Kwon Ho-ung, who used to be the chief negotiator for the inter-Korean ministerial talks, stepped down from the post and has been put under house arrest,” the source said.

The North reshuffled its cabinet recently, according to the South’s Unification Ministry. Ho Thaek, vice minister of the electric power industry, was promoted to minister. Other minister-level promotions also took place at the Ministry of Railways, Ministry of Forestry and Ministry of Foreign Trade. (Jeong Yong-soo, JoongAng Ilbo)

The Choson Ilbo reports on some more ministerial changes:

North Korea has reshuffled two cabinet ministers and appointed a new man to a key post in the Workers’ Party. North Korean state media reported that Kim Tae-bong was appointed new metal industry minister and Hur Tack new power industry minister. They replace Kim Sung-hyun and Pak Nam-chil. Kim Kyong-ok as newly-named first deputy director of the ruling party’s Organization Guidance Department that controls the party, Army and administration and is headed by leader Kim Jong-il.

It is rare for reshuffles to be announced separately. The new economic appointments may be related to the emphasis on “economic recovery” in a New Year’s statement released in the state media last week that is the closest the North has to an annual message from Kim Jong-il, a government official here speculated. The statement described the metal industry as the “pillar of the independent economy of socialism” and said the electricity, coal and railroad sectors “should take the lead in the people’s economic development through reforms.” Hence replacement of the metal and power industry ministers, according to the official. He admitted little is known about the newly appointed ministers.

The Organization and Guidance Department’s new first deputy director Kim Kyong-ok is reportedly in charge of regional party organizations.

“If the power succession is to move smoothly, the economy must be revived and control of the party organization is essential,” an intelligence officer here said. He predicted noticeable changes in the North’s power structure this year. A researcher at the Korea Institute of National Unification said North Korea “is going to take various steps in a bid to prevent Kim Jong-il’s authority from weakening due to ill health.”

And from Yonhap:

North Korea promoted industrial veterans to top posts in its latest Cabinet reshuffle, signaling Pyongyang’s stepped-up drive to rebuild the country’s frail economy, Seoul officials and analysts said Tuesday.

A reshuffle in the communist state is usually inferred when new faces appear in its media, as the country does not publicize such moves.

Five new names were mentioned as the North’s ministers of railways, forestry, electricity, agriculture and metal industry in the North’s New Year message and reports in October, Seoul’s Unification Ministry Spokesman Kim Ho-nyoun said.

“They are formerly vice ministers or those who climbed the ladder in each field. The reshuffle considered their on-spot experiences and expertise,” the spokesman said.

It was not clear when the reshuffle took place, he said.

North Korean media have been reporting a brisk campaign to rebuild the country’s ailing industrial infrastructure, following up on the New Year economic blueprint rolled out by leader Kim Jong-il. Kim called on citizens “to solve problems by our own efforts” and increase production in electricity, coal and daily equipment.

In the reshuffle, Jon Kil-su was named minister of railways; Kim Kwang-yong minister of forestry; Ho Taek minister of power industry; Kim Chang-sik minister of agriculture; Kim Tae-bong minister of metal industry.

Kim Kwang-yong and Kim Chang-sik were vice ministers and Jon held a senior post in their respective ministry. Ho was formerly a power plant chief, while little was known about Kim Tae-bong, Seoul officials said.

The shakeup was rumored to have affected more posts, but the Seoul spokesman could not officially confirm it.

Koh Yu-hwan, a North Korea studies professor at Seoul’s Dongguk University, said the reshuffle is a sign that the North is shifting its focus to the economy from the military. In its New Year message, Pyongyang pledged to build a “prosperous and powerful nation” by 2012, the 100th anniversary of North Korean founder Kim Il-sung’s birth, he noted.

“The key word this year is the economy,” Koh said. “The reshuffle seems to suggest officials with technical expertise should take the initiative to develop the economy.”

Kim Young-yoon, a researcher with the Korea Institute for National Unification, said Pyongyang is turning to its natural resources amid suspension of South Korean aid. The Seoul government halted its customary aid of rice and fertilizer this past year as Pyongyang refused offers of dialogue.

“North Korea has no other way but turn to its own natural resources as long as inter-Korean relations and the nuclear issue are in limbo,” he said.

Read the full articles here:
Buddhist leader gets North’s South policy spot
JoongAng Daily
Jeong Yong-soo
1/5/2009

N.Korea Reshuffles Economic Posts
Choson Ilbo
1/5/2009

N. Korea promotes industry veterans in Cabinet reshuffle
Yonhap
Kim Hyun
1/6/2008

North Korea says to elect MPs in government shake-up
Reuters
1/6/2009

North to hold parliamentary election
Joong Ang Ilbo
Ser Myo-ja
1/8/2009

Top North official said to be getting re-educated
Joong Ang Daily
1/12/2009

This seems speculative to me, however, the Daily Telegraph (London) is reporting that Kim Jong il’s brother in law, Jang Song Taek, is operating as the de facto decision-maker in the DPRK:

“Chang Sung Taek is now in control and is leading North Korea,” said Choi Jin Wook, of the (South Korean] government-affiliated Korea Institute for National Unification in Seoul. “Other important figures consulted him, even when Kim Jong Il was OK. He will keep Kim Jong Il’s policy line even if he dies.”

Apart from his family connection to Mr Kim, Mr Chang is a cosmopolitan among North Korean cadres whose career bounced back from the brink of disaster just two years ago.

According to South Korea’s ministry of unification, he was educated at an elite school in Pyongyang, and married Mr Kim’s younger sister, Kim Kyong Hui, after studying in Moscow for three years.

He rose through the hierarchy to become head of the most powerful bureau of the Korean Workers’ Party’s, the “organisation and guidance department”. His older brother was the army general responsible for the defence of the capital itself.

In 2002, two years after a historic summit meeting between North and South, he led a delegation of senior officials on an unprecedented tour of South Korean industrial sites.

The most senior North Korean defector to the South, the former chief ideologue, Hwang Jang Yop, spoke of him as a potential successor to Mr Kim after a coup, and said that he was especially close to Kim Jong Nam, the dictator’s eldest son.

Perhaps because of his growing influence, Mr Chang was abruptly purged in 2004, and sent into internal exile. He reappeared in 2006 and last year a new and powerful post was created for him: head of the Party’s “administrative department”, in charge of the courts, the prosecutors, and the police – including those responsible for internal spying.

And in related news, it appears that the French doctor contacted by Kim Jong Nam (Kim Jong il’s eldest acknowledged son) did in fact visit Pyongyang, although he denies seeing Kim Jong il:

Japanese television identified a French brain surgeon who had recently visited Pyongyang – although he denied having treated Mr Kim. The Government has angrily denied that anything is wrong with him, and has released several photographs of him attending public events, none of which have quelled the growing consensus that he is ill.

If all this is true, and that is a big “if”, then this would seem to indicate that Jang and the Workers Party are set to lead the country when Kim finally reaches a stage where he is unable to make decisions.  

Read more here:
North Korea ‘is being run by Kim Jong Il’s brother-in-law’
Daily Telegraph
Richard Lloyd Parry
11/8/2008

Daily NK
Jeong Jae Sung
10/31/2008

North Korean youth and women’s organizations have been holding meetings to elicit a vow of loyalty to Kim Jong Il since mid-August, when he disappeared from public view.

Meanwhile, North Korean media report that Kim Jong Il mails letters and gifts frequently in order to prevent a potentially unstable social situation caused by rumors of his serious illness. These loyalty vow meetings are also a tool by which to emphasize solidarity with the current political system.

Chosun (North Korea) Central News Agency reported on Friday that the Primary Organization Chairmen’s meeting of the Union of Democratic Women was held on the 30th in the People’s Palace of Culture, Pyongyang, at which Party Secretary Kim Jung Rin was present and a further “oath statement” to Kim Jong Il was selected.

The News Agency described the meeting thus, “Chairwoman of the Union of Democratic Women Roh Sung Sil reported their activities, after which they evaluated sub-organizational achievements as led by the leadership of the Party and discussed the duties of the primary organizations’ chairwomen and ways to raise their results.”

The Union of Democratic Women consists of around 200,000 women between 31 and 55 years old who do not have jobs. Women who meet these registration conditions have to affiliate with the Union.

On the 28th, a North Korean representative youth organization, the Kim Il Sung Socialist Youth League, held its 38th Assembly in order to discuss a way to enact Kim Jong Il’s instruction, “The youths should take the role of vanguard and storm troopers in the hardest fields, to establish a great and strong country,” according to the News Agency.

The Kim Il Sung Socialist Youth League was founded on January 17, 1946 and today consists of around five million students, workers and soldiers between 14 and 30. Its role is to act as a rearguard for the Party.

Vice Chairman of the General Federation of Korean Trade Unions, the largest workers’ organization, Kim Sung Cheol said in late September through the Chosun Central News Agency (KCNA) that “The core of the spirit of the thousands of soldiers and people is to firmly support the Leader, so we should put pressure on members to strengthen their spirits.” 

Daily NK
Choi Choel Hee
10/21/2008

With Kim Jong Il’s condition an issue, there has been a lot of talk about North Korea’s government system in the post-Kim Jong Il era.

Due to the strengthened military influence caused by the military-first policy, one prediction is that a military-based collective leadership system may take power after Kim Jong Il.

However, a defector who used to be a high-ranking official in North Korea pointed out that this prediction comes from an incorrect understanding about the relationship between the Party and the military.

Hwang Jang Yop, who is a former Secretary of International Affairs of the Workers’ Party, has said that not military authorities but the Party would likely grasp power after Kim Jong Il’s death.

I. Chosun (North Korea) People’s Army Is the Army of the Party

According to the Regulations of the Workers’ Party, the Chosun People’s Army is defined as “the revolutionary military power of the Workers’ Party.” Separate from the regular chain of command in the Army, Party members are assigned to each unit to command them. That is, there are two command structures: a military chain of command and the Party’s organizational system.

The People’s Army is controlled by the Party Committee of the Chosun People’s Army under the Military Committee of the Central Committee of the Workers’ Party. The chief secretary of the Party Committee of the Chosun People’s Army is Cho Myung Rok, who also holds the position of Director of the General Political Bureau of the Ministry of the People’s Armed Forces. His roles are to inform the Army of the Party’s instructions and regulations and to monitor and supervise the Army to make sure it adheres to the Party’s will and regulations.

At the same time, the highest political apparatus in the military, the General Political Bureau, is under surveillance of the Guidance Department of the Central Committee of the Party. Therefore, a Vice-Director of the Guidance Department of the Central Committee presides over the military while the military command system is always subordinate to the Party command system.

Regarding this relationship between the Party and the military, Hwang Jang Yop, the former Secretary of International Affairs of the Party, gave as an example “the Sixth Corps’ Coup d’état case,” and said that, “The suspected leaders of the coup were shot at once in a hall. The figure who ordered and carried out the massacre of the conspirators was Kim Young Choon, the Vice-Director of the National Defense Commission, but the political manager behind everything was Jang Sung Tae, Director of the Ministry of Administration, one of the departments under the Central Committee of the Party. This implies that there are different management systems overseeing the military — those of the military itself and those of the Party.”

II. The Right of Personnel Management and of Inspection Over the Military

The reason why the Director of the Guidance Department holds such a powerful influence is that the Director has the right to manage personnel and inspect the military.

Even the right to implement personnel management within the Army goes to the Secretariat of the Central Committee of the Party. The members of the Secretariat are the Director of the Ministry of the People’s Armed Forces, the Army Chief of Staff, the Director of the General Political Department, the Director of the Operations Department, and, in some cases, the commander of the Defense Security Command of the Army is included.

The Guidance Department of the Party maintains the right to inspect the Army. The scariest inspections for the military are the ones by the Guidance Department. On a rumor that the Guidance Department is coming, a few military officials are usually purged.

The fact is well known that Kim Jong Il himself also holds power over the military through controlling the Guidance Department.

The posts in charge of the military within the Guidance Department are the No. 13 Life Guidance Department and the No. 4 Cadre Department. Department #13 directly controls and instructs the operations of the Army Committee of the Central Committee of the Party and General Political Department of the Party.

III. Department #13 and Department #4 of the Guidance Department

The roles of these two departments are to monitor how well the Army follows the ideology and the leadership of Kim Jong Il, and whether or not party organizations and political organizations within the Army are operated well by the Party leadership. The Army Committee of the Party and the General Political Bureau doesn’t have the authority to make decisions, so it has to consult with Department #13 before taking action.

The Vice-Director of the Guidance Department is in charge of Department #13. The offices of Department #13 are located in the building of the Ministry of the People’s Armed Forces due to its association with the General Political Department of the People’s Army.

It also oversees the Army Committee of the Central Committee, the General Political Department, and the Army Committee. Department #13 participates in the major military meetings including the ideological struggle meeting. It hosts an annual fifteen-day-long Guidance Department lecture of the Party for military officials.

The No. 4 cadre department has the final say over personnel matters regarding high military officials. Officials whose rank is higher than brigadier general must be approved by the Guidance Department. After the Guidance Department signs off, posts and military title can be granted by the order of the supreme commander of the People’s Army. Therefore, the Guidance Department of the Party holds absolute control over the Army through exercising its right of personnel management of the officials.