North Korean Economy Watch

Korea Times
Andrei Lankov
10/14/2007

When I was looking at the narrow and shallow Tumen River which delineates the eastern part of border between China and Korea, I can not help but think that this area is very conducive for smuggling.

Indeed, the river can be waded over at many spots, the area is sparsely populated (by the Chinese standard, that is), the border is almost unguarded from the Chinese side and a large number of the locals have families on the other side of the border.

Indeed the area is frequented by North Korean traders, who until few years ago were mostly illegal border-crossers, essentially smugglers. In most cases they did not cross the river by stealth, hiding under the cover of darkness, but preferred to bribe the border guards instead.

North Korea is a very corrupt place these days, so the guards are ready to receive a hundred dollars, an equivalent of their small annual salaries, from a professional smuggler and then allow him or her to move bulky merchandise almost openly.

From around 2003 North Koreans could also apply for special permission, which allows them to visit China regularly and come back with merchandise. Only people with politically sound background are issued such permits, and in most cases the procedure includes heavy bribing.

Nonetheless, legal travel has become possible. On the other hand, all ethnic Korean residents of the Yanbian Autonomous Prefecture, an ethnic home of Chinese Koreans, can visit North Korea. There are no problems with obtaining a special travel pass from the Chinese authorities even it involves some payments (official, in this case).

In most cases the travel is of purely commercial nature: the visitors bring with them sacks of merchandise. Needless to say, customs officials expect their fair share of both legal fees and bribes. A local Korean, who occasionally goes to visit his relatives, described his usual experience.

“They are so greedy. Officials take bribes in China, too. But perhaps nowhere in the world are the officials so hungry for bribes as they are in North Korea. At the customs, they slowly go through the luggage and sometimes put aside a few things they like, and then they say that those things are not allowed into North Korea.

This is the hint, and I have no choice but to tell them to take those things, some dress or small items. And it is a tradition that everybody who checks you should be given some foreign cigarettes. Last time I took five cartons of cigarettes with me, and only one reached my relatives.

All others I had to give away to the officials.” A particular role is played by the so-called “chogyo,” those North Korean citizens, who permanently reside in China. This is a small group, numbering from 5,000-10,000 people, but their economic and social role is out of proportion to their modest numbers.

Their unusual legal standing allows movement between China and North Korea almost at will, and this means that they have great opportunities for very profitable trade. In the past, chogyo were often feared and distrusted since they were widely believed to be North Korean espionage agents.

This might have been the case, since their families in North Korea were indeed hostages to the Pyongyang authorities. Nowadays, however, these people came to understand that they are unlikely to earn much by serving as loyal soldiers of the “Dear Leader,” and switched to business instead.

They still are said to maintain special relations with North Korean secret agencies, but these agencies are also being increasingly driven by profit-seeking. A similar group, known as “hwagyo,” consists of Chinese citizens who are allowed to live permanently in North Korea.

The hwagyo also number just a few thousands, and in North Korea they enjoy a number of privileges, including the right to go overseas with relative ease. Nowadays, as my interlocutors never fail to stress, the hwagyo have become the most prosperous social group in North Korea.

From the Chinese side, the consumption goods are largely sold. The trade items include home appliances, footwear and garments. Used fridges are often sold, being seen in North Korea as an important status symbol. The VCRs and DVD players are also highly demanded, as well as tapes and DVDs of South Korean movies, dramas and shows.

Such items are prohibited, but bribes and ingenuity help to smuggle the subversive material across the border. The North Korean traders sell a rather limited number of items, since North Korea is not capable of producing a large array of products. The North Korean private export seems to be dominated by seafood. Dried squid, pollack and the like sell well in landlocked parts of China.

Some traders dare to deal in more dangerous items, such as gold or antiquities, secretly (and illegally) dug up by North Korean grave robbers. The recent decade was a time when capitalism began to spread to the North, and most of the capital, ideas and markets which made this quiet transformation possible, came from China.

In a sense, the North Korean grassroots capitalism of black markets, old trucks, female traders with huge and unwieldy sacks on their back was conceived in China, in the vast mountainous areas of Yanbian or on the plains of Southern Manchuria which stretch along the Yalu.

Daily NK
Yang Jung A
10/14/2007

The Asahi TV of Japan broadcasted in the evening of October 9th recent video footage of the market which is thriving across the North Korea. The released footage was filmed by an underground journalist, Lee Jun who operates in North Korea.

The footage captures the scenes of local people’s making transactions at the markets in Pyongyang, Chongjin, and Hamheung

Filmed last August, the scene from the Sungyo market in Pyongyang with its bustling crowd was distinguishable from the markets in the other parts of the country. Many different kinds of goods were available at the market.

Women’s dresses being sold at the market were trimmed with lace, and had floral design in splendid color. There were also clothed mannequins with heart-shaped price tags. If customers wanted to try on clothes, they could do so on the scene.

Storekeepers at grocery stores were wearing an apron, trying to keep their store clean and tidy.

Some female peddlers were engaging themselves in business at places other than the markets permitted by the state such as bus stations where there were many people. Among the peddlers were those wearing the badge of Kim Il Sung. Around parks or high-class apartments, there appeared small-scale markets where people could buy fruit such as apples or watermelons or some snack like doughnuts.

A 35-year old defector, Han Young Ju who had lived in Pyongyang until 2003 said, “The ordinary people frequently visit the Sungyo market. Judging from the video footage, I could see that the market became more crowded as the number of people engaged in business without permission has increased.”

“Back in 2003, the market was very clean because there were managers who kept the place in order and regularly directed cleanup activity. But, now, the place seems to be out of control because too many people are gathering around the market to do business,” the defector said, adding, “As I look at the types of clothes or shoes these people are wearing, I think the living conditions are worse off than before.”

Jiro Ishimaru, the chief editor of Asia Press International, said in his interview with Asahi TV, “We can see that the market economy is developing in Pyongyang.” The chief editor proceeded, “Nowadays, the North Korean people engage themselves in economical activities in order to improve their standard of living.”

The chief editor added, “For the past ten years, the market economy has been spreading into North Korea. And its power has been reshaping the country to the point that the state authorities cannot stop it.”

A market in Chongjin of North Hamkyung province did not look as vigorous as did the Sungyu market in Pyongyang. People in the market in Chongjin are wearing shabby cloth if compared to their counterparts in Pyongyang. Some women engaged in business at the market were notable with their baseball caps with visor.

There were many Kotjebi (street children) roaming around the markets in the Hamheung areas.

The footage featured a scene where the cameraman spoke with a homeless family. They were picking up usable stuff in a dumpster adjacent to the market. Lately, the number of families who were driven out of their homes into the street because of debt has been rising in the county.

The footage also showed a Kotjebi singing and begging for money, and an old man lying down in front of the railroad station but later being pulled along by a superintendent. Jiro Ishimaru explained about the rising of homeless families, saying, “It seems that we are observing ‘bankruptcy,’ one of many phenomena under capitalism occurring in North Korea.”

Version 5: Download it here (on Google Earth) 

This map covers North Korea’s agriculture, aviation, cultural locations, manufacturing facilities, railroad, energy infrastructure, politics, sports venues, military establishments, religious facilities, leisure destinations, and national parks. It is continually expanding and undergoing revisions. This is the fifth version.

Additions to the latest version of “North Korea Uncovered” include updates to new Google Earth overlays of Sinchon, UNESCO sites, Railroads, canals, and the DMZ, in addition to Kim Jong Suk college of eduation (Hyesan), a huge expansion of the electricity grid (with a little help from Martyn Williams) plus a few more parks, antiaircraft sites, dams, mines, canals, etc.

Disclaimer: I cannot vouch for the authenticity of many locations since I have not seen or been to them, but great efforts have been made to check for authenticity. These efforts include pouring over books, maps, conducting interviews, and keeping up with other peoples’ discoveries. In many cases, I have posted sources, though not for all. This is a thorough compilation of lots of material, but I will leave it up to the reader to make up their own minds as to what they see. I cannot catch everything and I welcome contributions.

I hope this map will increase interest in North Korea. There is still plenty more to learn, and I look forward to receiving your additions to this project.

Daily NK
Kwon Jeong Hyun
9/28/2007

With the 2nd Inter-Korea Summit Talks coming up in five days in Pyongyang, the North Korean authorities have officially begun regulations of civilian migrations.

An inside source in North Korea said in a phone conversation on the 27th, “Control of civilians have become significantly toughened due to events of national importance, so the top (government) has completely limited travel permit approval numbers of average civilians to Pyongyang and the border regions.”

People’s Units’ chairs are in the midst of temporarily working on a reporting system which analyzes the data of civilian migrations and daily reports them to the security office.

North Korea still requires travel permits for moves to other regions from the place of residence. The inspection of permits becomes even more difficult when public transportation such as rails are used.

In particular, entry into Pyongyang, Yongbyun (nuclear power plants), Hwadaegun (Musoodan rocket launching site), and the northern border unit requires special travel permissions that are different from normal permits. For these special regions, an approval number, which signifies “special business,” is needed.

After the March of Tribulation, incidents of the Safety Agents issuing travel permits after receiving bribes were rampant, but recently, the regulation of such permits and travel restrictions on special regions have become more stringent. Restrictions on the issue of travel permits have significantly increased since the Local People’s Assembly representative elections on July 29th.

The source said, “After Chuseok (fall holiday), the order restricting the issue of all border and Pyongyang-related permits was announced at the People’s Unit meeting. With the Summit talks several days ahead, meetings of key leaders have all been cancelled and all entry and exit prohibited.”

Further, he said, “The northern border region or other controlled areas are not exceptions. Money will not do anything when trying to attain travel permits. Due to the fact that the issue of permits, with the exception of deceased reports, has been completely disallowed in surrounding cities of Pyongyang, such as Pyongsung or Nampo, the discontents of merchants who are dependent on travelling are high.”

With restrictions on civilian migrations, the price of commodities at the Jangmadang (market) has also been raised. Chinese products have to be brought back from the North Korean-Chinese border region, but because travel permits have not been issued, the transport of goods is difficult.

For industrial products, if the border region lowers the price, then prices go up in inland regions such as Kangwong, South and North Hamkyung, etc., because Chinese products coming in from border cities Shinuiju and Hyesan, Yangkang are not able to move inland. The inland is the opposite. However, the amount of rice coming in from inland regions is high, so their prices end up hiking up.”

However, the source said, “This time, the management will probably end at one-time inspection because the South Korean President is visiting. The jangmadang price levels will not skyrocket.”

Regulations regarding private visits of Chinese through Chinese travel agencies have not occurred yet.

It appears that the North Korean authorities, in order to prevent accidents and events which could happen around the Summit talk period, have strengthened preventative means.

One source who is residing in Musan, North Hamkyung, said, “In order to ensure the success of national events, lectures for leaders, with the content of hindering behind-the-scenes maneuvering of enemies and accidents and events on a timely basis, are taking place. Strict disciplinary actions for those who divulge national secrets and illegal use of cell phone are being emphasized.”

The source relayed, “Border guards are telling smugglers, ‘Wait just a few more days. After the national event (the Summit Talks), regulations will be relaxed. The situation nowadays is that smuggling is self-restrained.”

Korea Times
Marcus Noland, Stephan Haggard
9/21/2007

Last summer North Korea conducted provocative missile and nuclear tests. Yet only four months later, Pyongyang signed on to a roadmap that included a return of international inspectors, a full declaration of contested nuclear activities, closing down existing facilities and ultimately disabling them.

American negotiator Christopher Hill predicted this last step could take place as early as the end of the year.

What are the North Koreans up to?

The cynical, some would say realistic, view in the United States _ advanced by departed Bush administration hawks such as John Bolton _ is that Kim Jong-il is raising false hopes.

The appearance of cooperation has several tactical advantages. Sanctions and ongoing uncertainty have had substantial economic costs. The February agreement was preceded by secret meetings in Berlin to resolve the Banco Delta Asia issue.

In return, the North Koreans closed their nuclear facilities, but they have not firmly committed to the difficult aspects of the agreement _ providing a full accounting of their programs, disabling their programs, and giving up actual stores of fissile material and weapons.

Cooperation also drives wedges between the U.S., South Korea and China. If North Korea appears to be making concessions, it is easier for South Korea and China to continue diplomatic and financial support.

Next month, President Roh Moo-hyun will travel to Pyongyang for a summit with Kim Jong-il. Expect him to come bearing gifts to cement his legacy as a peacemaker.

Other politicians in the presidential race have also offered extraordinarily ambitious and generous programs of support for the North as well.

Recent studies we have done on North Korea’s changing external economic relations are consistent with some of this cynical picture, but also suggest a sliver of hope for more substantial change.

To understand why, requires a brief tour of the miserable history of North Korea over the last two decades. Following the collapse of the Soviet Union, the North Korean economy went into a steep decline ending in full-blown famine.

By our estimates, as many as one million people _ five percent of the entire population _ perished in the mid-1990s. Out of the human ashes of this tragedy, however, the North Korean economy began to undergo a profound transformation.

As households and work units scrambled for food, they engaged in barter, trade and new economic activities.

The desperation of the famine also saw an upturn in illicit activities, from missile sales to drugs and the counterfeiting of U.S. currency. But trade and investment also started to flow across the Chinese border.

Chinese companies, small-scale traders and North Korean firms pursued business opportunities, from large-scale mining operations to the import of South Korean videos.

The regime was always hesitant about the emergence of the market. In July 2002, the government initiated economic policy changes that decriminalized some private activities. But reforms have taken a zig-zag path, always subject to reversal.

Sanctions and closer scrutiny have limited the country’s arms sales and illicit activities.
With these sources of revenue increasingly foreclosed, North Korea has two alternatives _ open the economy and increase normal commercial activities or cooperate primarily to obtain aid. In terms of internal change, these two options may actually push North Korea in opposite directions.

Consider the aid tack. Given the regime’s concerns about internal stability, aid could provide a lifeline, allowing the regime to sustain a modicum of current consumption while forgoing deeper reforms. Under this option, North Korea trades away its nuclear program for assistance precisely to maintain the political and economic status quo.

Alternatively, North Korea could use the resolution of diplomatic tensions to deepen the economic reform process.

The military has been engaged in commercial activities and could potentially benefit from such a course. But real reform will reshuffle power and influence within North Korea in ways that are unpredictable and risky.

So what can we expect from Pyongyang? The nuclear program is the regime’s one major asset and we should not expect them to bargain it away easily.

Rather we should expect prolonged and difficult negotiations as they try to extract tribute for their “Dear Leader.”

In the end, we may eliminate North Korea’s capacity for making additional nuclear weapons, but this will not necessarily be accompanied by economic or political reforms.

An important lesson learned elsewhere in the developing world is that aid is not a substitute for reform.

Ambitious schemes for infrastructure and other investment in North Korea will only generate large economic pay-offs if they are accompanied by genuine opening and a more aggressive embrace of the market.

The key issue, therefore, is how tightly South Korea will link its offer of aid to progress in the resolution of the nuclear issue. Properly conditioned, South Korean aid could be a powerful carrot in the nuclear negotiations, whether it ultimately encourages internal reforms or not.

But if the South Korean offers at the summit are large, unconditional and open-ended, they could permit the regime in Pyongyang to stall the nuclear negotiations while actually discouraging deeper reform.

Daily NK
Lee Kwang Baek
9/18/2007

According to the newsletter of “Good Friends” published recently, the students living in the dormitories of technical colleges have not been able to eat anything due to the shortage of food for more than 10 days.

If this were to be true, there is a sentiment of utter despair and helplessness since there is both the South Korea and the international society’s food support going into North Korea at the moment. There has been a food supply of 400,000 ton being exerted to North Korea since July, and there is continually a grand supply of food to assist the flood victims. How is it possible that in spite of all these efforts, there are still starving North Korean youth?

According to the newsletter, the situation has worsened to the point where the teachers and principles in schools and kindergartens have to go out on a limb to retain some food supply. In Wonsan, children of the school age are unable to attend school. They are spending their time at the market selling ice cream, vegetables or carrying goods to earn money for living. There have been schools in Hamkyung province reported to have stopped running due to this reason.

It is difficult to determine whether this phenomenon is spread out nationwide, or simply applicable to some students or specific region. However, in spite of the difficulty in determining the extent of these effects, considering the non-transparent state of the distribution of food provision, it is highly likely that these effects are spread out nationwide.

The newsletter states that students are not only responsible for their own stationeries and backpacks, but they are also for the necessary cleaning tools, desks and chairs, and even the chalks used by the teachers.

North Korean government enforced the students to pay for the operation of schools since the mid 1990s. The government collects fees for school operation, oil, and even the fee for designing tank constructions. It is said that students face hard times in even attending schools if they don’t pay these fees.

The children who should be spending their youth running around and being free are spending their study time in the market earning money. The level of begging has expanded to group theft on the streets. According to the villagers in Donglim, North Pyongan, 1 out of the 3 children is unable to attend school due to the lack of money. This is sufficient evidence of “School Breakdown” phenomenon.

There is a proverb that even God cannot salvage poverty. However, perhaps North Korea may be an exception to this proverb. The fault of school breakdown and poverty lies not in the civilians, but solely in Kim Jong Il. All of these phenomenons after one another are tragic ramifications of the ignorance and inhumane dictatorial leadership of Kim Jong Il. It is difficult to hide our distress and sorrow on the issue.

However, in retrospect, this phenomenon of school breakdown can also be perceived as the breakdown of North Korean free education system. What is the “free education system” that Kim Jong Il has so much bragged about? The nature of North Korean education is nothing but a systematic tool to make children as bullets and bombs to protect Kim Jong Il.

Was it not a tool to crush the creativity of young, intelligent minds to force them into becoming the slaves of the system? It wouldn’t be an exaggeration if we were to say that it was this education system that has created the North Korean society of today.

School breakdown phenomenon can also be interpreted as the destruction of idolization education revolved around Kim Jong Il glorification. The ideology inculcation system that bound all children and students in North Korea is finally coming to collapse.
The reason for the collapse is simple. Kim Jong Il regime is losing the strength to control it. We must carefully analyze this trend. While we must strive to stop the phenomenon of children starving and/or dropping out of schools, we must actively be supportive of the current situation that the North Korean government is losing its reign of its people.

We must focus our attention to the independent economic activities taken by the North Koreans, rather than them being dependent on the government sponsored rations. We must put our focus on restoring the practical right to live for the North Korean civilians and allow them to feel more connected to the international society, rather than Kim Jong Il ‘s regime.

The international community must come up with discerning measures to support the students and the parents to experience their independent economic activities and understand the vanity of the glorification-based education system of North Korea. It is time to carefully discern the possible remedies for individual schools and students, rather than continuing the sponsorship through Kim Jong Il regime and South Korean government.

Daily NK
Han Young Jin
9/4/2007

Distribution with “Korea” Trademark…”Rice Cookers Popular”

In the North Korean jangmadang (market), South Korean products are drawing huge popularity among citizens and are publicly being sold, relayed an internal source on the 30th.

The source said, “In the Pyongyang, Shinuiju, Hamheung, Chungjin, and other large-scale jangmadangs, South Korean products with the “Made in Korea” label is fairly popular among wealthy people.”

In the past, South Korean products were secretly sold in the North Korean market. When selling South Korean products, we sold them after removing the product label, “Made in Korea.” However, recently, only products with the label are recognized as South Korean products of good quality and sold at a high price.

The source added, “‘Made in Korea’ lends credibility to the people. Without this, people do not believe that the product is a Korean-made good. The label has to be there because Chinese products are disguised as South Korean goods.”

The South Korean product which is most sold in North Korea is the electric rice-cooker (Cuckoo), instantaneous water heaters, cosmetics, aromatics, computers, toothpaste, medical goods and a variety of sweets. Also, North Korean citizens have a lot of confidence in South Korean medicine. South Korean-made medicine or sweets are not discarded even after the expiration date.

He said, “Because Chinese-made products are no good, people who have money usually used Japanese products. In the place where Japanese products became rare, Korean-made products are now occupying that place.”

In Dandong, China, Kim Chi Duk (pseudonym), who is engaging in North Korea-Chinese trade met with the reporter and retorted, “Currently in Chosun (North Korea), Japanese-made products are still counted as number 1. Then there are South Korean-made products, then Chinese-made products. Poor people, even when the quality is lower, use Chinese-made products and those with money use South Korean products or Japanese-made products. What is the issue if one is buying with his or her money?”

He said, “Those with some amount of money use at least one or two South Korean products.”

The source relayed, “Currently in the Shinuiju market, South Korean toothpaste is 5,000 won (USD1.85), 1 set of aromatics (machinery and 2 bottles of gas) is 30,000 won (USD11.1), and one pack of Time cigarettes (tax-exempt) 3,000 won.” However, “Time,” a kind of South Korean cigarettes are counterfeit goods made in China, so is offered at a cheaper price than their domestic price.

Mr. Kim said, “Those who trade in North Korea request for South Korean-made goods, but I do not know whether they plan to export them or to use them. The authorities do not allow American-made goods, but is there anyone who doesn’t like the dollar? If it is not a big issue, they use everything.”

Daily NK
Yang Jung A
9/2/2007

HRW “irregularities and corruption provoked by governmental officials”

Recently, there has been an increase in kotjebi (homeless) families squandering around the vicinities of jangmadang (markets).

After interviewing 12 North Korean merchants who frequently travel in and out of North Korea as well as defectors, Kay Seok, a North Korea researcher for Human Rights Watch (HRW) revealed in an interview with Radio Free Asia on 29th, “Currently, the cost of food in North Korea is continuing to rise” and commented, “People are selling their homes to obtain food and as a result there has been an increase in kotjebi families.”

Seok said, “According to defectors, the number of street dwellers has increased as of the end of last year and beginning of this year” and explained, “If you compare these times, you can see more people do loitering around the city markets after the spring hardship. However, there are many people who have become kotjebi after selling their homes to buy food.”

Comparing the times of the hunger period in the 90s she said, “At the time, there were many kotjebi children having become orphans after their parents had died and hence, homelessness was directed at children” and asserted, “However, today there is an increase of homeless families who beg around jangmadang or steal goods during the day and then sleep in the same areas at night. These trends indicate that a large number of people are once again experiencing hardship as a result of hunger.”

She revealed, “As of early this year, the cost of food has steadily increased. According to various locations, costs have increased significantly in some areas” and “At present, 1kg of rice costs 1,000~1,200won at jangmadang. About this time last year, rice sold for 700~800won.”

Likewise, in August the DailyNK made reports indicating that the cost of rice had escalated to 1,200~1,300won (USD3.8~4.1) along the border regions and even 1,500won inner land.

Ms. Seok added, “The cost of rice is affected by various factors such as the distance in delivery and farms. Also, the closer you get to the border, the more rice is available from China.”

Regarding the cause in escalating rice costs she said, “Overall, agriculture and production decreased due to the flood last year. The fact that South Korea suspended its rice assistance following North Korea’s nuclear experiment also would have had a significant impact” and “Even this year, floods occurred in the agricultural regions and as a result, it is unlikely that prices will fall despite the harvest period in September and Oct.”

As for the reasons causing North Korea’s incessant food crisis Ms. Seok said, “Causes are the discrepancies in the North Korean government’s policies as well as irregularities and corruption by governmental officials.”

The most authoritative, publicly available map of North Korea
Version 4: August 29, 2007

Download it here 

This map covers North Korea’s agriculture, aviation, cultural locations, manufacturing facilities, railroad, energy infrastructure, politics, sports venues, military establishments, religious facilities, leisure destinations, and national parks. It is continually expanding and undergoing revisions. This is the fourth version.

Additions to the latest version of “North Korea Uncovered” include the city of Manpo along the Chinese border, KEDO, Kumgang Resort expansion, Kaesong Industrial Zone, as well as a few more parks, antiaircraft sites, dams, mines, canals, etc. I have also added more links in the menu which will tell the viewer a bit about the locations themselves. I have also changed the color scheme to make the collage easier to view.

Disclaimer: I cannot vouch for the authenticity of many locations since I have not seen or been to them, but great efforts have been made to check for authenticity. These efforts include pouring over books, maps, conducting interviews, and keeping up with other peoples’ discoveries. In many cases, I have posted sources, though not for all. This is a thorough compilation of lots of material, but I will leave it up to the reader to make up their own minds as to what they see. I cannot catch everything and I welcome contributions.

I hope this map will increase interest in North Korea. There is still plenty more to learn, and I look forward to receiving your additions to this project.

For several months I have been meaning to post a review of Stephen Haggard and Marcus Noland’s book, Famine in North Korea, but for thousands of reasons it was always pushed back.

Stephen Haggard and Marcus Noland wrote the definitive book on the DPRK’s Arduous March, and it is required reading for any serious North Korea watcher.

Now…Joshua at One Free Korea has written the definitive review of the book, so I will just put links to his posts: Part One, Part Two, Part Three.