North Korean Economy Watch

Story 2: The Inauspicious Life of Pilots
Daily NK
Yoo Gwan Hee
8/20/2010

…In North Korea, pilots receive top class treatment alongside submariners and the missile corps. They live above the law in many ways. For instance, if a pilot murders someone in society and then returns to their unit, M.P.s cannot arrest them.

While the top choice of middle school graduates is to work in the No.5 Department of the Central Committee of the Party, that which oversees every aspect of Kim Jong Il’s life, pilot is a popular second choice. The primary condition for selection is family background.

Until the 1980s, offspring of normal workers could be selected if they had a good academic record and enough physical strength. However, any person whose family had committed a political crime was excluded. Also, if a family member had sided with South Korea or went missing during the Korean War, they would be excluded, too.

Until this period, the occupation of pilot was deemed to be a dangerous job and children of the elite did not consider it as a career. However, as the economic crisis began in the 1990s, this view changed. Many of the children of elite officials now choose to become pilots.

Currently, pilots still receive ‘special treatment’ in North Korea; however, it is not particularly special any more. Compared to Party officials, who make money in business, the feeling of deprivation which pilots feel has increased a lot.

Pilots are still bound to the state for their living, while the elite increase their wealth and authority through foreign currency earning and market business.

Until the early 1990s, “No. 4 supplies,” which are given to pilots, were free and extras were sold to their families if necessary. Also, since North Korea was worried about the pilots’ mental states, they took care of family issues and distributed supplies to their families once a month.

Even during “The March of Tribulation” in the mid-1990s, normal food distribution was given to families of pilots. However, as the atmosphere in society changed, their stress is increasing. Children of pilots are becoming a target in schools; teachers demand much of pilots’ children first.

Air Force Units receive a relatively good coal supply, however, since the absolute quantity is still lacking, they need to prepare firewood on their own, too. Until the early 1990s, if one or two packs of cigarette, soybean oil, and beer were given to workers on a farm in the surrounding area or a forest ranger, firewood might come in return. However, the times have changed.

Wives of pilots also have to enter the battle. Wives sell distributed supplies to wholesalers or sell them directly in farming villages in the surrounding area.

However, even in the situation where a lot of workers receive not even a single grain of rice from the nation, the supply for pilots is still special. However, since pilots do not have the authority to use it for business and bribery like other officials; their practical standard of living is not very different from a person who sells home appliances in the market.

The biggest stress which North Korean pilots feel is their concern for their old age. Currently in North Korean society, the treatment you receive in active duty and that of the retired are very different.

Until the 1990s, North Korea praised pilots as a “treasure of the nation” and promised them lifelong care. But after 2000, the retired were completely abandoned. The national pension is worth less than a price of one kilogram of corn.

Usually in other countries, the rising generation has more discontent toward the government compared to the mature group, but in North Korea it is the opposite and this is the reason for the phenomenon. When retired, they need to farm or do business in the market, but retirees are short of market experience and strength. Current pilots, observing the lives of their former comrades, cannot feel comfortable about it.

Now we are in an era where even a pilot receiving “top” level treatment from North Korea attempts an escape, and this is not surprising anymore.

Story 1: Pilot Privileges Fade into History
Daily NK
Yoo Gwan Hee
8/11/2009

…[S]pecial employees, such as air force pilots or submarine captains, belong to a class which is treated as the most exceptional in North Korea (notwithstanding officials or members of elite organizations). Before the start of the 21st century, pilots enjoyed considerable privileges. The North Korean state paid special attention to cultivating pilots, showering them with preferential treatment. Goods provided to pilots and their family members were entirely free and a separate compensation-based ration system applied to the whole group.

So, in the North, the closest thing to a “summer vacation” as enjoyed by the people of the free world would inevitably be the “recreation” of pilots. In North Korea, pilots and their family members were permitted vacation once a year and once every two years, respectively. Submarine captains were entitled to similar terms.

Some of the recreation centers used by pilots and their families include the “Galma Recreation Center” in Wonsan, the “Sokhu Recreation Center” in South Hamkyung Province, and the “Jooeul Recreation Center,” among others. All are located near the ocean, and are unparalleled in terms of scenery. In the case of the Galma Recreation Center, there are two buildings housing bedrooms for the visitors standing side-by-side in a shady area, while a separate dining hall and indoor gymnasium can also be found.

Usually, three to four singles and four to five married households from one unit (regiment level) could use the recreation center at any one time.

Single and family rooms are separate. In the former, there are four single beds and in the latter, two double beds. According to regulations, only two children per family are permitted; those who need to bring three or four children have to work out an arrangement with the management office.

In the centers, there is no designated work, but meals and sleeping times must be strictly kept. Breakfast begins at 7:30 A.M., lunch at 12:30 P.M. and dinner at 6 P.M.; naps can only be taken between 2 and 4 P.M. Bedtime is fixed at 10 P.M. Guests have to strictly adhere to these times.

Besides these restrictions, the visitors have the freedom to spend time as they want. Some people play Chinese chess (janggi) and others cards while the rest may choose to head for the beach.

The menus for the week are displayed next to the windows from which the food is served. Soup and bowls of rice are distributed per person and up to four side dishes are distributed to each table (a table consists of two groups).

Until the early 1990s, the most popular food among those served at the recreation centers was bread made in the former Soviet Union. Every morning, a Russian bread called “Khleb,” on which butter or powdered sugar could be put, was provided. The fruit which was given to each person at lunchtime was also popular with the visitors.

The period of recreation enjoyed by pilots was usually 20 days. However, some families, rather than using up all of their days, left the recreation centers in a hurry to visit parents or relatives in their hometowns. Usually, an additional 15 days of vacation was added unto the 20 recreation days, during which many people take trips to their hometowns.

Some diligent wives would continue to work even while in the centers. Surrounding the Galma Recreation Center, located on the shore of the East Sea, or the Sokhu Recreation Center are heaps of seaweed which are washed ashore with the tides. The wives, after washing the seaweed in the ocean water, dried it on the seashore.

Two or three 50-kg bags are barely sufficient for that much dried seaweed. Wives sent these to their in-laws or families with satisfaction.

However, such extravagant levels of recreation for pilots began to disappear in the mid-1990s with the March of Tribulation. Now, even when the state issues recreation permits, people tend to take off for hometowns, not to recreation centers.

Further, with the decline in the national esteem of pilots in recent years and due to the fact that the items which are provided as rations tend to be sold in the markets for additional income, the luxurious lives of the special class are becoming less impressive all the time. Recently, some pilots have even been selling their cigarette rations (one month’s worth) in the jangmadang.

Corruption also afflicts pilots to no small extent. Schools request additional money and products from the children of pilots, due to the popular image of affluence they command.

The sense of deprivation among pilots and family members, who are supposedly among the most revered people in North Korea, has been growing. Their status has indeed decreased over the years; one cannot ignore the fact that the standard of living of private merchants or foreign currency earners has now outpaced that of pilots, who are dangerously dependent on rations for their survival.

According to the Daily NK:

It has been suggested that pets should added to the list of “luxury goods” sanctioned and supposedly out of reach of the Kim Jong Il regime.

While “thoroughbred horses” are already a luxury good on the EU’s list of banned products published in the final version of the “Report to the Security Council from the Panel of Experts Established Pursuant to Resolution 1874”, there is nothing about pets.

However, according to one anonymous source well-versed in North Korea matters, Kim Jong Il has been known to spend hundreds of thousands of dollars on pets from France and Switzerland.

The money for his purchases apparently comes from the No. 39 Department of the Central Committee of the Party, according to a Daily NK source, and since the funds generated by the No. 39 Department come from illicit activities such as selling weapons, drugs, counterfeit cigarettes and super notes, he believes this pet-related trading must also be put on the list of sanctioned “luxury goods.”

Among dogs, for example, Kim apparently has a preference for the Shitzu and has spent many thousands of dollars purchasing and raising them. Kim Chun Hyung, a Seoul-based veterinarian, confirmed the price of such fine breeds, saying, “The price of pets is very diverse, but when you import a purebred you may need to pay tens of thousands of dollars.”

Jang Jin Sung, a poet who was said to be Kim Jong Il’s favorite poet in North Korea until he defected in 2004, described how much Kim Jong Il loves his pet dogs in an interview on Wednesday, explaining, “I was invited to a no.1 event, in which Kim Jong Il is set to appear, at Kim’s Kalmacheon Villa in Wonsan, Kangwon Province. Security was so fussy that they forced us to disinfect our hands, and then I waited for him nervously.”

“All of sudden a small white puppy appeared, which made me wonder, but then Kim Jong Il entered the hall behind it,” Jang said. “While Kim was having dinner, the puppy walked around without restriction. When it approached Kim, he petted it many times.”

The anonymous source said that Kim is always accompanied by dogs to his onsite inspections, adding that their food and shampoo is all imported, from France in the case of shampoo.

When the animals fall sick, top quality vets from foreign countries are invited to Pyongyang or the animals are taken overseas for treatment, the source said, adding, “The reason why they go by plane is for ease of customs clearance.”

The responsibility for importing pets is the job of overseas-based officials, but due to Kim Jong Il’s picky taste, especially in cats, they find it hard to match the color of fur or eyes that Kim likes, according to the source. 

Read the full story here:
Pets Are Luxury Goods, Too
Daily NK
Shin Joo Hyun
8/12/2010

Institute for Far Eastern Studies (IFES)
NK Brief No. 10-08-09-1
8/9/2010

This year, North Korean leader Kim Jong Il has been very active in giving on-site guidance at economically-important venues. As recently as July 31, Kim visited the Ganggye and Huicheon areas of Jagang Province, inspecting and providing instruction at a number of facilities, including the Ganggye Tractor Complex, the Jangja River Construction Instrument Factory, the September Textile Factory, the Jangja Mountain Food Complex, and the Ganggye Basic Foods Factory. Between August 2-5, Kim Jong Il spent several days visiting venues in South Hamgyeong Province, including the February 8 Vinalon Complex, the Ryongseong Instrument Complex Military First Foundry, the People’s Consumables Exhibit Hall, and the Geumya River Power Station Construction Office.

Just by looking at Kim Jong Il’s public outings, one can see that he is focusing his efforts on economic recovery. From the beginning of the year until August 5, Kim has made a total of 90 public appearances, with 42 (46.7%) being to economic venues, 23 (25.6%) to military venues, 19 (21.1%) to theaters or other performance halls, and 6 (6.6%) to reception halls or other venues for foreign guests and dignitaries. Compared to the same period last year, Kim has made 4.7 percent more public appearances, and visits to economic venues increased by 7.2 percent. In 2009, he made 34 (39.5%) visits to economic venues, 23 (26.7%) to military installations, and 4 (4.7%) visits related to foreign diplomacy. The other 25 (29.1%) visits were to various other facilities. Reviews of artistic performances were down 8 percent (29.1%  21.1%) and inspections of military facilities fell 1.1 percent (26.7%  25.6%), while appearances at foreign diplomatic venues were up 1.9 percent (4.7 6.6%).

Kim Jong Il’s focus on the economy comes in a year in which the Workers’ Party of Korea celebrates its 65th anniversary (October 10), and the WPK party representatives are expected to meet in September for the first time in forty-four years, increasing pressure on Kim for visible economic improvements. Furthermore, reviving the stagnant economy is essential to providing a stable succession system for his third son, Kim Jong Eun. In the spirit of the movement, North Korea’s mass media outlets have also joined the campaign, encouraging the residents of North Korea to put forth more effort daily. An editorial in the WPK newspaper, Rodong Sinmun, on August 2 urged all the people of North Korea to strive harder to achieve the goals set forth in this year’s New Year’s Joint Editorial, and tied this to the upcoming “historic” WPK representatives meeting and the 65th anniversary, encouraging “glorious efforts” worthy of such political milestones.

On a different note, Kim Jong Il also launched a ‘good health’ campaign in the second half of July, inspecting health and wellness-related sights and promoting better health for all North Koreans. Kim has been making frequent site visits, but the fact that they have been only in a relatively limited area has raised questions as to just how healthy the leader is. Last month, after travelling frequently during the first two weeks, Kim’s travels toward the end of the month slowed down, with him making only three visits, all to artistic performances. Some wonder if it is not poor health that has slowed him down.

According to the Daily NK:

The 1718 Committee of the UN Security Council has published the final version of its “Report to the Security Council from the Panel of Experts established Pursuant to Resolution 1874,”

In the report, of which the Daily NK has obtained a copy, the 1718 Committee revealed North Korean overseas accounts which had likely been used for North Korea’s illicit activities such as conventional weapons transactions and luxury goods, and the names of entities and individuals involved in those activities. The lists were submitted by UN member states.

The report singles out 17 North Korean officials thought likely to violate UN Resolutions 1718 and 1874, and outlines the reasons why they were designated by the UN member states.

They are Jang Sung Taek, Vice-chairman of the National Defense Commission and the closest associate of Kim Jong Il, Vice-chairman of the National Defense Commission Oh Keuk Ryul, Kim Young Chun, the Minister for the People’s Armed Forces, Director of No. 39 Department Kim Dong Woon, Military Supplies Secretary in the Central Committee of the Party Jeon Byung Ho, former Yongbyon technical director Jeon Chi Bu, First Vice-director of the Ministry of the Munitions Industry Chu Kyu Chang, Standing Vice-director of the People’s Army’s General Political Department Hyun Cheul Hae, President of the Tanchon Commercial Bank Kim Dong Myung, Member of the National Defence Commission Baek Se Bong, Deputy Director of the General Political Department of the People’s Armed Forces Park Jae Kyung, President of the Academy of Science Byeon Youong Rip, Director of the General Bureau of Atomic Energy Ryeom Young, Head of the Department of Nuclear Physics of Kim Il Sung University Seo Sang Il, President of Kohas AG Jacop Steiger and Alex H.T. Tsai, who is known to have provided financial, technological and other support for KOMID, and his wife, Su Lu-chi.

It also released a list of autonomous designations provided by member states, covering 19 North Korean entities. That list was made based on information collected as of April 30th this year.

They are Amroggang Development Banking Corporation, Global Interface Company Inc., Hesong Trading Corporation, Korea Complex Equipment Import Corporation, Kohas AG, Korea International Chemical Joint Venture Company, Korea Kwangson Banking Corp, Korea Kwangsong Trading Corporation, Korea Pugang Trading Corporation, Korea Pugang Mining and Machinery Corporation ltd., Korea Ryongwang Trading Corporation, Korea Ryonha Machinery Joint Venture Corporation, Korea Tonghae Shipping Company, Ponghwa Hospital, Pyongyang Informatics Centre, Sobaeku United Corp., Tosong Technology Trading Corporation, Trans Merits Co. Ltd., and Yongbyon Nuclear Research Centre.

13 out of the 19 have direct or indirect links to Tanchon Commercial Bank and Korea Mining Development Trading Corporation (KOMID).

Amroggang Development Banking Corporation is the financial arm of KOMID and related to Tanchon Commercial Bank, which has also been designated by the 1718 Committee. Additionally, Global Interface Company Inc. is owned by Alex Tsai, who is thought to have provided, or attempted to provide, support to KOMID.

Sobaeku United Corp. is involved in activities related to natural graphite, producing graphite blocks that can be used in missiles.

The report points out, “North Korea has established a highly sophisticated international network for the acquisition, marketing and sale of arms and military equipment, and arms exports have become one of the country’s principal sources for obtaining foreign exchange,” and goes on to say, “Agencies under the National Defense Commission (NDC), the Workers’ Party of Korea (WPK) and the Korean People’s Army (KPA) are most active in this regard.”

The report explains, “The Second Economic Committee of the National Defense Commission plays the largest and most prominent role in nuclear, other WMD and missile-related development programs as well as in arranging and conducting arms-related exports.”

It adds, “The General Bureau of Surveillance of the Korean People’s Army is involved in the production and sale of conventional armaments.”

The report points out that North Korea has opened 39 accounts with 18 overseas banks in 14 countries. 17 of which are held with Chinese banks.

Besides China, 11 banks in eight European and former Soviet countries (Russia, Switzerland, Denmark, Hungary, Poland, Italy, German, Belarus and Kazakhstan) hold 18 North Korean accounts. There is one account in Malaysia.

“The DPRK also employs a broad range of techniques to mask its financial transactions, including the use of overseas entities, shell companies, informal transfer mechanisms, cash couriers and barter arrangements,” the report notes.

According to experts on North Korea, since North Korean overseas illegal activities are all led by the loyal group surrounding Kim Jong Il, U.S. financial sanctions in accordance with UN Security Council resolutions 1817 and 1874 and also U.S. Executive Order (E.O.) 13382 have the potential to be a great pressure on the Kim Jong Il regime.

The Panel of Experts, which was appointed by the UN Secretary-General on 12 August 2009 to author the report, are David J. Birch (United Kingdom of Great Britain and Northern Ireland, coordinator), Masahiko Asada (Japan), Victor D. Comras (United States of America), Erik Marzolf (France), Young Wan Song (Republic of Korea), Alexander Vilnin (Russian Federation), and Xiaodong Xue (People’s Republic of China).

Read the full story here:
Report Explains Sanctions Decisions
Daily NK
Kim Yong Hun
8/6/2010

UPDATE:  The Daily NK also offers some propaganda posters leading up to the event.

ORIGINAL POST: According to the Daily NK:

Hwang Jang Yop, President of the Committee for the Democratization of North Korea, believes the motivation behind the Chosun Workers’ Party (KWP) delegates’ conference, which is to be held for the first time in 44 years this September, is Kim Jong Il’s belief that the power of the Party needs to be increased since too much authority is currently concentrated in the National Defense Commission, and this could represent an obstacle to the establishment of Kim Jong Eun’s succession.

Hwang, who was speaking at a forum in Seoul on July 13th, explained, “Kim Jong Il relies on the military to reign, and the core of that power is the National Defense Commission, but he is trying to solve the succession issue by strengthening the authority of the Party.”

“Kim wants to return the National Defense Commission to its previous role, which was to devote itself to military duty,” he added.

Hwang stated, “Kim Jong Il believes that Kim Jong Eun’s succession cannot be same as his own, which was done through the military. He believes that Kim Jong Eun cannot manage the military as well as he could, and therefore, if Kim Jong Il dies with power concentrated in the National Defense Commission, stabilizing the succession will be difficult.”

“The military is difficult to control if there is a problem, and since Kim Jong Il understands this fact, he is intending to control the military through the Party. Also, Kim will want to announce the succession issue to the North Korean people through the Party rather than the military.”

“The previous Military Commission of the Chosun Worker’s Party served the role of an administrative organization,” Hwang reminded listeners. “Taking the opportunity offered by the Chosun Workers’ Party delegates’ conference, the functions of the Party will be acknowledged and strengthened, while the military will be refocused on military work.”

He also commented, “Kim Jong Il has threatened the international community through the military in difficult political and economic times, and run North Korea by directly mobilizing the army. However, the cultural and ideological unification of North Korean citizens is impossible through the military so, Kim Jong Il will actively use the Party in the establishment of the succession.”

“Kim Jong Il believes that only the Party can unite the North Korean people ideologically during the establishment of the succession, so therefore he is hosting the Chosun Workers’ Party delegates’ conference to begin the process by reinforcing Party authority,” Hwang concluded, returning to the main theme.

Previous posts on September conference here and here.

Read the full story here:
KWP to Take the Power Back in September
Daily NK
Kim Yong Hun
7/14/2010

According to Yonhap:

North Korea stressed on Tuesday the historical importance of its upcoming meeting of core ruling party delegates, urging the younger generation of party members to be as loyal to the leadership as their predecessors.

In September, the communist state will hold its first meeting of senior Workers’ Party delegates in 44 years, a move that observers say may be aimed at paving the ground for leader Kim Jong-il to transfer his power to his third son, Jong-un.

Kim, 68, made his first public appearance in a 1980 convention, considered to be more authoritative, and sealed himself as the successor to his father, Kim Il-sung, who founded the North and died in 1994.

In an editorial seen here on Tuesday, the Rodong Sinmun, the party’s daily, heaped praise on party members who died loyal to the founder and called on new members to “follow suit.”

The paper, considered to be Pyongyang’s main mouthpiece, also described the September meeting as one that will “shine as a notable event in the history of the holy Workers’ Party.”

Late last month, the paper said that the party will expand its role and function through the meeting, stressing the importance of the central party organ that had once served as a venue for Kim Jong-il to rise up the power ladder when he was young.

Kim is believed to be quickening his power transfer after suffering a stroke two years ago. Earlier this year, North Korea promoted Kim’s brother-in-law as a vice head of the National Defense Commission, the highest seat of power. Jang Song-thaek is believed to be the central figure behind the succession process.

Read the full story here:
N. Korea says upcoming party meeting will be historic
Yonhap
Sam Kim
7/13/2010

In the East Asia Forum:

June 2010 saw two major anniversaries on the Korean peninsula. On June 25 sixty years ago the Korean People’s Army (KPA) invaded the South launching a bitter three-year war. North Korea still denies culpability, claiming it was repelling a Southern invasion; despite overwhelming evidence, now backed by Soviet archives, that it was the aggressor. No less mendaciously Pyongyang nonetheless celebrates the July 27, 1953 Armistice which ended open hostilities as a ‘brilliant victory in the Fatherland Liberation War’ — even though this left the North bombed and napalmed to ruination.

China still formally backs the North’s version, but this year some brave soul decided to take seriously the late Deng Xiaoping’s instruction to ‘Seek truth from facts.’ The International Herald Leader, an affiliate of Xinhua news agency let the cat out of the bag. It featured interviews with Chinese historians telling the true story, and a timeline stating that ‘The North Korean military crossed the parallel on June 25 1950 and Seoul was taken in four days.’ Naturally, the article rapidly vanished from the web. But many Chinese now are openly critical of the DPRK, and embarrassed that Beijing continues to toe Pyongyang’s line.

North Korea itself sticks to the old tunes. On June 22 the Korean Central News Agency (KCNA) reported what it headlined as ‘Revenge-vowing Meetings.’

Youth and students and agricultural workers gathered in Susan-ri… and in Sinchon … Tuesday to vow to take revenge upon the U.S. imperialists on the occasion of the ‘June 25, the day of the struggle against the U.S. imperialists’.

The reporters and speakers at the meetings recalled that the U.S. imperialists brutally destroyed cities, villages, factories and farms and killed innocent civilians…denouncing the Yankees as a herd of wolves in human skin and the Koreans’ sworn-enemy with whom they cannot live under the same sky…

They bitterly condemned the U.S. imperialists and the Lee group of traitors for totally negating the historic June 15 North-South Joint….

If the U.S. imperialists intrude into the DPRK even an inch, all the servicepersons and people will mercilessly wipe out the aggressors.

Rhetoric like the above is clearly intended to fan the flames of hatred.

A further KCNA item on June 24 purported to list the ‘Tremendous Damage Done to DPRK by US.’ The KCNA, with unusual precision, computed a total of nearly 65 trillion dollars for human and material losses inflicted from 1945 up to the present. Considering the state of US public finances, Kim Jong-il should not expect a cheque any time soon. There is also a degree of inflation; last time KCNA published such an exercise, in November 2003, the bill was a mere US$ 43 trillion. One can only wonder what is the point of such grandstanding.

So savage a mood has torpedoed a second anniversary; one which should have been happier. On June 13 2000 South Korea’s then president, the veteran democrat Kim Dae-jung flew to Pyongyang for the first ever inter-Korean summit with the North’s leader, Kim Jong-il. On June 15 they signed a North-South Joint Declaration; Kim Dae-jung was awarded that year’s Nobel Peace Prize. Thus began a decade of unprecedented North-South cooperation, albeit patchy and one-sided. This ‘sunshine’ policy was ended by South Korea’s current president, Lee Myung-bak, who insists that the North must give up its nuclear weapons first if it wants better ties with the South. That sounds fine in theory, but few expect it will ever happen.

North Korea made much of the June 15 anniversary, even while excoriating the ‘traitor’ Lee Myung-bak for trampling on it. Pyongyang warmly welcomed a South Korean radical priest, Han Song-ryeol, who made the trip illegally to mark the occasion.

South Korea by contrast played up the war anniversary more than the inter-Korean one. Lee Myung-bak used this occasion to once again call on the North to admit that it sank the ROK corvette Cheonan on March 26, and to apologise.

Will the Cheonan go unpunished?
Nevertheless, it looks increasingly like Pyongyang has got away with it. June brought Lee Myung-bak little joy on the issue, at home or abroad. Local elections in South Korea on June 2 saw his ruling Grand National Party (GNP) rebuffed. Many voters saw Lee’s tough first reactions, which roiled global markets, as adding to rather than reducing risk.

Abroad too Lee has met obstacles. Assured of firm US and other Western support he is struggling to convince Russia and China. That was predictable: for Beijing and Moscow, unwillingness to paint Pyongyang into a corner was always going to trump the facts. A Russian naval team visited Seoul to inspect the Cheonan wreckage, including DPRK torpedo parts, but is not expected to report until July. In this light the ROK government will be relieved that the G-8 summit in Canada on June 25 issued a strong statement on the Cheonan – after energetic lobbying by Japan’s new prime minister Naoto Kan, which will get his relations with Lee Myung-bak off to a good start. Connoisseurs of diplomatic wordplay noted that while the G-8 condemned the attack, noted that an international team had blamed it on Pyongyang, and called on the DPRK to avoid any attacks against the ROK, it did not quite join up all those dots; doubtless at Moscow’s behest. Lee may lobby similarly when he arrives for the ensuing G-20 summit; although since South Korea chairs the group and will host its next jamboree in Seoul in November, it may look bad if he were perceived as acting in too particularist a way.

Earlier, on June 4 South Korea formally referred the Cheonan incident to the UN Security Council (UNSC). On June 14 both Korean states briefed the UNSC, with the North as ever denying all responsibility and urging the Council not to consider the matter. No official response is expected until July. With Russia and China likely to abstain at best, whatever the Security Council eventually comes up with looks set to be a damp squib. South Korea has already said it will not seek further sanctions, on top of those already in force under earlier UNSC resolutions from 2006 and 2009 after the North’s two nuclear tests. But it would like a clear, resounding condemnation, preferably in the form of a resolution.

Looking ahead, it is not too soon to wonder how the two Koreas will get past Cheonan. Record numbers of DPRK workers at the Kaesong Industrial Zone (KIZ) – 44,000 as of June, according to the ROK unification ministry (MOU) – are seen in Seoul as a sign that at some level Pyongyang remains committed to this joint venture at least.

A big event in September
Meanwhile North Korea looks more preoccupied with the succession issue than in reaching out to South Korea.

On June 26 KCNA reported that ‘the Political Bureau of the WPK [Workers’ Party of Korea] Central Committee decides to convene early in September … a conference of the WPK for electing its highest leading body reflecting the new requirements of the WPK.’

Though nominally it is North Korea’s ruling communist party, and still an important tool of control at lower echelons, the WPK has seen its topmost organs atrophy under Kim Jong-il. Neither the rarely mentioned Politburo nor the Central Committee (CC) is known to have met at all in the 16 years since Kim Il-sung died. Kim Jong-il has favoured the army, ruling through the NDC and informally via a kitchen cabinet of trusted cronies. The dear leader is also of course secretary-general of the WPK, but he acquired that post irregularly: by acclamation at a series of local Party meetings, rather than being duly elected by the CC.

Hence while the precise nature of September’s meeting remains vague, like its exact date, it looks like a long overdue effort to restore a measure of due process to the Party. If this is in fact a full formal WPK congress, it would be the first since the Sixth Congress thirty years ago in October 1980. It was then that Kim Jong-il, hitherto veiled behind coded references to a mysterious ‘Party Centre’, was finally revealed in the flesh. The speculation is that this new meeting similarly will finally give the world a glimpse of the enigmatic Kim Jong-eun.

While all rumours emanating from Seoul should be treated carefully it’s hard not to link this news with reports that Kim Jong-il’s health is worsening. There are claims that on some aides including his son are duping him with Potemkin factories to hide from him how dire the economy really is. An already tardy succession can clearly brook no further delay, or else regime stability and continuity may be gravely imperilled.

The economy shrank again last year
If Kim Jong-il wants to know how his economy is really doing, he could look at the latest estimates from the enemy.

The (southern) Bank of Korea (BOK) published its latest estimates, covering 2009, on June 24, just in time for Seoul to crow about them as it marked the Korean War anniversary. By this reckoning North Korea’s real annual gross domestic product (GDP) shrank by 0.9 per cent last year. Unlike most other countries this had little to do with the global financial crisis. Rather it reflected local conditions, natural and man-made.

The gaps just get wider
The result is a huge and ever widening gap. North Korea’s gross national income (GNI) in 2009 was a mere 2.7 per cent of the South’s. BOK cites Northern GNI in 2009 was US$22.4 billion, compared to US$837 billion for the South. True, the South has over twice as many people. But the average North Korean per capita income too is a minute fraction of the South’s, with the ROK topping US$17,000 while the DPRK’s is a paltry US960. (Some experts, including a former unification minister, think even this is too high and posit a figure nearer US$300, putting North Korea among the poorest nations on earth.)

With trade figures the gap is even wider. This year inter-Korean trade will fall, since Seoul has banned most of it (except the Kaesong zone, which accounts for over half) as punishment for the Cheonan. Peanuts to the South, this has been crucial for the North: South Korea is its largest market, taking almost half of its meagre total exports. Last year inter-Korean trade like DPRK trade overall fell slightly, from US$1.82 to US$1.68 billion. Yet Northern exports crept up, from US$932 to 934 million.

In 2009 North Korea’s real trade totals were just under US$2 billion in exports and US$3.1 billion in imports. They are still dwarfed by South Korea’s respective figures of US$364 and US$324 billion – and this in a bad year for the South, due to the downturn.

Every year the gap widens further, yet still Kim Jong-il refuses economic reform. It is hard to fathom a mind-set which can inflict such disaster and tragedy on a once proud land and people – and whose idea of a way out of its self-dug hole is to fire a sneaky torpedo.

Good losers
It was left to North Korea’s footballers to remind the world that their country does not lack for talent and virtue. As one would expect, North Korea were a disciplined team. They kept to themselves and avoided the press – with one striking exception, Jong Tae-se. Born in Japan to a South Korean father and a pro-North Korean mother, and having attended schools run by Chongryun – the organisation of pro-North Koreans in Japan – he elected to play for the DPRK; although he still holds ROK nationality, lives in Japan and plays in the J-League for Kawasaki Frontale.

A young man whose talk is as uninhibited as his style of play, Jong cried when the DPRK anthem was played before the Brazil match. Yet his love for his adopted homeland is not uncritical. ‘Everybody thinks about our country as being closed and mysterious, so we have to change that,’ he told AFP. ‘We can change for the better if we are more open with the way we talk to people and it would make a better team.’

It would make a better country too. If North Korea’s fate must rest in the hands of an untried youth, better it were the warm-hearted and wised-up Jong Tae-se than Kim Jong-eun.

Read the full story here:
North Korea: Unhappy anniversaries
East Asia Forum
Aidan Foster-Carter
7/6/2010

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

According to the Daily NK:

North Korea has earned more than $160 million in the last ten years thanks to the construction of sculptures and other edifices in countries across Africa.

A Daily NK source in China revealed on the 18th, “Since 2000, North Korea has been earning colossal quantities of dollars through contracts for the Mansudae Overseas Project Group of Companies under the Mansudae Art Institute to construct sculptures.”

Mansudae Art Institute is an organization primarily dedicated to the idolization of Kim Il Sung and Kim Jong Il through public works, one whose construction of edifices such as the Juche Tower and Arch of Triumph in Pyongyang has added to the status of the country.

It has also been building revolutionary monuments in African countries such as Ethiopia since the 1970s in order to maintain cordial relations with socialist states, but in the early 2000s started doing work in African countries to earn foreign currency as well.

According to the source, North Korea has earned $66.03 million from Namibia alone thanks to the construction of the Presidential Palace ($49 million); the Cemetery of National Heroes ($5.23 million); a military museum ($1.8 million); and Independence Hall ($10 million).

It has also earned almost $55 million from Angola via the António Agostinho Neto culture center ($40 million); Cabinda Park ($13 million); and the Peace Monument ($1.5 million).

Additionally, the North has constructed a basketball stadium ($14.4 million) and an athlete academic center ($4.8 million) in the Congo, earning almost $20 million dollars in total.

Thanks to the Monument to the African Renaissance in Senegal, the North has made another $12 million dollars.

There are around 19.8㎢ set aside for a vacation spot for the president of Equatorial Guinea, which is supposed to earn Mansudae around $800,000, not to mention a government office building ($1.5 million), Luba Stadium ($6.74 million) and conference halls ($3.5 million).

The source also reported, “The money earned from these construction projects is managed by the No. 39 Department. Some of these dollars are used for domestic governance, while the rest go to secret accounts in Switzerland or Macau to become Kim Jong Il’s secret funds.”

Here are the images from the story including a table of financial data (which I would take with a grain of salt):

Additional Information:

1. I blogged here about the Derg Monument in Ethiopia.

2. I have located some of the Mansudae Overseas projects mentioned in this story (as well as numerous other places not menioned in this story: Egypt and Syria, Zimbabwe, DR Congo). However, here are GeoEye satellite images of some of the Namibia and Angola projects mentioned above courtesy of Google Earth:  

Namibia National Heroes Acre (22°39’46.02″S,  17° 4’41.06″E):

Namibia State House (22°35’28.83″S,  17° 6’2.76″E)

Cultural Center of António Agostinho Neto (Mausoleum) (8°49’24.73″S,  13°13’8.52″E)

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