Archive for the ‘Economic reform’ Category

A new defector survey about market trade in North Korea, and what it says (maybe) about Kim Jong-un

Friday, August 28th, 2015

By Benjamin Katzeff Silberstein 

In Wall Street Journal, Jeyup Kwaak reports on a new defector survey by Seoul National University’s Institute for Peace and Unification Studies (08-26-2015) (added emphasis):

The Seoul National University Institute for Peace and Unification Studies annually surveys more than 100 North Koreans who defected in the prior calendar year. The results provide firsthand insight into developments in the isolated state, though its researchers said they shouldn’t be read as generalized facts due to the small pool of respondents.

[…]

The latest survey, of 146 North Koreans who escaped in 2014, shows significant growth from the previous year in the number of people saying they conducted private business activities and paid bribes to enable them. A little more than half said they received no money from the state, down from last year’s survey but up from the one released in 2013.

Experts say between half and three-quarters of North Koreans’ income comes from quasi-illegal market activities, such as trade of basic goods smuggled in from China, but sporadic crackdowns by national or regional security officials lead to irregular business and bribery. Defectors say officials often collect fees when they set up a booth at a market.

The results themselves do not present a new trend. Several previous defector studies indicate that markets are perhaps the most important source of income and sustenance for many (if not most) North Koreans. However, a few things are interesting to note.

The links may not be entirely clear, but it is at least symbolic that the current survey, albeit with a very small number of interviewees, suggests that support for Kim Jong-un and the leadership may not be waning, at the same time as market activity continues unabated. This at least calls into question an assumption that sometimes occurs that market trade would lead people to become more critical of the regime.

Again, too much shouldn’t be read too much into a small study with participants that probably are not geographically or socially representative of North Korea as a whole. Defectors as a group rarely are. But perhaps one could imagine that market trade being so institutionalized and regulated by the regime would make it more synonymous with the regime itself. I.e., if market trading is seen as something positive, maybe this reflects positively on the regime as well — perhaps the market has been co-opted.

The article also reminds us of the rather peculiar combination of dynamics seen under Kim Jong-un. On the one hand, market trade seems to continue unabated domestically, and initiatives like the new special economic zones and the agricultural reforms show that there is at the very minimum some new thinking going on.

But on the other hand, border controls have been tightened to a degree rarely seen since the mid-1990s, according to defector reports. Just today, DailyNK reports (in Korean) that resident in the Sino-Korean borderlands have seen their access to the Amnok river, often used for laundry by locals, increasingly restricted as of late. As the WSJ writes,

Just 614 North Koreans made it to the South in the first half of this year, compared with 2,706 in the 2011 calendar year, according to the most recent ministry data.

The drop in North Koreans who visited China on legal visas so far this year should perhaps also be seen in this context.

Taken together, the tightened border controls on the one hand, and the seemingly changing (one could say “progressive”) rhetoric on economic matters on the other, paint a mixed picture.

In the early days of Kim Jong-un, the question was whether he was a reformer or a hardliner. A few years into his rule, it seems he might be neither and both at the same time.

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The Kaesong Industrial Complex and inter-Korean tensions

Thursday, August 20th, 2015

UPDATE 1 (2015-8-24): The North and South Koreans have agreed to a solution to the situation. According to KCNA via Yonhap:

1. The north and the south agreed to hold talks between their authorities in Pyongyang or Seoul at an early date to improve the north-south ties and have multi-faceted dialogue and negotiations in the future.

2. The north side expressed regret over the recent mine explosion that occurred in the south side’s area of the Demilitarized Zone (DMZ) along the Military Demarcation Line (MDL), wounding soldiers of the south side.

3. The south side will stop all loudspeaker propaganda broadcasts along the MDL from 12:00, August 25 unless an abnormal case occurs.

4. The north side will lift the semi-war state at that time.

5. The north and the south agreed to arrange reunions of separated families and relatives from the north and the south on the occasion of the Harvest Moon Day this year and continue to hold such reunions in the future, too and to have a Red Cross working contact for it early in September.

6. The north and the south agreed to vitalize NGO exchanges in various fields.

ORIGINAL POST (2015-8-20): The two Korea’s literally just finished hammering out a new agreement on “wages” for North Korean workers at the Kaesong Industrial Complex. However, with the ink barely dried, a new round of escalating conflict between the Koreas is affecting operations at the KIC…

According to Yonhap:

South Korea said Friday it will limit the entry of its nationals into a joint industrial park in North Korea following the exchange of artillery fire between the two sides.

The Unification Ministry said it will only permit South Korean businessmen directly involved in the operation of factories at the Kaesong Industrial Park to enter the complex.

But other South Koreans, including those working at subcontractors, will not be allowed to move in and out of the complex in the North’s border city of the same name, the ministry said.

South Korea fired back at North Korea on Thursday following the North’s firing of shells at a South Korean front-line military unit in the western area of the heavily fortified border. No damage was reported.

A total of 124 South Korean small and medium-size enterprises operate factories at the industrial park, the last remaining symbol of inter-Korean reconciliation. About 54,000 North Koreans work there.

South Korean businessmen safely returned to the South from the complex on Thursday despite the North’s provocation.

The ministry said it has taken measures to ensure the safety of South Koreans who are temporarily staying in the North.

Read the full story here:
S. Korea to partially ban entry into joint industrial park
Yonhap
2015-8-20

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Wonsan Kalma Airport imagery (UPDATED)

Monday, August 17th, 2015

UPDATE 1 (2015-8-17): Kim Jong-un visited the Wonsan Airport (Kalma Airport) for an air force demonstration reported in Rodong Sinmun on July 30. You can see a video of that event here. A second official video claims that the demonstration took place on July 28. A satellite image of the facility was taken just the day before (July 27) and we can see some of the new facilities and preparation for Kim Jong-un’s arrival. I have already reported on most of this material at Radio Free Asia (새단장 갈마비행장…활주로에 광고도).

First, Google Earth imagery shows thousands of soldiers on the new runway practicing for Kim Jong-un’s arrival at the observation building. They can also be seen in the official images:

Wonsan-runway-soldiers-2015-7-27

wonsan-runway-soldiers-2015-7-30

We can also see the completed (on the outside) Wonsan Airport terminal building:

Wonsan-terminal-2015-7-27

Also unveiled is the new logo for the airport which reminds visitors that (despite the heavy military presence) the new airport welcomes civilian vacation travelers. We can see this design at both ends of the runway:

Wonsan-Kalma-airport-logo

We can also see what appears to be a (fifth!) runway for Kim Jong-un. This runway contains similar facilities to the new Kim Jong-il runway built in Taesong District for use of the individuals that live in the Kim Family’s Ryongsong Complex:

Kalma-kim-jong-un-runway

Pictured above: The probable Kim Jong-un light aircraft runway at the Wonsan Kalma Airport

Taesong-Kim-Jong-un-runway

Pictured above: Kim Jong-un’s runway in Taesong district of Pyongyang which bears a close resemblance to the facilities at the Wonsan Kalma Airport.

ORIGINAL POST (2015-5-1): New Google Earth imagery shows continued development of the new civilian airport in Wonsan. The airport is presumably intended to support the Wonsan-Mt. Kumgang International Tourist Zone.

2015-3-26 (Google Earth)

Wonsan-Airport-2015-3-26

2015-2-10 (Google Earth)

Wonsan-Airport-2015-2-10

2014-12-25 (Google Earth)

Wonsan-Airport-2014-12-25

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Lankov issues warning on North Korea’s economic reforms

Thursday, August 13th, 2015

According to Yonhap:

North Korean leader Kim Jong-un’s reformatory policy is highly likely to spark political instability in the country, a Russian professor said Thursday, stressing the need to prepare for a potential volatile situation there.

“Kim Jong-un’s policy has a high possibility to destabilize North Korea’s local situation, therefore preparations are necessary for a sudden change there,” Andrei Lankov, a professor at Kookmin University, said during a forum co-hosted by Yonhap News Agency and the Presidential Committee for Unification Preparation.

Under the reform-seeking young leader, North Korea is less secure than under the previous Kim Jong-il era when the country had experienced no changes, the professor said.

Under the new leadership, North Korea has shown signs of adopting a developmental dictatorship, the professor noted.

Kim is aware that he cannot hold on to his power for the next several decades without a reform.

Kim’s predecessor and father Kim Jong-il was different. In his 60s, he knew that even without the reform, which has the potential of thwarting the regime, his power grip could be sustained until his death, Lankov added.

Even though the North chooses to follow the footsteps of the Chinese economic reform, the reclusive country may have to be careful about opening up the country to the outside world, because after seeing South Korea’s incomparable affluence, North Koreans may become very discontented with the North Korean system, the professor said.

“It will be something tantamount to an act of political suicide,” he noted.

If North Korea happens to succeed in the reform drive, the result will better help the two Koreas peacefully coexist over the long term, he said, adding that it will cut down the costs of unification.

Touching on North Korea’s nuclear ambition, he said the communist country will never even dream of giving up its nuclear arsenal.

“Any reward, any pressure will be of no avail,” because nuclear weapons are irreplaceable means of deterrence and threats for the Kim regime.

The North Korean government knows that Gaddafi is the only leader who gave up nuclear arms in international political history and he was killed, according to the professor.

Read the full story here:
Preparations needed for potential volatile situation in N. Korea: Lankov
Yonhap
2015-8-13

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The paradoxes of North Korea’s food situation

Wednesday, August 12th, 2015

By Benjamin Katzeff Silberstein 

A lot of things are going on in North Korean agriculture and food production these days. First, there was the drought. I haven’t seen any unequivocal assessments showing with certainty that the damage wasn’t as bad as feared, but both outside and regime sources certainly seem to be indicating this. Then, a few weeks ago, a regime source said that food production had even increased this year, thanks to management reforms in agriculture. And now, international relief agencies are reporting that the nearly yearly flooding has hit the country once again, damaging food production.

How can one reconcile all these events?

It may of course be that the earlier assessment published in Tongil Sinbo, with an optimistic forecast of food production, took the coming flooding into account and assumed that food production, overall, would still be up. Crop damage so far seems far smaller than it has been in previous years. 4,000 hectares have been reported as damaged this year, while the equivalent figure in 2013 was 13,300.

It may also be that the Tongil Sinbo claims were premature, but it is difficult to see why a North Korean regime source would claim production increases without taking potential damage from torrential rains into account. After all, they keep on coming year after year. Still, it seems risky to claim success for agricultural production before the August rains. North Korean publication routines are too murky to tell exactly how it is decided what information should be released and when.

It could also be that regions were agricultural reforms have been implemented have seen harvests increase, while others have been hit worse by both the drought and the floods. Reforms have so far been implemented on a local experimental basis and it could be that the success has been so great in localities where they have been tried that production has increased overall, despite both the flooding and the drought.

Hopefully, some of the confusion will clear as more information becomes available about the flooding damage. Natural disasters, after all, tend to increase the information flow from North Korea somewhat through the extended work of relief agencies.

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Golden Triangle Bank pre-pay cards

Tuesday, August 11th, 2015

Aram Pan visited the new Golden Triangle Bank building (it has recently moved offices) in Rason and took some interesting pictures of the interior.

DPRK-360-golden-triangle-1 DPRK-360-golden-triangle-2

DPRK-360-golden-triangle-3 DPRK-360-golden-triangle-4

However, my favorite is probably the giant pile of new US $100 notes:

GTB-DPRK-360-cash

That looks like $1.8 million to me. When was the last time you saw that much cash sitting on a counter?

Mr. Pan also shows that the Golden Triangle Bank has established a pre-pay card (similar to the Narae Card or the Koryo Bank Card). I say “pre-pay card” (not debit card) because a debit card is linked to a personal account whereas a pre-pay card is drawn from a bank-owned account. I do not suspect that card holders have actually opened personal accounts at these banks but have instead topped off a card that draws from a bank-owned account (In other words, I don’t think it is easy to get your cash back, and the bank earns the float from investing the currency while the card holder carries a positive balance).

GTB-card-DPRK360-2015

Mr. Pan claims to have put RMB25 into his account, which can be spent in the Rason SEZ, but not outside of it.

Here is a closeup of the front and back of the card:

Golden-Triangle-Bank-Debit-card-2015-edited

 

Here is a translation of the card:

GTB-debit-card-translation

“Seon Bong” is how a South Korean translates “Sonbong”.

The card appears to be equipped with an EMV chip. I am not sure how that works.

UPDATE (2015-8-17): The Daily Mail did a follow up piece here.

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The drought that didn’t matter, North Korea says – thanks to agricultural reform?

Monday, August 10th, 2015

By Benjamin Katzeff Silberstein

During the past few months, the World Food Program (WFP) has made reoccurring pleas for increased food assistance to North Korea to alleviate the food shortages expected from a severe summer drought. The North Korean government made similar statements and claimed that the drought was the worst one to occur in 100 years. Aid to the country was subsequently increased from the originally planned level, due to the drought. But now, one North Korean official is saying that food production ended up increasing, after all, thanks to agricultural reforms.

A recent brief by the Institute for Far Eastern Studies at Kyungnam University (IFES) cites a July issue of Tongil Sinbo, a North Korean state-run weekly newspaper. There, Chi Myong Su, director of the Agricultural Research Institute of the Academy of Agricultural Sciences in the country, says that

“the effectiveness of field management system (pojon) from cooperative farm production unit system (bunjo) is noticeable and succeeded in increasing grain production despite the adverse weather conditions.”

The article cited by IFES highlights the smaller work-team structure as key to the success of the reforms. Also, it almost outright states that greater economic incentives were the main factor (although they call it “enthusiasm” and “patriotism”):

“Despite the adverse weather conditions last year, the high grain yield was possible due to implementation of scientific farming methods and field management system to increase enthusiasm of farmers,” and “based on this experience, many cooperative farms across the country will expand subworkteam management system to field management system.”

This is interesting for several reasons.

First, the agricultural reforms seem increasingly pronounced. Though other reforms were reportedly backtracked earlier this year, the government seems eager to claim success for the road travelled in agriculture.

I have written elsewhere that the data doesn’t necessarily support a claim that reforms are working. There is still reason to be skeptical – after all, a North Korean government official claiming that his government’s policies are working is not surprising – but even the claim itself is interesting.

Second, the statement raises questions about monitoring and data gathering capacities, both of the regime and relief organizations in Pyongyang. Again, just a few months ago, alarm bells were ringing about a potential food shortage, and now, a regime official claims that food production has increased. What was the basis of the WFP and regime claims that a food shortage was imminent a few months ago, and what has changed since those claims were made?

Another recent IFES brief also deals with North Korean press reports about the agricultural reforms. It quotes a Rodong Sinmun article from earlier in the summer that brings up some adjustment problems that farmers have had, such as learning how to properly use fertilizers. The most interesting part in my opinion is the following:

The newspaper stressed that “when all farmers claim ownership of their field and subworkteam, one can create innovation in the farming operations.”

Thus, it seems like Pyongyang wants to encourage experimentation and diversity in production methods. This would be a potentially important step towards more efficient agriculture. Perhaps it is part of a pattern. Provinces have reportedly gotten significant leeway in setting up their respective special economic development zones, which could also be a way to encourage experimentation in policies and management methods.

According to the Tongil Sinbo article, reforms are set to expand further in the country given the alleged success. Perhaps it won’t be too long before we can learn more about them through assessments by multilateral organizations like WFP.

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Grasshopper markets (메뚜기시장)

Monday, August 3rd, 2015

According to Reuters:

From the dark alleys of Pyongyang, the showpiece North Korean capital, tiny specks of torchlight shine carefully into the eyes of passersby, leading to bustling and illegal street markets where traders, usually women, call out “buy, buy!”

The “maeddugi shijang”, or “grasshopper markets,” get their name from the lightning-quick way traders must pack up and hop from place to place to evade authorities in a country making a grudging embrace of free enterprise.

As markets have taken hold in North Korea, the government has sporadically legalized and formalized them, while at the same time imposing new crackdowns, taxes, and bribes, forcing smaller traders back on to the streets where they set up “grasshopper markets” selling goods for cash.

“The grasshopper markets form in places near stations, on the roads to the (official) market, and around schools and parks,” said Seol Song Ah, a defector who left North Korea in 2011 and now works with the Daily NK, a Seoul-based website with sources inside North Korea.

“Wherever there are people, there are grasshopper markets.”

The markets are less well-stocked than official shops but offer convenience, carrying items from pots, socks, batteries, and cigarettes to fresh meat, according to residents of Pyongyang and defectors from the isolated country.

The informal, movable markets represent the new, grassroots driven economic reality in a country which is no longer truly collectivized, or communist – a change that began during the devastating famine of the 1990s and has since gained momentum.

‘TICK MERCHANTS’

Grasshoppers date to the 1980s, when old women started selling sweet potatoes and bean curd by roadsides, according to Seol, and have proliferated in recent years as more people, squeezed by new government regulations on the marketplace, have returned to underground trade.

In recent months, those who trade in the grasshopper markets have become known as “tick merchants” because they are hard to remove, and have therefore had restrictions on them slowly eased as security services struggle to shut them down, according to the Daily NK.

Still, because grasshopper markets are illegal, they are highly sensitive in the authoritarian country. A diplomatic source in Pyongyang who has visited grasshopper markets said he was followed by the “bowibu”, or secret police, down the dark grasshopper alleys.

“Trying to take a photo of a grasshopper market is one of the only times I’ve been seriously apprehended by the secret police,” the diplomatic source said.

A former foreign resident of Pyongyang said he had also never managed to photograph a grasshopper market.

“The one time I tried, the market ladies had vanished in the time it took me to get my camera from my pocket and raise it to take the shot,” the resident said.

“They are used to disappearing very, very quickly”.

Read the full story here:
In North Korean grassroots capitalism, ticks and grasshoppers skip
Reuters
James Pearson
2015-8-3

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Real estate and insurance laws adopted for SEZs

Wednesday, July 22nd, 2015

According to KCNA:

Rules of Real Estate and Insurance in EDP Adopted

Rules of real estate and insurance in the economic development parks (EDP) were adopted according to the decision of the Presidium of the Supreme People’s Assembly of the DPRK.

The rule of real estate consists of seven chapters and 59 articles and the rule of insurance four chapters and 52 articles.

The rules deal with possession, registration and employment of real estates, their rent and rate, conclusion of insurance contract, formalities of insurance offices, etc. in the EDP.

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Joint NK-Russia pharmaceutical company revamps operations

Tuesday, July 21st, 2015

According to the Daily NK:

Python, a joint company between North Korea and Russia, which had manufactured health supplements during Kim Jong Il’s era, has recently renewed its contract and is set to manufacture products using materials produced in North Korea, Daily NK has learned.

“Python closed down due to financial difficulties but has recently renewed its contract with North Korea,” a source in Russia told Daily NK. “On the 7th, the North Korean consul general and the deputy prime minister of Zabaykalsky Krai signed related contracts to operate the Python factory.”

An additional source in Russia confirmed this development.

The factory, located in Russia, is currently shuttered due to financial restraints, but the North Korean state authorities have been providing cadres dispatched to the facility for management with living expenses. The source said the factory is expected to give the Russian city Chita a boost in its local economy, helping to propel the deal.

“Before production ground to a halt, Python had been sending hefty sums of money to North Korea. Russia can also rake in profits from the company, so neither wants to give up on the endeavor,” the source speculated. “Once production begins, North Korea will select and dispatch workers to Russia who will produce medicine and health supplements.”

He added, “We can’t tell exactly how much was being made from the production, but former workers say under normal operations, the sum going to the North was significant,” the source said, noting that North Korea is surely hoping the deal can try to make in a dent in the dearth of state foreign-currency funds.

“In the past, Python mainly produced health supplements, such as ‘baljam’ (herbal wine) and ginseng extract,” he explained. “But after Russia was introduced to capitalism, financial, ideological, etc. difficulties emerged and operations took a toll. Over the past few years, only a few North Korean managers have been left behind.”

He added that the North Korean laborers who worked at Python were guaranteed housing and food in addition to receiving a monthly salary of 50 to 60 USD, and given that the organization is a pharmaceutical company, most of the Party cadres dispatched there are college graduates; some researchers were sent with their families as well.

Meanwhile, earlier on the 14th, Radio Free Asia [RFA], citing Russian internet publication ‘Business Buryatia,’ also reported that “North Korea and Russia are planning to co-produce medical products in Chita, a city in Eastern Siberia as early as before the end of this year.”

Read the full story here:
Joint NK-Russia pharmaceutical company revamps operations
Daily NK
Kang Mi Jin
2015-07-21

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