It is getting harder to know specific information about the DPRK’s mobile phone network…such as how many subscribers have signed up or how revenues/profits are doing.
Under the terms of the VimpelCom transaction, VimpelCom, Weather II and OTH agreed on a demerger plan (the Demerger”) pursuant to which the Company‟s investments in certain telecom, media and technology assets (the “SpinOff Assets”), which were not intended to form part of the VimpelCom business going forward, would be transferred to a new company, Orascom Telecom Media and Technology Holding S.A.E. (“OTMT”). The Demerger was performed in accordance with the guidelines of the Egyptian Financial Supervisory Authority and in particular decree no. 124 of 2010 and was completed in December 2011. The split of OTH shares by the way of the Demerger resulted in OTH shareholders holding the same percentage interest in OTMT as they held in the Company. The Demerger plan was initially approved in a shareholders meeting dated 14 April 2011 and subsequently on 23 October 2011. Approval from the Egyptian Financial Supervisory Authority was received in December 2011.
As a result of the Demerger, during November and December 2011, ownership of the following Spin-Off Assets was transferred from the Company to OTMT:
[…]
75% ownership in CHEO Technology Joint Venture Company, together with all other assets and businesses located in
North Korea;
95% ownership in Orabank NK;
[…]
Other than the reference above, the Q1 report does not mention KoryoLink or even the DPRK. As you would expect, KoryoLink is not mentioned in Orascom’s Q2 2012 Shareholder Report either.
A joint venture between OTH [Orascom Telecom Holdings] and the state-owned KPTC [Korea Post and Telecommunications Company] and included as part of the assets held by OTMT following the demerger. OTMT holds, a 75% stake in [Cheo Technology Joint Venture Company] with KPTC. The company is North Korea’s only 3G Mobile operator. By June 2011, Koryolink’s network covered more than 75% of North Korea’s population (estimated at 24.5 million).
Being the first company of its kind and scale in North Korea, koryolink established many precedents; a first of its kind call center to provide customer service; a launch announcement in major newspapers and on radio despite almost non-existent marketing and advertising industries; and the implementation of a koryolink advertising billboard, the first of its kind in Pyongyang.
KPTC is the “Korea Post and Telecommunications Company” which is nominally controlled by the DPRK’s Ministry of Post and Telecommunications.
The OTMT web page does not mention OraBank at all. According to this organization chart, however, it appears to be held by a separate holding company under the OTMT umbrella, the Oracap Holding Co./Oracap Far East Ltd. I have not been able to find out much more than that.
Pictured above (Google Earth) is Changsong Town in North Pyongan Province.
There has been a lot of talk about economic reform in the DPRK in recent weeks (see here). One of the aspects of these reforms has been greater local/regional control over economic policies and outcomes.
On August 9, the Daily NKreported that Changsong is “again being put forward as a model for the spontaneous economic development of regional cities and counties as the regime works to foster a different mindset prior to impending economic changes”. According to the article:
On the 8th, Rodong Shinmun published an editorial entitled, ‘Let Our Country Be Prosperous in the Spirit of the Changsung Joint Session’ in an edition that also featured seven other related articles. The articles served as a timely reminder of the joint session of central cadres, their provincial counterparts and economic sector officials held on August 7th and 8th in Changsung County.
[…]
Utilizing the history lesson, Rodong Shinmun emphasized, “The fundamental essence of the Changsung Joint Session was increasing the role of the county in developing regional industry and agricultural accounting, and enhanced the people’s lives by the strength of our household itself.”
It went on, “In every city and district, we must resolve to decisively raise the productivity of our land to solve issues of food insecurity, and must thoroughly implement the Party’s agricultural revolution.”
On days prior, Rodong Shinmun, KCNA and other state-run media outlets also reported in various forms the idea that ‘all the counties in the country are going to follow the example of Changsung County.’ For example, on the 7th it introduced a new food processing plant in Changsung County itself.
Analyzing these moves, Kwon Tae Jin, a researcher with the Korea Rural Economic Institute told Daily NK, “When it comes to the agricultural sector, the county is at the center of everything. This is a way of passing the center’s role to the regions at a time when the center (the Ministry of Agriculture) cannot play its role properly.”
“The purpose of emphasizing the responsibility of the Cabinet and the counties at the same time is to readjust the system,” Kwon added, while the head of North Korea Strategy Center, Kim Kwang In added, “Since the center cannot do what it needs to, they want the regions to deal with survival.”
The move is also intended to raise the likelihood of the 6.28 Policy succeeding. In Kim’s words, “The regime is pushing regional self-reliance prior to the announcement of the new policy.”
Interestingly, this narrative paints the 6.28 policy as an effort to decentralize economic production because Pyongyang can no longer afford the old policies, yet for propaganda purposes, it is being portrayed as the continuation of a movement personally launched by Kim Il-sung 50 years ago!
Changsong has indeed seen a lot of recent construction. According to KCNA (2012-8-4):
County, Model in Local Economic Development
Pyongyang, August 4 (KCNA) — Changsong County, North Phyongan Province of the DPRK, has become a model in the development of local economy in the new century. Great changes have taken place in all aspects of production and construction in a matter of little over one year.
Local industrial factories have been placed on a modern and scientific basis to lay a firm foundation for reenergizing production and improving the standard of people’s living. The county seat has taken on a new appearance to suit the specific features of a county.
President Kim Il Sung provided field guidance of devotion to the county, once known as remote mountainous county, more than a hundred times in his lifetime with a noble intention to turn it into a model to be followed by all other counties.
There began a new history of mountains of treasures in the county under his care. As a result, the Changsong joint meeting of local party and economic officials was held in the county in August 1962.
Leader Kim Jong Il made sure that the spirit of the joint meeting was fully displayed generation after generation. He gave an instruction to the county to raise a new torch for effecting a dramatic turn in the local industry in November 2010.
The dear respected Marshal Kim Jong Un has led a drive to face-lift the county as required by the building of a thriving nation so that the year 2012, the 50th anniversary of the joint meeting, may shine as a proud year and a year of new changes in the development of local industry.
All local industrial establishments in the county have undergone dramatic changes as required by the new century in a matter of little over one year.
All production processes at the foodstuff factory ranging from feeding of raw materials to packing and forwarding have been automated and its overall processes sterilized to ensure high quality and hygienic safety of products.
Its textile mill has installed new type machines. Technological updating has made brisk headway at all industrial establishments in the county including paper, furniture and chemical and daily necessities factories.
There has sprung up a new food processing factory. All its processes computerized, the factory mass-produces processed meat and vegetables, varieties of soft drink, and confectionary.
A garment factory with big capacity has been built to meet the county’s need for school uniforms and solve the issue of clothing by itself.
The appearance of the county has changed beyond recognition.
The county erected a mosaic depicting the portraits of the smiling peerlessly great persons. The Changsong revolutionary museum and the county hall of culture have been successfully renovated as centers for the education in the revolutionary history and people’s cultural and emotional life.
The Changsong Restaurant and a noodle restaurant built with Korean style roofs in the center of the county seat add to the beautiful landscape of the township.
There sprang up the Undok Health Complex with all welfare and service facilities, a children’s hall, kindergarten and nursery.
The library, county people’s hospital, sanatorium, commercial and catering network, public buildings and dwelling houses have also been renovated as required by the new century.
A great success has been made in the land management.
The eye-opening changes in the county promise a socialist land of bliss where all varieties of consumer goods are mass-produced at the local industrial factories and the people enjoy happiness in their modern houses.
On 2012-8-7, the KCTV evening news broadcast images of some of the new construction:
And on August 8, KCNA reported that Choe Yong-rim visited the town:
Senior DPRK Party and State Officials Visit Changsong County
Pyongyang, August 8 (KCNA) — Senior party and state officials including Choe Yong Rim and officials of party, ministries, national institutions and local party, power and economic bodies visited various places of Changsong County, North Phyongan Province on Wednesday on the occasion of the 50th anniversary of the Changsong joint conference of local party and economic officials.
Changsong County is associated with the leadership feats of President Kim Il Sung and leader Kim Jong Il who opened up a wide road of developing local economy and improving the people’s living standard by increasing the role of county as a regional base.
The participants laid bunches of flowers before the newly erected mosaic depicting portraits of smiling Kim Il Sung and Kim Jong Il and made bows to them.
At the Changsong Revolutionary Museum, they looked round historic relics showing the efforts made by the President and Kim Jong Il who ushered in a new history of mountains of treasures, while giving field guidance to the county.
They also went to local industrial factories in Changsong including Foodstuff Factory, Foodstuff Processing Factory, Furniture Factory, Paper Mill, Jute Bag Factory and Okpho Stockbreeding Farm.
They enjoyed a performance given by the art group of the county at its cultural hall.
An agreement has been reached that sees the minimum monthly wage for North Korean workers in the Kaesong Industrial Complex rise by 5% to a little over $67.
According to information released by the Ministry of Unification today, the wage increase was negotiated by the Kaesong Industrial Complex Management Committee and the North Korean ‘Central Special Economic Zone Development Bureau’.
In accordance with the agreement, which will remain in force until the end of July next year, the wages of workers will rise from $63.80 to $67.05 per month.
Kaesong Industrial Complex regulations stipulate that wages may not rise by more than 5% per annum, and since 2007 they have risen by exactly that amount year-on-year.
At the end of May this year, there were 123 South Korean companies operating in the zone, employing a total of 51,452 North Korean staff.
According to the Ministry of Unification, when all payments and bonuses are taken into account, the average wage per North Korean worker in the complex was $110 per month in 2011, a figure that has risen to $130 in the first half of this year.
There has long been controversy over the fact that the North Korean authorities take a percentage of the wages of Kaesong Industrial Complex workers in taxes. However, even taking this into account, such workers are known to be better off than the vast majority of average North Koreans.
The only edit I would make to this story is to change the phrase “percentage of the wages of Kaesong Industrial Complex workers in taxes” in the above paragraph to “nearly all of the workers’ monetary income in taxes”.
Kaesong Industrial Complex (KIC) has recorded 1.7 billion USD in accumulative production output as of May this year. The first phase construction of KIC consisting of some 3.3 square meters was completed in July 2006.
According to a report submitted to the National Assembly on July 25, the Ministry of Unification (MOU) specified that, out of the 123 companies in KIC, there were 51,452 North Korean employees (as of May 2012) and the accumulative export reached 1.21 billion USD out of the accumulative production output.
Despite the severed inter-Korean ties from the May 24 sanctions of 2010, the KIC continued to operate while most economic cooperation, social and cultural exchanges and humanitarian aid were halted.
The report also included MOU’s pledge to continue to support for stable development of KIC consisting of building fire stations and emergency medical facility and road repairs, among other measures.
Currently, there are water purification and supply plant (30,000 ton/day), waste water treatment plant (15,000 ton/day), waste landfill (60,000 ㎥), and waste incineration plants (12,000 ton/day) in operation and health and safety facilities such as police and fire stations, Green Doctors Hospitals are in the vicinity. Power is provided by South Korea with 100,000 kilowatts capacity power supply system.
In addition, MOU announced that it will continue to coordinate with North Korea to improve transportation, communication and customs system at the next meeting, and engage in negotiation to solve other issues including improvement of personal safety and labor shortages.
MOU also claimed it is making efforts to obtain the “Made in (South) Korea” labels for the products made in KIC for FTAs (Free Trade Agreement) with the EU, United States, and China. MOU officials are also a part of the South Korean FTA negotiation team.
Currently, the top agenda for the KIC is housing for North Korean employees. Unification Minister Ryu Woo-ik stated, “While I understand the positions of both North and the South, in which South Korean companies are in need of more labor and North Korea wants for more employment opportunities, dormitory construction for employees is a large-scale project similar to building a new town. Therefore, it must be coordinated carefully with North Korea to find the best solution.”
The Beijing branch of the Joint Venture and Investment Committee of North Korea (JVIC), called the Choson Investment Office, announced on July 18 of various preferential conditions to foreign investors and employment conditions on its website.
The Choson Investment Office opened its doors this year and is the only overseas branch of the JVIC, in charge not only of securing foreign capital but cultural and science and technology exchanges and cooperation.
The website posted an article titled, “Problems Investors Face,” which provided useful information for foreign investors in a question and answer format.
In the article, the employment conditions for workers were included. The minimum monthly wage for workers in North Korea was set at 30 euros or about 42,000 KRW. In addition, foreign companies must pay 7 euros to each employee separately as social insurance. Overtime pay also needs to be paid and at the event of work related injuries or illness, the company is responsible for handling the situation with its board of directors.
In comparison, the minimum monthly wage for North Korean employees in the Kaesong Industrial Complex (KIC) is 110 USD or about 125,000 KRW.
As for preferential tax policies, foreign-capital companies that are not joint venture are exempt from certain taxes including tariffs on exports and resource tax for the development of mines.
North Korea will bear the land use tax, which is 1 euro per square meter, and China and other foreign investors will have no restriction for mining the underground resources.
The income tax rate for the foreign capital companies was specified at 25 percent and business tax between 2 to 10 percent will be collected from transportation, power, commerce, trade, finance, insurance, tourism, advertisement, hotel and entertainment industries.
Power is the main concern for most foreign companies and it will be provided at 0.053 euro per 1,000 kilowatt. The DPRK’s central trade guiding organ will oversee the setting of prices of goods while the trademark rights will belong to the company.
The DPRK’s Joint Venture and Investment Committee was expanded and reorganized in July 2010 from Joint Venture and Investment Bureau, with main activities centered around Hwanggumpyong Island and Rajin-Sonbong development.
The main agents for foreign currency earnings are the cabinet, military, JVIC, and Daepung International Investment Group*. Most of the trading companies are affiliated with one of the four groups.
In March, JVIC announced through the KCNA that “As the investment environment is favorably changing, joint venture and investment contracts are increasing. Investment interests from large companies are rising especially in our abundant rare-earth and underground resources as well as building railroads, roads, and power plants.”
*IFES and Choson Exchange previously discussed the merger of JVIC and “Daephung”
ORIGINAL POST: Following the spread of speculation in the West that the DPRK is in the midst of re-calibrating some of its economic policies (see here, here, here, here, and here), KCNA issued a public rebuttal (and took a swipe at deaf and blind people through some strange metaphors). According to the article (2012-7-29):
To Expect ‘Change’ from DPRK Is Foolish Ambition: Spokesman for CPRK
Pyongyang, July 29 (KCNA) — A spokesman for the Committee for the Peaceful Reunification of Korea gave the following answer to a question put by KCNA Sunday in connection with the fact that the south Korean puppet group is talking loudly about the DPRK’s “policy change” and “reform and opening”:
The army and people of the DPRK are dynamically advancing toward the final victory full of fresh conviction and vitality with a great honor and pride of holding in high esteem Kim Jong Un, supreme leader of the party, army and state, as DPRK Marshal.
They are bringing about remarkable events one after another in high spirit and stamina while demonstrating over the world the dignity and might as a power which is carrying forward the tradition of Mt. Paektu. This stirring reality is greatly admired by the whole world.
Upset by this, the puppet group let experts in the north affairs and others interpret the stirring situation of the DPRK in a self-centered manner, vociferating about “signs of policy change” and “attempt at reform and opening”. This ridiculous rhetoric only revealed its ignorance and sinister intention against the DPRK.
As far as “signs of policy change” are concerned, there can not be any slightest change in all policies of the DPRK as they are meant to carry forward and accomplish the ideas and cause of the peerlessly great persons generation after generation, to all intents and purposes.
The DPRK is putting forward new strategic and tactical policies in keeping with the changing and developing situation in each stage of revolution. The puppet group is describing it as a “policy change” and tried to give impression that the present leadership of the DPRK broke with the past. This is the height of ignorance just like a deaf person saying in his favor.
There is increasing speculation that the new Kim Jong Un regime is pushing toward economic reform. This may be due to Kim’s young age, as he is considered to be more open to change than his father.
According to an unnamed South Korean official, there is a growing prospect that North Korea will soon release a new economic reform measure. More and more testimonies from North Korean defectors suggest that since Kim Jong Il’s death, reform measures are slowly taking place. But it is unclear when such new economic reform measure will occur.
North Korea’s behavior also implies that certain economic reform may occur. The spokesperson for the DPRK’s foreign ministry made a statement last month to the KCNA, “The dear respected Kim Jong Un has already set forth a goal of Korean-style development and strategies and tactics for enabling the Korean people to live well with nothing to desire more in the world. He is now wisely leading the general advance of the Korean people for economic construction and improving the standard of people’s living.” This indirectly suggests that the Kim Jong Un regime will put forth a new economic measure.
On the other hand, the content and timing of such still remains uncertain. According to the NK Intellectuals Solidarity, the Central Committee of Workers’ Party decided on a policy to introduce a new economic management system on August 1, one that would be centered around the cabinet.
What path North Korea will take with the new economic reform is unknown. However, the reform will comprise various economic sectors including agriculture, commerce, production and distribution. Details of the reform are unavailable.
The NK Intellectuals Solidarity predicted that new measures will be centered around the legalization of permitting private investment and commercial activities in service and trade sectors and private contract system for agriculture.
In contrast, Daily NK expects the core of the new economic measure will involve downsizing of cooperative farms (from 10-to-25 people in size to 4-to-6 people) and permit farming in unused lands; enforce government procurement system based on market price and strengthening self-supporting accounting system for companies.
The Choson Sinbo, a Japan-based pro-North Korean newspaper ran an editorial on July 11 that North Korea’s economic revival strategy is to follow the global trend but doing it “our-way.” The news also added that North Korea has already entered the path toward economic restoration and praised Kim Jong Un’s “our-style development goal and strategy” to improve the lives of the people while following the current trend of knowledge-based economy.
The news explicated that emphasis on “following the global trend” did not mean following and copying other nations but aimed for the nation to develop and rise on its own to reach the most advanced level of society. In addition, it is considered a refute against South Korea’s over interpretation about the possibility for opening and reform in North Korea during the Kim Jong Un era.
On 2010-11-5, the Choson Ilbo published a report on a North Korean video which portrayed an urban/architectural vision for the future of Rajin (Rason). I have uploaded this video to YouTube:
For those of you who don’t want to watch the video again, here are the relevant images:
The video begins with a quote by Kim Il-sung who insists that the DPRK needs to make Rason better than Singapore after-which it elucidates the viewer as to how this task will be accomplished. Part one of the video focuses on the reconstruction of downtown Rajin, where a broad new north-south boulevard lined with new housing and facilities is set to become the new city center.
When I first saw this video I interpreted it as more “wishful thinking” on the part of North Korea’s urban planners than a manifestation of actual policy proposals. According to new[ish] satellite imagery on Google Earth, however, it appears that the North Koreans are actually going for it:
The image on the left is an old one archived on my computer so I unfortunately don’t know the date. The image on the right is from Google Earth and was taken on 2011-6-19. The recenlty released Google Earth image actually predates the release of the North Korean video–so this is what the city looked like when the video was made public. Unfortunately I have not yet seen any new tourism photos from this area to determine if construction has continued to the present day.
Many houses have been demolished to make way for the new road, and I am not sure to where the dislocated families have been moved. If progress continues, however, many more Rajin residents can expect to see their homes demolished to make way for new high-rise apartments. To see a good example of the urban transition, look at what happened in Ryongchon.
Along the south end of the new road, we can see proposed construction projects in various stages of implementation–from “completed” to “unstarted”:
The Rajin Noodle Restaurant has long been completed. A new project to the north-east of the restaurant has been launched. I am not sure, but I believe it is either a new library or health complex. South of that is a construction site that has not yet been launched. The video also shows a large new stadium scheduled to replace Rajin’s humbe sports field and gymnasium. This work does not appear to have begun either.
If any readers can understand the video and pass along any helpful information I would appreciate it.
UPDATE 1: Calvin Chua of Choson Exchange writes in with the following commentary:
In general, these are three main characteristics of their urban plan which I gather from the video.
1) Functional Zoning
Like any typical urban master plan, Rason is divided into various zones: commercial, leisure, residential, distributed according to its geographical characteristics of hilly regions and the sea.
2) Emphasis of Axis and Roundabouts
There is a great emphasis on the long axial roads meeting at roundabouts which are filled with monuments and civic buildings. I believe this is largely influenced by their urban plan for Pyongyang which is planned according to early 20th century socialist urban model. In principle, it is should be efficient for vehicular movement and transportation of goods.
3) Relationship with Mountain and Sea and the 3D Effect Narrative
The urban plan is also built upon a visual narrative of the harmony between the mountain and the sea where the buildings are designed and placed strategically to provide a 3-dimensional effect‘입체감’ (a term that is constantly repeated throughout the video).
Aesthetics aside, Rason’s urban plan seems to be quite basic, it lacks the dynamism of other new SEZs, research parks that are currently being developed. Increasingly, cities are becoming more complex and developing the software infrastructure (data cables, monitoring systems, green technologies, etc) are becoming as equally important as developing the physical infrastructure (buildings and roads). New business parks like Songdo in Incheon are fully wired up jointly by IBM and Cisco. Urban planning and management has become a thriving business for tech companies like Siemens to construction conglomerates like Bechtel which offer one-stop solutions from financing to construction and layout grids for the city.
While Rason is far less sophisticated than Songdo, but in order to be a well-functioning SEZ, it needs to consider and provide better urban management systems beyond physical infrastructure. Rason would need to consider the project on a longer term basis since the urban infrastructure provided today will have economic ramifications in future. For example, to rewire or install new technological infrastructure in future would cost much more than planning for future expansion. Perhaps, it will be interesting to uncover their plans for these ‘soft’ infrastructures together with the organisations (multidisciplinary conglomerates) that would invest in them.
However, luck isn’t on Rason’s side, its development might be hindered by its geographical constraints. It is locked within hilly ridges and to pipe cable infrastructure to it might be costly and it also prevents future expansion of the city. As such, there are many hurdles for Rason to cross before becoming a well-functioning city.
They should be studying Xiaogang Village! But instead they are studying Huaxi Village. Why? According to the Joong Ang Ilbo:
For the past six months, seven working-level North Korean officials have been staying at the Longxi International Hotel, located in a 72-story skyscraper in Huaxi Village, in China’s Jiangsu Province, a local government official told the JoongAng Ilbo in a telephone interview.
They’re allegedly trying to learn the secrets of Huaxi Village, known as China’s richest village but one that is still dedicated to socialism.
…
Huaxi Village is one of the richest places in China and a symbol of a model mixing socialism and capitalism. All the residents are shareholders of the local conglomerate and earn dividends at the end of every year according to its profitability.
“Roughly 20 North Koreans recently toured Huaxi Village,” a local resident told the JoongAng Ilbo. “The seven working-level North Korean officials have been staying in the village for six months learning how to manage a modern-style hotel.” Intriguingly, all seven are women.
The 328-meter (1,076-foot)-high Longxi International Hotel was completed last October and cost 3 billion yuan ($471 million). The five-star hotel has 800 rooms, including suites that go for 99,999 yuan per night.
“Officials from North Korea’s Foreign Ministry and the North Korean Embassy in Beijing also visited the village,” the resident said. “I’m not quite sure whether the women workers are from the ruling Workers’ Party, but they are mostly in their 20s.
“They have a great interest in learning about the dramatic growth of the village,” he continued. “They reportedly receive some kind of wages [from North Korea].”
Starting in 1978, the village’s residents actively participated in the reforms led by Deng Xiaoping. Wu Ren Bao, 84-year-old local secretary of the village, said in an interview with the JoongAng Ilbo in October 2011, “We accepted whatever was needed to make people rich and develop the village.”
Read the full story here:
Title
Joong Ang Ilbo
Chang Se-jeong, Jeong Yong-soo
2012-7-20
Bribery has little to do with ethics or honesty but relative costs and benefits:
The incorruptibility of the old bureaucracy has a rather simple and rational explanation: Most of the time, it did not pay to be a corrupt official under Kim Il-sung. Money was of surprisingly little use in the 1960s and 1970s, when pretty much everything was rationed and distributed by the state according to predetermined quotas and norms.
In those days officials lived significantly better than the average North Korean, no doubt. But they were affluent not because they had significantly more money (the wage differential between a top official and a humble worker was remarkably low), but rather because they had access to higher-quality goods and services that were not available to the common people. One of my North Korean interlocutors said: “Back in the 1980s, I did not care about money. Nobody did, since money did not buy much in those days.” In those days, in the 1970s or 1980s, one had to be an official to drink beer every week, to smoke cigarettes with filters, or feast on pork a few times a month. But officials did not buy these goods at market; rather they received them from the state as part of their special (very special) rations.
In this situation, it did not make sense for an official to accept bribes as a reward for overlooking some misbehavior or violations of some rules. Money would not be particularly useful and at the same time there was a significant risk of being caught. If caught, an unlucky official would at best lose his or her job and at worst even freedom, and no amount of money would compensate for this disaster.
In highly regulated economies, bribery and growth are positively correlated:
We are conditioned to see official corruption as an evil, but in present-day North Korea, corruption might be a life-saver. The average North Korean gets most of his or her income (about 75%, if recent estimates are to be believed) from private economic activities – these include private agriculture, trade and small-scale household production, and myriad other things. Nonetheless, nearly all of these activities remain technically illegal. Unlike China, North Korea has never undertaken serious economic reform, so private economic activities are still considered crimes, even though they have long become, in practice, a universal norm (and without such activities many would be unable to stay alive).
The only reason these activities are able to exist is corruption. Without widespread corruption, many more North Koreans would probably have perished in the great famine because there would have been no way to have private agriculture, and it would have been nearly impossible for private traders to move food across the country, delivering it to areas where the food situation was especially dire. After all, trade in grain and long-distance travel for commercial purposes are both technically crimes. No markets would be possible had the local bureaucracy been serious about enforcing a multitude of bans and restrictions on commercial activities.
Although corruption will lead to low levels of growth, it will impede overall development in the long-term:
Even when the Kim family regime meets its eventual demise, when a new North Korea emerges, the culture of corruption may remain as part of its heritage. And perhaps eventually it will become a serious burden to a resurgent North Korean economy.
