Archive for the ‘Economic reform’ Category

North Korean government continues to strengthen market control

Friday, November 13th, 2020

By Benjamin Katzeff Silberstein

The trend continues, Daily NK reports, as the government apparently is strengthening direct Party control over the market system, all in line with the broader policy trend of stronger government control over the economy under Kim Jong-un. As I’ve pointed out in many previous posts and articles, stronger control doesn’t necessarily mean repression of market activity per se, but rather, the ability to more closely manage, direct and not least better tax market activity. This news reports suggests that that’s the case for this recent order as well (see my emphasis in bold):

North Korea recently crafted new market management regulations to give the Workers’ Party greater involvement in and control over markets, handing down orders to this effect to regional administrative organizations and market management offices.

A source in North Hamgyong Province told Daily NK on Tuesday that a written order entitled “Cabinet Decision on the New Market Management and Operation Regulations” was handed to the commercial departments of the provincial people’s committees and market management offices.

The new regulations were decided upon during an extended plenary meeting of the Cabinet on Oct. 19. Provincial people’s committees nationwide received copies of that decision one day in advance.

According to the source, who spoke on condition of anonymity, the new order calls for the establishment of a system where local provincial, municipal and county people’s committees manage the creation and dissolution of markets, with the commercial departments of the provincial people’s committees ultimately making reports to the Cabinet and the Central Committee’s Organization and Guidance Department. These changes ultimately broaden the ability of the Central Committee to monitor and exert control over the entire civilian economy.

In the past, only the commercial departments of people’s committees – which are administrative organizations – were involved in running the markets; party organizations had little to do with them. With the regulation changes, however, markets have now come under party management and control, according to the source.

The state appears to be trying a new tack with these regulation changes, the source said. According to him, North Korean authorities are “moving towards a system of direct management and control of markets nationwide through the Central Committee.” In the past, by contrast, the markets were managed and controlled by provincial people’s committees.

The order also encouraged local North Korean authorities to open new markets as needed so that they can “involve themselves in helping improve the lives of the people while also exercising control.” 

The order further instructed the commercial departments of people’s committees – in consultation with the Workers’ Party – to set the opening and closing times of markets according to the “time period” (season) and the “conditions” of each province, city and county, rather than making opening and closing times uniform across the country. It also ordered that fees on imported goods be increased.

The order directed people’s committees to regulate products in the markets while, at the same time, expand the list of goods available and – in consultation with party committees – set maximum and minimum prices. It further called for the promulgation and establishment of a system to fine those caught distributing goods at prices higher than those set by the state.

The order included a directive to restructure market use fees or payments to the state in accordance with the size of the markets or “distribution of urban populations,” and include these new fees and payments in “budget implementation.”

“The state’s new market management and operation regulations are still unknown to the general populace,” said the source, who further claimed that, “[The new orders] call for overlapping control of the markets and aim to raise market fees and other financial burdens, so they [ultimately] put ordinary people at a disadvantage.”

(Source: Kim Yoo Jin, “North Korea increases Workers’ Party control over markets,” Daily NK, November 6th, 2020.)

That is, the government wants market activity to be vigorous and rules and regulations to conform to what people actually want and need — but all under its own auspices.

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North Korea’s disaster management: a comment about a comment

Wednesday, November 4th, 2020

By Benjamin Katzeff Silberstein

It might seem a strange topic to post about on the day after the US elections, but perhaps some readers might like a break from the incessant commentary for something completely different.

If so, I highly recommend the article that former ambassador James Hoare published yesterday on 38 North, partially as a comment to my earlier article about North Korean disaster management. Ambassador Hoare gives a highly interesting historical perspective partially based on his own experiences in the country, noting that deforestation is a problem on the Korean peninsula much older than North Korea itself. He also notes that North Korea is far from the only country where homes constructed near riverbeds are regularly flooded, and argues that North Korea’s flooding problems are, after all, not so unusual in an international context.

I fully agree with all of these points, and the historical context is very valuable and crucial for understanding the current situation. If anything, there are perhaps two points of minor disagreement that I have with Hoare’s text.

First, the current North Korean situation is in large part a result of changes that could have been avoided. Deforestation was acutely exacerbated during the Arduous March, because people had few other alternatives than to cut down trees for firewood and to clear the ground for farming. Deforestation and flooding, therefore, are not phenomena entirely endemic or “natural” neither to the Korean peninsula nor to North Korea in particular, because things were not always this way. There is nothing natural or inherently necessary about North Korea’s economic system, as the many former communist states who have adopted programs of systemic overhaul have shown. Natural disasters may be natural, but each state has a choice in how to meet them.

Second, ambassador Hoare rightly points out that one should perhaps applaud the progress being made rather than to note that improvements have a long way to go. My article neither sought to decry nor applaud any improvements, but simply to show where things stand, based partially on conversations with several people who have themselves worked in natural disaster mitigation in the country.

And despite the improvements that have been made, there is a real and substantive risks that North Korea’s disaster management improvement plans and ambitions will stop at being just that. In this realm, there should be little doubt that the government’s ambitions are high and praiseworthy. The problem is that we have seen too many examples of ambitions without implementation to conclude that they will in fact be realized. Oftentimes, the policy process, opaque as it is, often appears to stall, and political interest and attention may wane. In this, too, North Korea is not alone in the world.

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North Korea reportedly suspends public bond program

Tuesday, October 27th, 2020

By: Benjamin Katzeff Silberstein

This blog has followed as closely as possible, over the past few months, the issue of North Korea’s public bonds program. It was in April of this year that news first surfaced of the North Korean government having issued public bonds, to drive in more cash to the state. The central worry with all this was that the state would use coercive methods to force people to purchase bonds, thereby creating significant distress among the public, and sucking out resources from the private economic sector.

For months, however, little subsequent reporting came on the bonds. This indicated that the state was perhaps not moving forward with the program all too aggressively.

It turns out this seems to have been what happened. Some days ago, Daily NK, who originally broke the story, reported that the North Korean government appears to have abandoned the project around early September, after what some claim was some initial success:

While the halting of the scheme appears to signal its overall failure, some North Korean officials believe that the bonds helped to quickly bring in funds the state needed to continue building the Pyongyang General Hospital and prepare for the Party Foundation Day celebrations on Oct. 10.

A Pyongyang-based source told Daily NK yesterday that the Central Committee’s Economic Affairs Department issued an order early last month to the Cabinet and its subordinate agencies that concerned “suspending the issuance of the bonds.”

The order noted that the “distribution of the state agency public bonds and state trade public bonds” would “temporarily be suspended”; that there would be a review of the bonds that were sold and those in stock by the State Planning Committee’s Financial Affairs Board; and, that bonds allotted to “each agency” would be collected, then gathered and “frozen” at the Central Bank. In short, the order stated that all bonds – except for those already in distribution or sold – will no longer be considered valid.

The source, who spoke on condition of anonymity, told Daily NK that the order further stated that “in accordance with an order from the central [leadership], a review of the current financial status of agencies that have used the public bonds will be conducted and [their] planned quotas for this year may be adjusted.” This suggests that the leadership is willing to “eliminate difficulties” faced by “lower-ranking work units” that “loyally” took part in the bonds scheme and that they may receive unspecified “benefits.”

The Economic Affairs Department’s order was reportedly issued after North Korean leader Kim Jong Un acknowledged the failure of his country’s economic policies at a Workers’ Party plenary session in August.

“[The] economy was not improved in the face of the sustaining [sic] severe internal and external situations and unexpected manifold challenges,” Kim reportedly said during the plenary session. He also announced during the meeting that a new five-year economic development plan would be presented at the Eighth Party Congress next January.

It appears that after Kim acknowledged the failure of the country’s existing “five-year economic development strategy” and presented plans to establish new economic goals the Central Committee’s Economic Department discussed revising the scale of the public bonds scheme.

According to the source, the Economic Affairs Department order stated that it “permits the revision of tasks related to the five-year people’s economic plan of last year and this year due to the distribution of public bonds.”

As part of efforts to increase the country’s foreign currency stores, North Korean authorities gave members of the donju, North Korea’s wealthy entrepreneurial class, and private business people “business rights” in return for having them purchase the bonds in foreign currency. Now that the bonds are not longer being issued, it appears that the Economic Affairs Department has been forced to revise its plans.

[…]

An internal investigation by the Central Committee in August found that less than 20% of the bonds earmarked for the donju (“state trade public bonds”) were sold off.

The authorities tried to woo the donju and private business people to buy the bonds by offering them “patriotism awards” and “business rights”; when that did not work, the authorities resorted to “forced allocations.” All of these efforts apparently had little effect in getting the bonds sold. The failure to sell the bonds seems to have been a major factor in the Economic Affairs Department suspending the sale of the bonds.

Within the Economic Affairs Department, however, some argue that the public bond scheme has not “completely failed” and that it “significantly helped” the country prepare for the Party Foundation Day celebrations despite facing unexpected obstacles such as the COVID-19 pandemic, typhoons, and floods. They also claim that the public bonds scheme was an “experimental yet daring attempt.”

In contrast to this assessment, the source argued that the “public bonds [scheme] was a measure that completely failed to consider the realities of the people’s economy [civilian economy].”

(Source: Jang Seul Gi, “N. Korea suspended public bonds scheme in early September,” Daily NK, October 23, 2020.)

The allocation of “business rights” sounds an awful lot like an attempt to more strongly formalize practices on which the economy already runs…

In any case, this signals a comforting sense of pragmatism among North Korean economic policy makers on this particular issue. It’s impossible to rule out, however, that the idea might come up again should the economic situation continue to deteriorate, and perhaps, regrettably, with stronger methods of coercion to back it.

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The Pyongyang General Hospital and Kim Jong Un’s “Benevolent Dictator” Economics

Tuesday, July 21st, 2020

By: Benjamin Katzeff Silberstein 

On Monday (July 20th), Kim Jong Un visited the construction site for the Pyongyang General Hospital and unleashed some rather scathing criticism against the management of the project. An excerpt from KCNA:

Noting that it is making a serious digression from the Party’s policy in supplying equipment and materials to go against the intention of the Party which initiated the construction for the people and mapped out its operation, he severely rebuked it for burdening the people by encouraging all kinds of “assistance”.

Saying that the construction coordination commission failed to solve all the problems in conformity with the Party’s policy line, he said in the strong terms that if such situation is left to go on, the noble plan and intention of the Party which initiated the glorious and worthwhile construction for the good of the people could be distorted and the image of the Party be tarnished.

He instructed the relevant departments of the Party Central Committee to investigate the performance of the construction coordination commission as a whole and replace all the officials responsible and make strict referral of them.

Pointing out that though the construction work of the hospital was being pushed ahead thanks to the patriotic zeal and devoted efforts of the builders […].

(Source: “Supreme Leader Kim Jong Un Gives Field Guidance to Pyongyang General Hospital under Construction,” Korean Central News Agency, July 20th, 2020.)

The Pyongyang General Hospital project was destined for hurdles from the very beginning, as this article explores. Kim has personally emphasized how central it is to finish hospital construction by the deadline of October 10th this year, when the Korean Worker’s Party will celebrate its 75th anniversary.

With such time pressure for construction, worksite conditions were always going to be problematic. The politically motivated deadline, moreover, increases the risk of shoddy construction work. Rather than serve the general public at large, the hospital, whenever finished, is likelier to cater to the sociopolitical elite who can pay their way and, perhaps, to medical tourism.

Kim’s criticism against construction officials, however, is about much more than the hospital construction project itself. It relates to the very structure of the North Korean system, and of communist economies in general. This sort of criticism really is a standard performance in a decades-old genre, where the supreme leader shows himself to be on the side of the people by pinning the blame for any problems and suffering among the population on lower-ranking officials.

Kim’s public criticism of the construction management officials is, in other words, not exceptional, but a standard mechanism and a feature of North Korea’s economic system. Much in North Korean governance may be subject to dynamic change, but the one constant is that the leader can hardly ever be at fault.* To hold this constant, someone else must be blamed when economic plans don’t go the way they should. Never mind that the leader often rules by directives that are often vague and given in off-the-cuff-statements, left to subordinates to interpret and implement as best as they can. Problems like this are almost inevitable in an economy like North Korea’s, still in structure very much a command economy despite significant relaxations over the past few decades.

Thus, when the Soviet Union’s industrialization plan didn’t proceed as intended, it had to be the fault of wreckers working for foreign powers. Stalin himself could never be at fault. In the same way, it cannot, by definition, be Kim’s fault that people are overburdened with requests for “assistance” to help build the hospital. Lower-level bureaucrats have to be the ones to blame, for overburdening the people, because the leader can never be associated with direct pain and suffering in people’s daily lives.

In fact, such “assistance” – often termed “voluntary” – is a mainstay of the North Korean economic system and pretty much has been ever since the beginning. Kim surely cannot have missed the pictures and news reports in his own state media about “active support” from “the people”, and different localities sending construction materials. This sort of “voluntary labor” to gather materials for state projects or work on construction sites is of course not voluntary at all, as staying away would be punishable.

It is a facet of everyday life in North Korea that doesn’t get nearly the attention it deserves, as it often takes up a substantial number of hours. It is also not a new phenomena. The North Korean state has always demanded such “voluntary” contributions from the people to make up for materials and labor that the state cannot produce. Naturally, officials will use whatever means required to make their deliveries, even if these means are forcible. This applies to financial assets as well. The wealthier the trading middle class grows, the more the state will subject them to loyalty payments and the like.

In North Korea’s current situation, what choice does Kim really have but to blame lower officials for failures, and admonish them to do better? The Pyongyang General Hospital is not the only grandiose, heavily publicized project that is doing poorly. The Wonsan-Kalma resort has also been plagued by shortages and delays. The government needs these projects not least for propaganda value, to show to the country that although difficulties abound, all is not hopeless, the economy is still making progress, and people’s living standards will improve. So when none of the projects carrying this message are working out, the government has a problem.

In normal times, the state could have dismantled more economic regulations to make it easier for people to conduct trade and private economic activity. Indeed, though it is difficult to quantify, the state giving room for market mechanisms has been the most important factor for the significant improvements in the North Korean economy over the past few years.

Right now, this is difficult to do, because the state needs to extract more resources, not fewer. Over the past few years, the state has grown increasingly short of foreign currency and other assets, first because of sanctions, and later because of the Covid-19 border shutdown (which has partially ended). As a result, we’ve seen the state cracking down more and more on private business and market actors, to bring in resources as other avenues dry up.

The more difficult things get for the North Korean economy, the more demands increase for “loyalty payments” from private citizens, to fund the mega-projects that Kim has staked so much credibility on. We can expect to see more officials lose their jobs in the future in the same manner as those who got axed after Kim’s hospital construction field guidance.

 

*Such self-criticism does of course happen, but its rarity is attested to by the fact that it (rightfully) makes news headlines. One recent example is Kim Jong Un’s 2017 New Year’s Address.

 

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What explains North Korea’s puzzling price stability?

Friday, July 17th, 2020

By Benjamin Katzeff Silberstein

Looking at the latest market price data from North Korea, things do not look like external conditions dictate that they should. Food prices are…low. Very low. In fact, for the July 1st price report, the average rice price for the three North Korean cities was the lowest on record since April 2019. Gasoline prices haven’t been this low since June of 2018. (Click for larger graphs.)

Average rice prices for Pyongyang, Sinuiju, and Hyesan. Data source: Daily NK.

Average gas prices for Pyongyang, Sinuiju, and Hyesan. Data source: Daily NK.

 

By themselves, these prices are not so surprising. Prices generally fluctuate with seasonal variation, in North Korea as everywhere else. Both gas and rice prices tend to drop around this time of year, at least over the past few years.

But there is nothing normal about 2020. In addition to harsh sanctions, Covid-19 has made almost everything more difficult to acquire from abroad, from fertilizer and food, to machine parts for industry. So these lower prices are puzzling, in a way because they would seem to indicate stability and normalcy at a time when there is nothing stabile and normal about the situation.

There are (at least) two possible explanations:

One is that North Korea’s external conditions are indeed steadily improving, and returning to some sort of normalcy. Strong signs suggest that trade between North Korea and China is picking back up, as relations deteriorate between the US and China and the North Korean issue becomes less and less central on the global stage. As Daily NK has reported, North Korea has been importing items such as construction materials and food from China, both in June and July. Gas prices, moreover, may partially be untouched by Covid-19 because much of the trade goes through a pipeline near Dandong.

Another possibility is that prices are going down because people simply cannot afford higher prices. This report on train ticket prices is perhaps instructive. In the words of one source inside North Korea: “Despite the fall in the number of train passengers, [black market vendors] seem to believe that raising prices would [make it harder to sell tickets],” the source said. “In other words, you could say that a ‘market price’ [for tickets] has appeared that train riders are willing to accept.” In other words, if consumers on a given market have a reservation prices – the highest price they’re willing to pay – underneath what sellers would really charge given the supply at hand, sellers can either cut down on their profit or minimize their losses by selling at a lower prices than those dictated by economic conditions.

As always, information is in short supply, and these market prices raise more questions than they answer.

Update, 23/7/2020:

Part of what’s so puzzling about all this is that reports keep suggesting that the regime is cracking down continuously and with growing vigor against cross-border smuggling and the like. According to this report by Daily NK, Pyongyang recently ordered provincial authorities to intensify their border monitoring.

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North Korea promoting Mt Kumgang tourism

Thursday, July 16th, 2020

By: Benjamin Katzeff Silberstein

Clearly, now is not the best time for tourism promotion. One might wonder what target audience is for the North Korean promotion website for tourism to Mt Kumgang. The website itself isn’t new, but as Yonhap/Korea Herald reports here, it’s recently been updated for the first time in a while. The update of a website perhaps isn’t the most riveting piece of news, but at the very least, it means that someone in some office in North Korea took time out of their day to keep this website maintained and updated with new pictures.

Even in non-Covid times, however, the success of Mt Kumgang under fully North Korean management is doubtful. Without cooperation with foreign partners, Mt Kumgang may meet the same fate as Masikryong, not exactly overcrowded with foreign visitors even before Covid hit. As I wrote in this column when North Korea confiscated Mt Kumgang, the success of the resort likely hinges upon South Korean and Japanese visitors coming in addition to tourists from China.

You can find the North Korean website in question here.

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Autarky, self-reliance and urban privilege in Kim Jong-un’s June politburo remarks

Monday, June 8th, 2020

By: Benjamin Katzeff Silberstein

On Monday June 8th, the Korean Worker’s Party politburo held a meeting. Kim Jong-un made several interesting remarks about the overall state of the economy, as Reuters reported here. The full Rodong Sinmun recounting of Kim’s statements is interesting and worth reading in its entirety. More and more state rhetoric seems to presume autarky as the default approach for economic development which is somewhat worrying, but perhaps just a reflection of where the country’s economic conditions stand as of now.

It’s also interesting to note Kim’s mention of the situation specifically in Pyongyang. Perhaps he means to signal to the political elites that he is looking out for their interests and quality of life, and that things will improve. What that means for the rest of the country is less clear. Pyongyang is symbolically important, but the growing disparity between the capital city and the rest of the country should concern the government.

Rodong’s rendition below, in both the original Korean and an English translation.

Political Bureau of C.C., WPK Meets under Guidance of Supreme Leader Kim Jong Un

The 13th Political Bureau meeting of the 7th Central Committee of the Workers’ Party of Korea (WPK) was held on June 6 and 7 at a time when the entire Party, the whole country and all the people have vigorously turned out in the general offensive for glorifying the 75th founding anniversary of the WPK as the great festival of victors true to the great idea and strategy of the Party for making a breakthrough head-on and its action program.

Kim Jong Un, chairman of the WPK, chairman of the State Affairs Commission of the Democratic People’s Republic of Korea and supreme commander of the armed forces of the DPRK, was present in the meeting.

Attending the meeting were members and alternate members of the Political Bureau of the C.C., WPK.

Vice-premiers of the Cabinet, some chairpersons of provincial party committees and leading officials of committees and ministries were there as observers.

Upon authorization of the Political Bureau of the C.C., WPK, Supreme Leader of the Party, state and armed forces Kim Jong Un presided over the meeting.

The meeting discussed in depth some crucial issues arising in further developing the self-sufficient economy of the country and improving the standard of people’s living.

Discussed as the first agenda items were some urgent problems arising in developing the chemical industry of the country in a well-defined framework.

He indicated orientation and way to reconstruct the chemical industry as required by Juche and modernity and put it on a track of sustainable development.

Repeatedly stressing that the chemical industry is the foundation of industry and a major thrust front of the national economy, he recollected that the Party, regarding the chemical and metallurgical industries as twin pillars of the self-supporting economy, set forth the policy of founding the C1 chemical industry to suit to the specific conditions of the country and to meet the world’s trend at its Seventh Congress and has since pushed forward with the work.

Recalling that the Fifth Plenary Meeting of the Seventh Central Committee of the Workers’ Party of Korea discussed the issues of establishing the C1 chemical industry and of building the fertilizer production capacity as core points in developing the chemical industry, the Supreme Leader clarified the plan and will of waging a bold struggle to put the overall chemical industry on a Juche and modern basis.

The premier of the Cabinet made a report on the review by the scientific group of the scientific and technical guarantee and economic efficiency of founding C1 chemical industry, and the present situation of the chemical industry.

The meeting heard suggestions on earlier completion of founding C1 chemical industry and had in-depth discussion of issues of opening a broad avenue to the development of chemical industry.

The chemical industrial field has to be activated first to propel and guarantee the economic development of the country, the Supreme Leader said, setting forth immediate tasks for propping up the chemical industry as a whole.

He stressed the need to give top priority to increasing the capacity for producing fertilizer, to begin with, in the chemical industrial field and push forward this work and put particular emphasis on promptly settling scientific and technological issues of founding potassic fertilizer industry based on our own raw materials.

Indicating orientation and immediate goal for energizing existent chemical factories, the Supreme Leader pointed out the need to conduct in a far-sighted way the work to explore chemical industrial field based on new raw materials.

He underlined the need to actively propel the work to perfect and update in a modern way the structure of sectors of the chemical industry.

He clarified that the new structure of sectors of Juche-based chemical industry should be multi-lateral production system, which is saving energy, labor and natural resources and which is technology-intensive and development-and-creation-oriented, that produces nonstop all kinds of chemical goods enough to meet demand thoroughly based on locally available raw and other materials.

He called for building reliable national level scientific research force, actively pushing forward the development of catalyst and laying a material foundation for developing catalyst technology, catalyst industry.

He stressed the importance to carry out substantial work to build talent force in chemical industrial field and to bring up a greater number of talents of practical type who are development-and-creation-oriented in the field of education.

As the second agenda item the meeting discussed immediate issues of ensuring living conditions for citizens in the capital city.

Pointing out in detail the issues that have to be urgently settled to ensure living conditions of citizens in the city, the Supreme Leader stressed to take strong state measures for ensuring the living conditions of people including the construction of dwelling houses.

Important issues for settling issues arising as regards the living conditions of Pyongyang citizens were discussed at the meeting.

A resolution on the first and second agenda items was adopted with full approval at the meeting.

As the third agenda item, the meeting examined before ratification the suggestion on modifying some rule-related matters arising in the present party work and reflecting them in a draft amendment to the party rules.

The fourth agenda item was an organizational matter.

There was a by-election of an alternate member of the Political Bureau of the WPK Central Committee. Kim Yong Hwan was by-elected as an alternate member of the Political Bureau of the WPK Central Committee.

Members and alternate members of the WPK Central Committee were recalled and elected to fill vacancies. Ko Kil Son, Kim Jong Nam, Song Yong Gon were by-elected as members from alternate members while Ri Jae Nam, Kwon Thae Yong and Kwon Yong Jin as members of the WPK Central Committee.

Rim Yong Chol, Kang Il Sop, Sin In Yong, Ri Kyong Chon, Kim Ju Sam, Kim Jong Chol, Choe Kwang Jun, Yang Myong Chol, Kim Yong Chol, Pak Man Ho were by-elected as alternate members of the WPK Central Committee.

The 13th Political Bureau meeting of the 7th Central Committee of the WPK marked an important occasion in further consolidating the foundation and potential of the self-supporting national economy, giving top priority to the people’s dignity, rights and interests under the uplifted banner of people-first principle and opening up a broad avenue to improving the standard of people’s living to meet the requirements of the prevailing situation of the revolution.

(Source: Political News Team, “Political Bureau of C.C., WPK Meets under Guidance of Supreme Leader Kim Jong Un,” Rodong Sinmun, June 8th, 2020.)

조선로동당 중앙위원회 제7기 제13차 정치국회의 진행

우리 당의 위대한 정면돌파사상과 전략, 실천강령을 높이 받들고 당창건 75돐을 승리자의 대축전으로 빛내이기 위한 전당적, 전국가적, 전인민적총진군의 불길이 세차게 타번지고있는 속에서 조선로동당 중앙위원회 제7기 제13차 정치국회의가 6월 7일에 진행되였다.

조선로동당 위원장이시며 조선민주주의인민공화국 국무위원회 위원장이시며 조선민주주의인민공화국무력 최고사령관이신 우리 당과 국가, 무력의 최고령도자 김정은동지께서 정치국회의에 참가하시였다.

정치국회의에는 조선로동당 중앙위원회 정치국 위원, 후보위원들이 참가하였다.

내각부총리들과 일부 도당위원장들, 위원회, 성 책임일군들이 방청으로 참가하였다.

당중앙위원회 정치국의 위임에 따라 김정은동지께서 회의를 사회하시였다.

정치국회의에서는 나라의 자립경제를 더욱 발전시키며 인민들의 생활을 향상시키는데서 나서는 일련의 중대한 문제들이 심도있게 토의되였다.

첫째의정으로 나라의 화학공업을 전망성있게 발전시키는데서 나서는 당면한 몇가지 문제에 대하여 토의하였다.

경애하는 최고령도자동지께서는 화학공업의 구조를 주체화, 현대화의 요구에 맞게 개조하고 지속적인 발전궤도에 올려세우기 위한 방향과 방도를 밝혀주시였다.

경애하는 최고령도자동지께서는 화학공업은 공업의 기초이고 인민경제의 주타격전선이라고 거듭 강조하시면서 우리 당이 화학공업을 금속공업과 함께 자립경제의 쌍기둥으로 내세우고 당 제7차대회에서 우리 나라의 실정과 세계적추세에 맞게 탄소하나화학공업을 창설할데 대한 방침을 제시한 후 그 사업을 본격화하여온데 대하여 말씀하시였다.

경애하는 최고령도자동지께서는 당중앙위원회 제7기 제5차전원회의에서 화학공업발전의 핵심사항으로 탄소하나화학공업창설과 비료생산능력조성문제를 취급한데 대하여 언급하시면서 화학공업전반의 주체화, 현대화를 실현하기 위한 투쟁을 통이 크게 벌려나갈 구상과 의지를 표명하시였다.

회의에서는 내각총리가 탄소하나화학공업창설의 과학기술적담보와 경제적효과성을 재검토심의한 과학그루빠의 사업정형과 화학공업부문의 현 실태에 대한 보고를 하였다.

회의에서는 탄소하나화학공업창설을 다그쳐 끝내기 위한 의견들을 청취하고 화학공업발전의 새 활로를 열어놓기 위한 문제들을 진지하게 협의하였다.

경애하는 최고령도자동지께서는 나라의 경제발전을 추동하고 담보하기 위해서는 화학공업부문이 먼저 들고일어나야 한다고 하시면서 화학공업전반을 추켜세우기 위한 당면과업들을 제시하시였다.

경애하는 최고령도자동지께서는 화학공업부문에서 무엇보다도 비료생산능력을 늘이기 위한 사업을 최우선적인 문제로 보고 대하며 이 사업을 강하게 밀고나갈데 대하여서와 우리의 원료에 의거한 카리비료공업을 창설하는데서 나서는 과학기술적문제들을 시급히 해결할데 대하여 특별히 강조하시였다.

경애하는 최고령도자동지께서는 현존화학공장들을 활성화하기 위한 방향과 당면목표를 제시하시고 새로운 원료에 의거하는 화학공업분야를 개척하기 위한 사업도 전망성있게 벌려나갈데 대하여 지적하시였다.

경애하는 최고령도자동지께서는 화학공업의 부문구조를 완비하고 현대적으로 개건하기 위한 사업을 적극 추진할데 대하여 강조하시였다.

경애하는 최고령도자동지께서는 국내원료와 자재에 철저히 의거하여 각종 화학제품들을 수요대로 중단없이 생산해내는 에네르기절약형, 로력절약형, 자원절약형, 기술집약형, 개발창조형의 다방면적인 생산체계를 갖추는것이 주체화된 화학공업의 새 부문구조로 되여야 한다고 천명하시였다.

경애하는 최고령도자동지께서는 국가적인 과학연구력량을 튼튼히 꾸리고 탄소하나화학공업에 쓰이는 촉매개발을 적극 다그치면서 촉매기술, 촉매공업을 발전시키기 위한 물질적토대를 갖출데 대하여 지적하시였다.

경애하는 최고령도자동지께서는 화학공업부문의 인재력량을 꾸리기 위한 사업을 착실히 해나가며 교육부문에서 개발창조형의 인재, 실천형의 인재들을 더 많이 키워낼데 대하여 말씀하시였다.

정치국회의에서는 둘째의정으로 수도시민들의 생활보장에서 나서는 당면한 문제들이 토의되였다.

경애하는 최고령도자동지께서는 수도시민들의 생활보장에서 시급히 해결해야 할 문제들을 구체적으로 지적하시면서 살림집건설을 비롯한 인민생활보장과 관련한 국가적인 대책을 강하게 세울데 대하여 강조하시였다.

회의에서는 평양시민들의 생활에서 제기되는 문제들을 풀기 위한 중요문제들이 토의되였다.

정치국회의에서는 첫째의정과 둘째의정에 대한 결정서가 전원일치로 채택되였다.

정치국회의에서는 셋째의정으로 현행당사업에서 제기되는 일련의 규약상문제들을 일부 수정하고 당규약개정안에 반영할데 대한 의견을 심의비준하였다.

정치국회의에서는 넷째의정으로 조직문제를 토의하였다.

당중앙위원회 정치국 후보위원을 보선하였다.

김영환동지를 당중앙위원회 정치국 후보위원으로 보선하였다.

당중앙위원회 위원, 후보위원들을 소환 및 보선하였다.

고길선동지, 김정남동지, 송영건동지를 당중앙위원회 후보위원에서 위원으로, 리재남동지, 권태영동지, 권영진동지를 당중앙위원회 위원으로 보선하였다.

림영철동지, 강일섭동지, 신인영동지, 리경천동지, 김주삼동지, 김정철동지, 최광준동지, 양명철동지, 김영철동지, 박만호동지를 당중앙위원회 후보위원으로 보선하였다.

조선로동당 중앙위원회 제7기 제13차 정치국회의는 조성된 혁명정세의 요구에 맞게 자립경제의 토대와 잠재력을 더욱 튼튼히 다지며 인민대중제일주의의 기치높이 인민의 존엄과 권익을 최우선, 절대시하고 인민생활향상의 활로를 열어나가는데서 중요한 계기로 된다.

(Source: Ponsajŏngch’ibodoban, “Chosŏllodongdang Chungangwiwŏnhoe Che7ki che13ch’a Chŏngch’igukhoeŭi Chinhaeng,” Rodong Sinmun, June 8th, 2020.)

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North Korea’s government bonds, and other economic coercion

Tuesday, May 19th, 2020

By: Benjamin Katzeff Silberstein 

For long, one of the main mysteries of the North Korean economy was how the government managed to keep the economy afloat despite what seemed, for a long time, like fairly stern sanctions implementation by China. North Korea’s market prices for both food and foreign currency remained largely stabile, while price for products such as gas perhaps at times were more volatile than normal, but still not at crisis levels. One of the most puzzling facts was that there were very few signs that state finances were hurting, although by all metrics, they should.

There are several reasons why they most likely did, quite severely, although it wouldn’t necessarily show up in market price data. Perhaps the state sector and marketized sectors are not as closely intertwined as many have thought, or perhaps the government was conducting stabilizing measures that somehow actually worked, either by coercion or market interventions.

The recent news that the government has issued bonds, however, is one of the more concrete signs of significant distress in North Korea’s state finances. In mid-April, Daily NK reported that the government would issue public bonds for the first time in 17 years, partially to finance construction of the Pyongyang General Hospital by ordering institutions involved in the project to pay subcontractors in bonds. A few days later, Daily NK confirmed that bonds had been issued, and that they would be used instead of cash to pay factories for materials necessary for state projects and the like. 40 percent of the bonds would be sold to individuals and 60 to enterprises. Sources that Daily NK spoke to were critical – unsurprisingly – and said that the measure was part of a general drive by the regime to soak up desperately needed cash, and not least foreign currency:

“The government failed to raise the funds it needed when it last floated bonds back in 2003,” another source in the country told Daily NK.

“The government is returning to this already failed way of doing things and only factories and business people will suffer,” he added.

Factories are being pressured to purchase the bonds and donju may face legal punishment or damage to their businesses if they fail to buy the bonds, Daily NK sources warned.

In response to the plan to float public bonds, high-level regime officials are reportedly starting to hoard US dollars. The Ministry of State Security (MSS), the country’s feared security agency, reportedly mobilized teams on Apr. 17 to crack down on those exchanging North Korean won for foreign currency.

“Money dealers have disappeared after it was made known that the MSS would arrest them for peddling dollars,” the first source told Daily NK.

“Donju in Pyongyang are desperate to buy up dollars but there’s nowhere to buy them,” he added.

(Source: “North Korea has begun issuing public bonds,” Daily NK, 22/4/2020.)

It might be worth pausing here to remember what bond are and why the North Korean government has (reportedly) issued them. Put simply, a bond is a loan that an investor – the entity that purchases the bond – gives to the issuer of the bond. Of course, it is very normal and common for governments to issue bonds. But in the case of North Korea, the problem is that investors have good reasons to have little faith that the state will actually be able to hold up its end of the bargain. In that case, the coercive bond sales essentially entail the state expropriating funds from individuals and institutions. The full details of the conditions of the bonds remain unclear, to the present author’s knowledge.

The danger is that when donju and other North Koreans with means don’t want to purchase bonds, the state may use force and coercion to make them do so even when they don’t see it as being in their economic interest. To many significant market actors, it’s likely already clear that those who refuse to purchase bonds or accept them as payment – if they even have that choice – may run into obstacles in running their businesses in the future. Judging by the reports so far, it seems that any organizations that require state funds to purchase raw materials or supplies now use bonds instead of cash, though it’s hard to imagine that this practice really extends to all such actions. In any case, for all the multitudes of ways in which the North Korean economy has changed over the past few years, the omnipotence and autonomy of the state, when it chooses to exercise it, remains.

When economic actors don’t want to purchase bonds voluntarily, coercion is another route to take. In a country such as North Korea, few economic actions are entirely non-political. Therefore, we should not be all that surprised that an owner of mine shafts near Pyongyang has reportedly been executed for his refusal to buy bonds. Part of the reason for the harsh punishment was his criticism of the state and the Party, but nonetheless, refusing to buy bonds was itself a political action:

The source told Daily NK that the sales department director had called the meeting to echo calls by the government to “spend their dollars and participate in the national public bond purchasing plan.” While the other mine shaft owners quietly listened, Lee reportedly asked the director what would happen if he chose to “not buy any public bonds.”

The sales department director responded that the act would be considered “reactionary” because it would mean refusal to carry out party policy.

Lee responded sarcastically, asking in what way the “state” and the “complex” had helped him build up his mining business. His response led to a war of words between the two men.

“The sales department director immediately reported the events of that day to the complex’s party committee. The committee convened a ‘security committee meeting’ [안전위원회] that ended up reporting Lee to the Ministry of State Security [MSS],” the source said.

Security committee meetings are convened at the provincial, municipal and county levels to discuss and make decisions on urgent matters. Participants typically include the chairman of the relevant party committee, the chairman and vice-chairman of the local people’s committee and management-level security officials.

The MSS did not immediately take action against Lee. It was not until May 6 that agents from the security agency visited the complex, forced all the complex’s workers to gather in the facility’s Laborer Hall, and then arrested Lee in front of them for “verbal reactionism” (말 반동). Lee was charged with “criticizing party policy” and he was immediately executed without trial or any other due process.

(Source: Ha Yoon Ah, “N. Korean businessman executed for refusing to buy gov’t bonds,” Daily NK, May 12th, 2020.)

The state is simultaneously using less coercive means to induce donju to invest in state enterprises. Nonetheless, the government is unlikely to raise the sorts of funds it hopes to through the bonds without serious means of coercion. It’s also not the only recent measure that suggests that the regime is quite seriously short on cash, and foreign currency in particular. Radio Free Asia reported on May 11th that the state has banned the use of foreign currency for most transactions, to force people to exchange their foreign currency for domestic at state institutions.

We don’t know the scale at which measures such as these are being implemented. They are unlikely to work in the longer run and may well be rolled back in time. But still, much damage may be done in the process.

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North Korean businessman executed for refusing to buy bonds

Tuesday, May 12th, 2020

Benjamin Katzeff Silberstein

A very disturbing report from Daily NK. Much of North Korea’s economic governance does still rest on sheer management by brute force and extortion:

The owner of mine shafts in a suburban area of Pyongyang who refused to buy government bonds was recently arrested and quietly executed, Daily NK has learned.

“The owner, a Mr. Lee, was arrested at the Laborer Hall in the Kangdong Area Coal-mining Complex on May 6 and executed soon after,” a source in North Korea told Daily NK on May 7.

DANGEROUS WORDS

In late April, Lee was called to a meeting with other mine shaft owners by the complex’s sales department director. Lee’s open refusal to purchase government bonds at this meeting was reportedly the reason why he was punished so harshly.

North Korea began requiring organizations requiring state funds to purchase raw materials or supplies in the country to use bonds instead of cash from Apr. 20.

The source told Daily NK that the sales department director had called the meeting to echo calls by the government to “spend their dollars and participate in the national public bond purchasing plan.” While the other mine shaft owners quietly listened, Lee reportedly asked the director what would happen if he chose to “not buy any public bonds.”

The sales department director responded that the act would be considered “reactionary” because it would mean refusal to carry out party policy.

Lee responded sarcastically, asking in what way the “state” and the “complex” had helped him build up his mining business. His response led to a war of words between the two men.

“The sales department director immediately reported the events of that day to the complex’s party committee. The committee convened a ‘security committee meeting’ [안전위원회] that ended up reporting Lee to the Ministry of State Security [MSS],” the source said.

Security committee meetings are convened at the provincial, municipal and county levels to discuss and make decisions on urgent matters. Participants typically include the chairman of the relevant party committee, the chairman and vice-chairman of the local people’s committee and management-level security officials.

The MSS did not immediately take action against Lee. It was not until May 6 that agents from the security agency visited the complex, forced all the complex’s workers to gather in the facility’s Laborer Hall, and then arrested Lee in front of them for “verbal reactionism” (말 반동). Lee was charged with “criticizing party policy” and he was immediately executed without trial or any other due process.

SEVERE PUNISHMENT

It is rare in North Korea for such a punishment to be meted out so quickly – and on the same day – as an arrest. North Korean authorities may have aimed to make Lee an example of what happens when business people refuse to take part in party policy.

“[Other] mine shaft owners appear to be accepting the [government’s] plans to have enterprises buy up public bonds, but they are complaining about it nonetheless,” the source said.

The state reportedly seized Lee’s mine shafts along with large cargo trucks Lee purchased with his own money. North Korean authorities also raided Lee’s home and seized his possessions while his wife and two children were sent to a prison camp.

(Source: Ha Yoon Ah, “N. Korean businessman executed for refusing to buy gov’t bonds,” Daily NK, 12/5/2020.)

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“New” bridge between China and North Korea getting a little closer to completion. But what does it really mean?

Tuesday, May 12th, 2020

By: Benjamin Katzeff Silberstein

Another day, some more progress on the so-called “bridge to nowhere”. It’s now been around six years since construction started on the new bridge between North Korea and China, crossing the Yalu river. The currently operational one between Dandong and Sinuiju already (in normal times) operates over capacity, and frequently needs repairs. Last year, in June, Xi Jinping supposedly promised Kim Jong-un funding to finally complete the bridge and to connect it to North Korea’s road networks to make it operational. Recently, work has finally taken off again on the North Korean side to do just that. Dong-a Ilbo:

North Korea resumed the construction of a road on last Sunday, according to multiple sources and photos posted on a Chinese social media platform.

With the help of China’s investment, the six-lane bridge was completed in 2014 as a replacement of the Sino–North Korean Friendship Bridge, an old and narrow bridge built in 1943. The New Yalu River Bridge was expected to boost trade between the two nations.

(Source: Wan-Jun Yun, “New Yalu River Bridge gears up to open six years after its construction,” Dong-a Ilbo, May 4th, 2020.)

The Dong-a headline appears somewhat premature, however, since customs buildings and other essential infrastructure still isn’t built. As Daily NK reports:

The opening of the bridge has long been delayed because North Korea had demanded that China pay for the construction of the North Korean road to the bridge.

While Daily NK has been unable to confirm whether any agreement on the payment issue has been reached, the efforts to complete the road suggest that the two countries have reached some sort of agreement.

There may, however, be obstacles in the way of the bridge opening any time soon.

“Customs-related buildings need to be built even if the road is finished,” the source said.

“The closure of the Sino-North Korean border due to COVID-19 and international sanctions on North Korea make it difficult to know when the bridge will open,” he added.

North Korean authorities are also highly sensitive to the threat of the COVID-19 pandemic despite their moves to restart the road construction.

“Sinuiju residents were practically confined to their homes when COVID-19 posed a clear threat to the city, but the authorities have restarted construction – perhaps because the threat has gone away,” the source said.

“That doesn’t mean, however, that Chinese engineers and materials are entering the country [in quantities] like before,” he added.

A Chinese company had been managing the construction of the North Korean road to the bridge before work was halted. Now the North Koreans have completely taken over the construction process – none of the Chinese workers and their equipment are present at the construction site anymore, the source explained.

The lack of Chinese labor and equipment may be due to the North Korean government’s fears over COVID-19, but the country’s efforts to finish the road suggest that North Korean leaders are keen to use the bridge when Sino-North Korean trade begins again.

(Source: Mun Dong Hui, “N. Korean road connected to New Yalu River Bridge nears completion,” Daily NK, May 11th, 2020.)

There are two quite different ways of looking at these developments. I’d argue the bridge is, despite how things may seem, not a very good metric for the prospects of trade between China and North Korea. Surely, China would not likely invest in a new bridge unless it envisioned growing economic activity along the border. There are good reasons to believe that this is indeed the case, and that these border regions in particular regard North Korea as a driver for local growth and advantage. At the same time, planned economies such as China often make investment decisions for reasons unrelated to actual economic prospects. Perhaps infrastructure like this is also intended to boost the region itself, or at least, make it look like that is what the central government is doing. Moreover, it is also possible that China and North Korea merely envision replacing the current bridge over time. Last but not least, it may well be a political gesture of good faith and friendship to North Korea. Or, most likely, a mix of all of the above.

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