Archive for the ‘Finance’ Category

Politburo meeting and 1st session of the 13th SPA

Thursday, April 10th, 2014

UPDATE 1 [1st session of SPA] (2014-4-9): KCNA has posted many articles on the first session of the SPA. I have archived the important ones below:

Story 1: 1st Session of 13th SPA of DPRK Held  (KCNA) (PDF). Notes: Kim Jong-un elected as First Chairman of the NDC. State posts determined. One interesting agenda item was not elaborated on: “2. Election of the State Guidance Organ of the DPRK”.

Story 2: DPRK National Defence Commission Elected (KCNA):

Pyongyang, April 9 (KCNA) — The following National Defence Commission was elected at the First Session of the 13th Supreme People’s Assembly of the DPRK:

First chairman of the NDC of the DPRK Kim Jong Un

Vice-chairmen of the NDC Choe Ryong Hae, Ri Yong Mu and O Kuk Ryol

Members of the NDC Jang Jong Nam, Pak To Chun, Kim Won Hong, Choe Pu Il and Jo Chun Ryong.

Yonhap reports on Choe Ryong-hae:

Choe Ryong-hae, a top military official, has become a truly influential figure second to only North Korean leader Kim Jong-un on April 9 when the newly launched North Korean parliament elected him as new vice chairman of the communist country’s most powerful body, National Defense Commission (NDC), during its first session.

Choe, the director of the North Korean army’s General Political Bureau, took up the mighty post that had been kept vacant since Jang Song-thaek, a powerful uncle of the North Korean leader, was executed on treason charges in December.

With his NDC appointment, Choe has grabbed all of the No. 2 positions of the North’s three core power bodies, the Political Bureau of the Workers’ Party’s Central Committee and the party’s Central Military Commission.

Story 3: Presidium of Supreme People’s Assembly of DPRK Elected (KCNA):

Pyongyang, April 9 (KCNA) — The following Presidium of the Supreme People’s Assembly of the DPRK was elected at the First Session of the 13th Supreme People’s Assembly:

President of the Presidium of the SPA of the DPRK Kim Yong Nam

Its Vice-Presidents Yang Hyong Sop and Kim Yong Dae

Its Honorary Vice-Presidents Kim Yong Ju and Choe Yong Rim

Its Secretary General Hong Son Ok

Its Members Kim Yang Gon, Thae Jong Su, Jon Yong Nam, Hyon Sang Ju, Ri Myong Gil, Kim Jong Sun, Kim Wan Su, Ryu Mi Yong, Kang Myong Chol, Kang Su Rin and Jon Kyong Nam.

Story 4: Members of DPRK Cabinet Appointed (KCNA) (PDF).

Yonhap reports:

Meanwhile, the North apparently opted for stability by making no dramatic changes in a Cabinet shakeup, which the parliament rubber-stamped during its session.

The North’s octogenarian titular head of state, Kim Yong-nam, retained his position as president of the Presidium of the Supreme People’s Assembly, with Premier Pak Pong-ju also keeping his job.

What is notable is that the North replaced its foreign minister. Ri Su-yong, a former ambassador to Switzerland, was named to replace Pak Ui-chun as the top diplomat of the communist country.

Ri is known to have served as a guardian of leader Kim and his younger sister Kim Yo-jong when they studied at an international school in Switzerland in the 1990s.

NK News reports on other changes:

Mun Myong Hak replaced Ri Yong Yong as Minister of Coal Industry
Kim Yong Gwang replaced Han Hyo Yon as Minister of Metallurgical Industry
Ri Hak Chol replaced Kang Min Chol as Minister of Mining Industry
Han Ryong Guk replaced Kim Kwang Yong as Minister of Forestry
Kim Kyong Nam replaced Ri Song Ho as Minister of Commerce
Pak Chun Nam replaced Hong Kwang Sun as Minister of Culture
Kim Chon Gyun replaced Paek Ryong Chon as President of the Central Bank
Pak Myong Chol replaced Kim Pyong Ryul as President of the Supreme Court (not a cabinet position)

Story 5: Director of Supreme Public Prosecutors Office Appointed, President of Supreme Court Elected (KCNA)

Pyongyang, April 9 (KCNA) — The 1st Session of the 13th Supreme People’s Assembly of the DPRK appointed Jang Pyong Gyu as director of the Supreme Public Prosecutors Office and elected Pak Myong Chol as president of the Supreme Court.

Story 6: Panel Committees of SPA of DPRK Elected (KCNA)

The following Legislation Committee and Budget Committee, panel committees of the Supreme People’s Assembly of the DPRK, were elected at the 1st Session of the 13th SPA of the DPRK:

Legislation Committee of the SPA of the DPRK
Chairman Choe Pu Il
Members Jang Pyong Gyu, Pak Myong Chol, Pak Thae Dok, Thae Hyong Chol, Cha Hui Rim and Pak Myong Guk.

Budget Committee of the SPA of the DPRK
Chairman O Su Yong
Members Pak Yong Ho, Kye Yong Sam, Hong So Hon, Kim Hui Suk, Choe Yong Il and Pak Hyong Ryol.

Story 7: Statistics on the SPA members (KCNA)

The elected deputies to the SPA are the genuine people’s representatives who are devoting themselves to strengthening the DPRK government and accomplishing the revolutionary cause of Juche, remaining loyal to the idea and guidance of supreme leader Kim Jong Un.

Among the SPA deputies are anti-Japanese revolutionary fighters who participated in the anti-Japanese armed struggle led by President Kim Il Sung and veterans of the Fatherland Liberation War.

17.2 percent of the deputies are service personnel who are performing shining feats at posts to defend the country and worksites to build a rich and powerful country, true to the Songun revolutionary leadership of Supreme Commander Kim Jong Un.

Workers account for 12. 7 percent, cooperative farmers 11.1 percent and women 16.3 percent. They are bringing about shining labor innovations in the van of the heroic advance to build a thriving socialist nation.

Also among the deputies are officials of the party and power bodies, administrative and economic organs and working people’s organizations, those in the fields of science, education, public health, literature and arts and media and various other sectors and those of the General Association of Korean Residents in Japan and organizations under it.

Winners of Order of Kim Il Sung, Kim Il Sung Prize, Order of Kim Jong Il and Kim Jong Il Prize account for 30.2 percent, recipients of the titles of the DPRK hero and labor hero 14. 6 percent and recipients of academic degrees and titles including professors and doctors and scientists, technicians and experts 91.7 percent.

3.9 percent of the deputies are aged below 39, 66.9 percent 40-59, 29.2 percent above 60 and 94.2 percent of them graduated from universities or received similar level of education.

Story 8: Report on Implementation of State Budget for 2013 and State Budget for 2014 (KCNA)(PDF).

16% of the total expenditure was spent for national defence, thus contributing to smashing the enemies’ reckless moves to ignite a nuclear war and the anti-DPRK confrontation racket and powerfully demonstrating the dignity and might of the DPRK.

45.2% of the total expenditure went to the field of economic construction to consolidate the foundation of the self-supporting economy, bring a surge in the production in various fields of the national economy including agriculture and usher in a heyday in construction.

38.8% of the total expenditure was spent for the field of cultural construction including education, healthcare, sports and music and arts, contributing to the enforcement of popular policies and the building of a highly-civilized socialist nation.

This year’s state budgetary revenue and expenditure have been shaped in such a manner as to meet the financial needs for realizing the Party’s plan to build a thriving nation as early as possible and carrying out the national economy plan.

The state budgetary revenue is expected to grow 4.3% over last year. Out of this, transaction revenue is expected to swell 4.5%, the revenue from the profits of state enterprises 7.9%, that from the profits of cooperative organizations 4.8%, that from real estate rent 9.5%, that from social insurance 5.1%, that from sale of properties and price differential 2.4%, other revenues 1.7% and the revenue from economic and trade zone 5.1%.

This year’s state budget envisages that provinces, cities and counties will ensure the expenditure with their own incomes and deliver revenue to the national budget for their fulfillment of the plan for local budgetary revenue and expenditure.

The state budgetary expenditure is expected to increase 6.5% over last year. Out of this, spending for the fields of agriculture, stockbreeding and fishery is expected to go up 5.1%, that for capital construction 4.3%, that for science and technology 3.6%, that for the vanguard sector of the national economy and the fields of basic industry and light industry 5.2%, that for education 5.6%, that for healthcare 2.2%, that for social insurance and social security 1.4%, that for sports 17.1% and that for culture 1.3%.

15.9% of the total state budgetary expenditure is expected to be spent for national defence this year and a huge amount of educational aid fund and stipends is to be sent to the children of Koreans in Japan.

According to the Wall Street Journal’s Korea Real Time:

The last publicly available figure for Pyongyang’s annual budget, in 2008, was 451.3 billion North Korean won. Based on the latest available market rate, that would be roughly equivalent to $61.8 million. Using that figure to calculate spending on national defense would give a figure of around $8.65 million.

Here are the pictured from Rodong Sinmun:

 2014-04-10-SPA-1

 

2014-04-10-SPA-2

 

2014-04-10-SPA-3

ADDITIONAL INFORMATION:

1. The Daily NK has an interview with a participant in the 12th SPA.

2. Here is 13th SPA “election” coverage.

ORIGINAL POST [Politburo] (2014-4-9): KCNA reports on the meeting of the Political Bureau of the Worker’s Party:

Meeting of Political Bureau of C.C., WPK Held under Guidance of Kim Jong Un

Pyongyang, April 8 (KCNA) — A meeting of the Political Bureau of the Central Committee of the Workers’ Party of Korea was held under the guidance of Kim Jong Un, first secretary of the Workers’ Party of Korea, first chairman of the National Defence Commission of the DPRK and supreme commander of the Korean People’s Army, on April 8.

It was attended by members of the Presidium of the Political Bureau of the C.C., the WPK, and members and alternate members of the Political Bureau of the C.C., the WPK.

Vice-premiers of the Cabinet and some department directors, first vice-department directors and vice-department directors of the C.C., the WPK were present at the meeting as observers.

The meeting discussed the issue of reinforcing the organization for increasing the leadership role and function of the Party as required by the developing revolution.

It discussed a proposal for forming the state leadership body to be submitted to the First Session of the 13th Supreme People’s Assembly.

It also discussed an organizational matter.

Decisions on the relevant agenda items were unanimously adopted at the meeting.

Kim Jong Un at the meeting set forth important tasks to be fulfilled to further strengthen the WPK to be an invincible revolutionary party, firmly protect the dignity and sovereignty of the country and dynamically accelerate the work to improve the standard of the people’s living and the building of a rich and powerful country.

The meeting held under the guidance of Kim Jong Un marks a historic occasion that encouraged the service personnel and people in the struggle to dynamically advance along the road of independence, Songun and socialism under the uplifted banner of great Kimilsungism-Kimjongilism and provided an important milestone in bringing earlier the building of a thriving nation and a great revolutionary event of national reunification.

Here are photos from Rodong Sinmun:

2014-04-09-politburo-1

 

2014-04-09-politburo-2

 

2014-04-09-politburo-3

Here is coverage in the Daily NK.

Read the full story here:
Meeting of Political Bureau of C.C., WPK Held under Guidance of Kim Jong Un
KCNA
2014-4-8

Share

Russia and DPRK discuss economic opportunities

Saturday, March 29th, 2014

What are the opportunities? Rason port, Iron Silk Road (Rail), Kaesong Industrial Complex, gas pipeline.

According to RIA Novosti:

Russia and North Korea have signed a new protocol to transition to using the ruble for payments between the two countries as part of an effort to boost annual bilateral trade to $1 billion by 2020, Russia’s Far East Development Ministry said Friday.

The announcement came as Russian officials have expressed a desire to explore new markets for the country’s businesses, following the introduction of sanctions by the West in reaction to Moscow’s stance over Crimea. Russian leaders have simultaneously reassured international investors the country remains open for business, and there are no plans to restrict international commerce.

The protocol announced Friday came following a visit of a Russian delegation to the Asian country for a meeting of a standing bilateral commission, timed to mark the 65th anniversary of a cooperation agreement between the Soviet Union and North Korea.

The parties agreed to move towards settling payments in rubles as well as adopting further measures to boost bilateral trade, including easing visa procedures and providing for Russian access to proposed special economic zones in the country, the ministry’s statement said.

The ministry reaffirmed the countries’ mutual interest in joint projects with South Korea, including international connections for railways [Iron Silk Road], gas pipelines and power lines.

The Russian delegation also proposed the entry of Russian businesses into the Kaesong Industrial Park, a special economic zone in North Korea just north of Seoul where South Korean companies are allowed to employ northern workers.

The two sides identified areas for further cooperation, including a transshipment complex at the port of Rason and technical cooperation for the modernization of North Korea’s mining sector, automobile industry and electric power plants.

According to the statement, during the talks Russian Far East Development Minister Alexander Galushka emphasized that achieving such goals would only be possible if stability is maintained on the Korean peninsula.

The next meeting of the bilateral commission is scheduled for June in Russia’s far eastern Vladivostok.

Here is what Yonhap reports:

North Korea and Russia have agreed to boost economic ties by pushing for trilateral projects involving South Korea, including a plan to support Russian companies’ entry into an inter-Korean industrial complex, a media report said Saturday.

The agreement between the two was made earlier this week when Russia’s Far East Development Minister Alexander Galushka visited the North for a five-day run until Friday to explore ways to boost bilateral economic cooperation, according to the Russian news agency RIA Novosti.

“The Russian delegation proposed the entry of Russian businesses into the Kaesong Industrial Park, a special economic zone in North Korea just north of Seoul where South Korean companies are allowed to employ northern workers,” the RIA Novosti reported, citing the ministry.

Officials of Seoul’s unification ministry, which handles inter-Korean affairs, welcomed the agreement between the North and Russia, while stressing the importance of Russia’s prior consultation with the South.

“Russian companies’ making inroads into the Kaesong park is desirable in terms of the internationalization of the complex … It would also prevent the North from unilaterally reversing its agreement with Seoul over the Kaeesong operation,” the ministry official said, requesting anonymity.

Internationalization of the enclave, a symbol of inter-Korean detente, is one of the key topics for inter-Korean meetings aimed at ensuring its normal operations and further invigorating the complex. The Kaesong park resumed operations in September, more than five months after the North unilaterally closed it in anger over Seoul-Washington joint military exercises.

“But it is crucial for Russia to discuss the matter with our side first as it is basically operated by the South Korean authorities,” he added.

A handful of companies from China, Australia and Germany have so far expressed interests in making an investment in the Kaesong complex, prompting the Seoul government to review holding joint presentation sessions with the North to lure investors from overseas, according to another ministry official.

Here is additional information from Yonhap on recent shipments from Russia to the DPRK:

Russia exported US$21.16 million’s worth of jib cranes, machinery used mostly for cargo handling at ports, to North Korea last year, accounting for nearly 22 percent of its total exports to the North, according to the report by the Korea Trade-Investment Promotion Agency (KOTRA). The amount surpasses that of Russia’s traditional export goods such as coal, petroleum and bituminous oil.

There were no records of the machines being exported to North Korea the year before, with the 2011 amount standing at $139,000.

North Korea and Russia maintain economic relations that include a project that would make North Korea’s northeastern port city of Rajin a logistics hub by connecting it to Russia’s Trans-Siberian Railway. North Korea is said to have agreed to a long-term lease of the No. 3 dock at Rajin port to Russia and that it is modernizing facilities there. The cranes may be for such modernization efforts, the KOTRA report said.

Also noteworthy is Russia’s exports of ambulances to the North, amounting to approximately 10.1 billion won ($9.45 million), the fourth largest in terms of value. Ambulances are a relatively new product on the trade list.

KCNA’s reporting of the meeting was much more muted:

DPRK Premier Meets Minister of Development of Far East of Russia

Pyongyang, March 26 (KCNA) — Pak Pong Ju, premier of the DPRK Cabinet, met Alexandr Galushka, minister of the Development of Far East of Russia who is chairman of the Russian side to the Inter-governmental Committee for Cooperation in Trade, Economy, Science and Technology between the DPRK and Russia, and his party.

He had a friendly talk with them who paid a courtesy call on him at the Mansudae Assembly Hall on Wednesday.

Minutes of Talks between Governments of DPRK, Russia Signed

Pyongyang, March 26 (KCNA) — Minutes of talks on cooperation in trade, economy, science and technology between the governments of the DPRK and Russia were signed here Wednesday.

Present at the signing ceremony were Ri Ryong Nam, minister of Foreign Trade who is chairman of the DPRK side to the Inter-governmental Committee for Cooperation in Trade, Economy, Science and Technology between the DPRK and Russia, and officials concerned, Alexandr Galushka, minister for the Development of Far East who is chairman of the Russian side to the Inter-governmental Committee, and his party and Alexandr Timonin, Russian ambassador to the DPRK.

Ri Ryong Nam and Alexandr Galushka signed the minutes of the talks.

Read the full story here:
Russia, North Korea Agree to Settle Payments in Rubles in Trade Pact
RIA Novosti
2014-3-28

N. Korea, Russia to discuss supporting Moscow firms’ advance into Kaesong park
Yonhap
2014-3-29

Share

Russia to forgive DPRK debt (2006-present)

Thursday, March 20th, 2014

UPDATE 7 (2014-3-20): Russian Duma committee recommends write off $10 b DPRK debt. According to Voice of Russia:

Committee of the State Duma for the budget and taxes has issued a recommendation to the MPs to ratify an agreement between the Russian government and the Democratic People’s Republic of Korea on settling the North Korea’s debt to Russia on the Soviet-era loans issued to that country.

The document that was submitted for ratification by the Russian government features the agreements reached at the negotiations that lasted almost twenty years and took account of the special features of financial, political and economic relations between Russia and North Korea.

Debt settlement embraces all the categories of reciprocal financial claims and obligations of the former USSR and the DPRK, with the precise parameters registered on the date when the agreement is signed.

Overall amount of the DPRK’s financial obligations to Russia stood at an equivalent of $ 10.96 billion as of September 17, 2012.

“This amount is rather conventional in many ways – not only because of the exchange rate but also due to the interest rates accumulated over a huge period or, in other words, a non-return of the loans because many of them were issued in the 1980′s,” Sergei Storchak, a deputy minister of finance said at the session.

“We applied a standard pattern in which we write off 90% of the debts amount and 10% is left over,” he said. “We agreed to utilize this 10% for financing the joint projects implemented on the North Korean territory.”

There projects are related to the energy sector, healthcare, and the country’s foodstuff security.

“Frankly speaking, we hope we’ll be able to attain agreement in the course of future joint work on allotting plots of land for construction of a gas pipeline on the DPRK territory,” Storchak said adding that Russia’s major producer and exporter of natural gas, OAO Gazprom, continues eyeing a possible integration in the Korean market of gas.

For this purpose, it will need some land acquisitions and “a part of the debt can be utilized for this purpose,” Storchak said.

Russian government officials say settlement of debts on the loans issued by the former USSR with the observance of conditions coordinated with Pyongyang pursues three objectives.

In the first place, it removes the problem of North Korea’s outstanding debt to the Russian Federation that was an irritating factor for bilateral relations for quite some time.

Secondly, the agreements that have been reached enable Russia to exert noticeable influence on the DPRK’s social and economic development through projects in healthcare, education, and the energy sector, since Russia will have a say in the decisions on their financing.

Thirdly, owing to the presence of big enough debt claims, Russia will have an opportunity to take part in multilateral talks on settling the North Korean debts in the format of the Paris Club of Sovereign Debtors and to influence the terms of debt repayments in Pyongyang’s interests.

You can read more about the gas pipeline here.

UPDATE 6 (2012-9-18): RIA Novosti reports that the DPRK and Russia have signed a debt deal.  According to the article:

Russia and North Korea have signed a deal on settlement of the DPRK’s $11 billion debts to Russia, Deputy Finance Minister Sergei Storchak told Prime news agency on Tuesday.

“It was signed yesterday,” Storchak said.

Russia and North Korea have been negotiating over the issue of Pyongyang’s debt to Russia, left over from the Soviet era, for the last four years without result. Russia did not rule out writing off part of the debt and either rescheduling the remainder or offsetting it against investment.

Storchak previously said it was understood a debt settlement would involve a conversion of the ruble debt into dollars, giving an initial discount of around 90 percent of the debt.

The remaining debt of over $1 billion would be used in a “debt for aid exchange” plan to assist with joint education, health and energy projects in North Korea.

Here is coverage of the deal in KCNA:

Agreement on Debt Settlement between DPRK, Russia Signed

Pyongyang, September 18 (KCNA) — An agreement on settling the debt incurred by the loan provided by the former Soviet Union which the DPRK owes to the Russian Federation was signed between the governments of the two countries in Moscow on Monday.

The agreement was inked by Vice-Minister of Finance Ki Kwang Ho from the DPRK side and Vice-Minister of Finance Sergey Storchak from the Russian side.

The conclusion of the agreement on the debt settlement would create fresh conditions for boosting the relations of economic cooperation between the two countries in the future.

The Wall Street Journal offers some additional details on the deal:

Deputy Finance Minister Sergei Storchak told Interfax that the “restructuring conditions are standard in connection with our membership in the Paris Club, with a conversion into U.S. dollars at an appropriate discounted rate with the balance of the debt to be used for a debt-for-aid program.”

The $11 billion figure was reached by using the Soviet conversion rate of 67 kopecks to the dollar, the ministry said, which at today’s exchange rate would make the debt just $238 million. Russia has reached similar agreements over the years with many former Soviet-clients in larger part because there was little chance the loans would ever be repaid.

Russian and North Korea had resumed negotiations over the decades-old debt in August 2011, following a meeting between former Russian President Dmitry Medvedev and the late-North Korean leader Kim Jong Il. During the meeting, the two sides agreed to pursue a pipeline project that would send Russian gas to South Korea via North Korea.

The following June, a preliminary agreement was reached and the finance ministry submitted a proposal to the Russian government for approval, Interfax reported.

Experts say the settlement of the long-stalled debt talks represented a change in political will on both sides and would help spur along the pipeline project as well as other railway and electricity deals.

“The decision on a settlement of debt is a significant step as it removes the obstacles for cooperation. Now credits can be granted,” said Alexander Vorontsov, an expert on North Korea at the Russian Academy of Sciences.

Read more below:

(more…)

Share

Babson on post-Jang economic management

Monday, February 24th, 2014

Writing in 38 North, Bradley Babson comments on the effect Jang Song-thaek purge will have on North Korea’s economic management moving forward:

With Jang’s demise there is now a potential opportunity to make fundamental changes in the North Korean economic management and financial systems. Removing his influence over major foreign exchange earning enterprises operating outside any institutionalized supervision means that some other mechanisms must be put in place to manage these important national resources. Whether this will lead to a more rational system of cabinet-managed financial institutions serving an economic development strategy endorsed by Kim Jong Un is a basic question. Early indications are that the cabinet will be empowered to exercise more centralized control over the economy,[2] but how far this will extend into the fragmented financial system remains to be seen.

One indicator of possible significant change is whether the KPA will regain its former economic independence or become more closely integrated with national economic and financial management. This is important for improving efficiency in allocation of resources for economic development and having more control in balancing security expenditures with investments in the general economy.

Another indicator will be whether the existing system that provides funds for sustaining luxury goods patronage for the Pyongyang elite and for showcase projects like equipping the new Masik Pass ski resort, will be handed over to new more loyal technocrats to manage. Or will the Cabinet be given more latitude to shape the future political economy and distribution of wealth, given the reality that access to market power is becoming more valuable for the Pyongyang elite than receiving patronage? This would be a major change that could lead to new incentives for more rational economic management. Acknowledgment that markets are here to stay would open the possibility of addressing the need to build new financial institutional capabilities required for mobilizing and regulating private savings and economic activity. This would also help focus attention on ways to improve macroeconomic management of the mixed state-directed and market economy system.

Read the full story here:
The Demise of Jang Song Thaek and the Future of North Korea’s Financial System
38 North
Bradley Babson
2014-2-24

Share

DPRK consolidates gold export revenues

Friday, December 27th, 2013

According to the Daily NK:

Approximately two months prior to the purge of Jang Sung Taek, the North Korean authorities halted exports of gold ore from the mines of Hwanghae Province in the southwest of the country, Daily NK has learned.

The step allegedly followed the discovery of improprieties in the operation of mining enterprises managed by persons linked with Jang, and formed part of measures designed to bring foreign currency-earning activities en masse under strict Central Party control.

“The order to halt exports was handed down in October, some months before the official news of the purge of Jang Sung Taek,” a source involved in the industry told Daily NK on the 27th. “It was even applied to foreign currency-earners affiliated with Central Party organs, as well as those from normal provincial-level agencies.”

“A directive ordering operations to cease from the second half of the year was issued to Holdong and Eunpa mines in Yeonsan County, North Hwanghae Province. These mines are shut now and their shafts are just filling up with water,” the source went on. “Mine officials have told me that this order came down stating that neither provincial nor Central Party managed-enterprises were allowed to mine for gold.”

“By doing this just a few months before the Jang Song Taek purge, the authorities moved to integrate foreign currency-earning activities and confiscate those enterprises and funds formerly managed by Jang prior to his purging,” he added. Explicating his view of the logic behind the step, he went on, “[The authorities] wish to greatly reinforce their control over these foreign-currency earning enterprises’ resources so as to bring together the management of Kim Jong Eun’s ruling funds.”

“I am told that they discovered that the enterprises Jang was managing had not been passing their profits to the state in the prescribed manner, so they halted the trade completely” the source alleged. “They controlled the mines, saying that the reason was because Jang was flogging off natural resources for a low price.”

“Previously, only ore with a purity of 20-30g of gold per ton could be exported, so any ore with a lower purity than this was not controlled. But now they are stopping all gold ore from exiting,” he went on to explain, adding that the ban is causing serious problems for the region’s miners, many of whom rely in large part on income from the mines for their survival.

“They used to share export licenses with other enterprises and export ore that way, too, but right now that is also totally prohibited,” he added.

Read the full story here:
Gold Mining Stopped to Unify Funds
Daily NK
Oh Se Hyeok
2013-12-27

Share

Noland on DPRK sovereign debt

Wednesday, December 11th, 2013

Marcus Noland posted some interesting information on North Korean debt that should be helpful for future researchers:

Back in the 1970s, North Korea borrowed heavily from Western banks and then defaulted. (To be clear, this does not refer to borrowing from the Soviet Union or other Eastern Bloc countries—these are commercial bank loans extended by syndicates involving more than 100 banks from 17 countries.) The loans were rescheduled in 1977, 1980, and 1984, but each time North Korea fell into default. In 1988, the London Club, representing the banks, took North Korea to court and obtained a judgment by the International Court of Arbitration, but even this did not prompt North Korea to settle. The principal and accumulated interest now stands at roughly $3 billion.

BNP subsequently issued three series of certificates which securitize the debt into transferable securities in the name of the NK Debt Corporation (Bloomberg ticker: NKDEBT). These securities trade at a large discount (currently around 5 cents on the dollar) though at the height of the famine, the price of the debt reached more than 50 cents (see Avoiding the Apocalypse Figure 3.5), as it was interpreted as an inverse indicator of regime survivability assuming that in case of a North Korean collapse, South Korea will pay off the debt. There might be challenges to this scenario on the basis of “odious debt” but that is not what the market seems to believe.

You can read previous posts on the DPRK’s debts here.

Share

DPRK’s “Economic Research” focuses on regional economic development zones

Sunday, November 10th, 2013

According to Yonhap:

North Korea is focusing more on diversified development of its economy and pushing regional industries to play a greater role in earning foreign capital, Pyongyang watchers said Sunday.

Observers in Seoul said that the Oct. 31 issue of “economic research” published in the North highlighted the need for regional governments to generate more revenue, bolster industrial output and earn more foreign capital.

According to papers in the research journal that offer a glimpse into how Pyongyang wants to run the country, factories in the provinces must strive to modernize and form close knit alliances with industries located in the capital city and with laboratories.

This call is similar to a speech given by Vice Premier Ro Du-chol on Wednesday at a ceremony marking the 40th anniversary of regional governments being given authority to generate profits and manage their respective budgets.

The senior official stressed that all cities and counties need to do their utmost to improve their economies and come up with necessary policy plans.

Such a move calls for redoubled efforts to attract overseas investments in mineral mines and other manufacturing facilities.

Ro’s remarks have been interpreted as Pyongyang paying more attention to regional economies and getting local authorities to take charge of providing for its citizens, instead of relying on the central government.

Related to such calls, the North recently announced that it will set up a total of 14 special economic zones across the country to pursue economic growth and bring in more investments. At present the communist country only has four such special zones, including those set up in Kaesong and the Mount Kumgang resort.

“There has been a trend coming into this year of the North paying closer attention to building up its regional economy,” said Cho Bong-hyun, an analyst at the IBK Economic Research Institute. The North Korean expert said that this may be a move by the North to bring about results on the economic front under the Kim Jong-un leadership.

Kim, who took over running the country following the sudden death of his father in late 2011, has called for the simultaneous development of the country’s nuclear capability and its economy.

This move is seen as a departure from the “songun,” or military-first politics, pursued by his late father, Kim Jong-il.

Read the full story here:
N. Korea focusing more on regional development: research journal
Yonhap
2013-11-10

Share

New info on the DPRK’s exchange rates and Economic Development Zones

Sunday, November 3rd, 2013

James Pearson writing in Reuters updates us on the state of the DPRK’s domestic currency:

In a dimly-lit Pyongyang toy shop packed with Mickey Mouse picture frames and plastic handguns, a basketball sells for 46,000 Korean People’s Won – close to $500 at North Korea’s centrally planned exchange rate.

Luckily, for young North Koreans looking to shoot hoops with Dennis Rodman, the new friend of leader Kim Jong Un, the Chinese-made ball actually costs a little less than $6 based on black market rates.

Once reserved for official exchange only in zones aimed at attracting foreign investment, and in illegal underground market deals elsewhere, black market rates are being used more frequently and openly in North Korean cities.

Publicly advertised prices at rates close to the market rate – around 8,000 won to the dollar versus the official rate of 96 – could signal Pyongyang is trying to marketise its centrally planned economy and allow a burgeoning “grey market” to thrive. This could boost growth and capture more of the dollars and Chinese yuan circulating widely so that North Korea can pay for imports of oil and food.

Unofficial market rates could become more widespread following an announcement last month of 14 new special economic zones (SEZs) aimed at kickstarting a moribund economy where output is just one fortieth of wealthier South Korea’s. A spokesperson for the Korea Economic Development Association, a local organization tasked with communicating policy in the new SEZs, told Reuters that exchange rates in the new zones are to be “fixed according to (local) market rates.”

“The official rate for the won is like a placeholder,” said Matthew Reichel, director of the Pyongyang Project, a Canadian NGO that organizes academic exchanges with North Korea. “We all know that the value of the won is not this.”

UNDER STRAIN

An estimated 90 percent of economic transactions along North Korea’s border with China are in yuan, an embarrassment for a country whose policy stresses economic independence, and something that reduces the grip that authorities attempt to exercise over its people and economy.

Pyongyang does not publish economic data, but is believed to have run a sizeable current account deficit for years, straining its ability to pay for imports in hard currency.

An attempt in 2009 to revalue the won and confiscate private foreign currency savings prompted protests from market traders and forced a rare policy reversal and public apology from state officials.

“Due to its lack of foreign currency, the North Korean government will have to tolerate black market rates, even if it has difficulty in officially recognizing them,” said Cho Bong-hyun, a North Korea economics expert at the IBK Economic Research Institute in Seoul.

Read the full story here:
Insight: Won for the money: North Korea experiments with exchange rates
Reuters
2013-11-3

Share

DPRK debt will hamper development of Economic Development Zones

Wednesday, October 30th, 2013

According to the Daily NK:

North Korea’s unserviced external debt will make it difficult for the country and its partners to implement plans for special economic zones, it has been pointed out. North Korea, which defaulted on its external debt decades ago, needs to recover its sovereign credit rating through repayment or rescheduling, but has not shown any intention of doing so.

“North Korea’s outstanding foreign debt is between $120 billion and $150 billion; if the state cannot repay this, they cannot get access to international financial institutions,” Yoon Deok Ryong, a senior researcher with the Korea Institute for International Economic Policy explained to Daily NK. “The North Korean regime must take steps to restore trust. One of the ways this could be done would be to join the Paris Club of debtors, a structure within which developing nations can borrow money without incurring interest.”

“For a number of years, the Chinese government has been distributing investment guides to Chinese businessmen that outline the risks of investing in North Korea. These guides were previously shared privately, but have now been made public by the Chinese Ministry of Commerce,” Yoon went on. “We can see in this that China, too, is wary of investing in North Korea; it is therefore imperative for the North Korean government to adopt trustworthy measures such as servicing its debts. This is the only way that their development plans can work out.”

“North Korea has been pushing for foreign capital via investment symposiums and talks, as well as the enactment of appropriate trade legislation. But the truly vital concern they should deal with is the building of trust to improve their battered image, one that is often associated with massive outstanding sovereign debt,” a second economic expert, speaking on condition of anonymity, agreed.

All joint ventures require a North Korean business partner. However, many previous JV agreements have seen the North Korean side not service its financial obligations properly. This makes it harder every time Pyongyang makes a new attempt to attract foreign capital.

“During the peak of joint ventures with China in the mid-2000s, there was this hotel in Pyongyang designated solely for Chinese visitors, Kim Seong Ryong, a recent defector who worked on trade issues for a provincial people’s committee in Hwanghae Province, revealed to Daily NK. “Of the 1000 Chinese staying there, most had come to collect their debts. Eventually, however, most could not get their money back and had to close down their businesses.”

Kim went on, “No matter how the Chinese government goes about spurring investment in North Korea, it remains uncertain how much money Chinese businessmen will willingly give in light of the calculations involved. In particular, Chinese traders are fully aware that North Korea does not service its debts properly; thus, the likelihood that Chinese traders will refrain from participating in the development zones is very high.”

Read the full story here:
Debt Burden Set to Trip Up SEZ Plans
Daily NK
Oh Se Hyeok
2013-10-30

Share

DPRK Won exchange rate data

Friday, October 18th, 2013

DPRK-won-JA-Ilbo-2013-10

According to the JoongAng Ilbo:

The value of the North Korean won has plummeted against the Chinese yuan in the last three years, hit by a continual series of crises, a South Korean ruling party lawmaker said.

Representative Yoon Sang-hyun of the Saenuri Party, a member of the National Assembly’s Foreign Affairs and Unification Committee, said at a parliamentary hearing Wednesday, “Through some sources in North Korea and from the government, we have analyzed the fluctuation of the North Korean currency for the last three years.

“The value of the Chinese yuan has surged in North Korean territory amidst a series of crises: military provocations, power succession and natural disasters,” Yoon said.

According to Yoon, the exchange rate of North Korean currency on the black market was around 400 won ($0.38) to the Chinese yuan between January and September 2011. But it rose to 560 won against the yuan in October 2011, 640 won in November and 850 won in December. That was a precarious time, Yoon says, with rumors that leader Kim Jong-il was sick. On Dec. 17, 2011, Kim died and was succeeded by his youngest son, Kim Jong-un.

In July and August 2012, when heavy rainfall battered North Korea, the won weakened more, reaching 1,000 won against the yuan. In December 2012, when North Korea successfully launched a long-range missile, its currency dipped to 1,350 won to the yuan from 1,250 won in November.

Ahead of its third underground nuclear weapons test on Feb. 12 of this year, the won fell close to 1,450 won against the yuan, the lowest level ever.

The currency became stronger when Pyongyang went off its highest level of military readiness last May, and its value returned to 1,200 won to the yuan. The won is currently trading at around 1,250 won against the yuan, Yoon said. The yuan has appreciated 171.7 percent against the won from two years ago.

“In 2009, when North Korean botched its currency renomination, anxiety spread that the local currency would become ‘paper money,’?” Cheong Seong-chang, a senior fellow at the Sejong Institute in South Korea, said. “Officials in North Korea prefer to receive bribes in yuan, not in won.

“When tensions escalate in North Korea, demand for the more stable yuan increases,” Cheong said. “And whenever North Korea makes an attack or other kind of provocation, the Chinese government tightens up procedures for visas and customs regulations on North Korean products.

That makes trade with China more difficult, resulting in a shrinkage in the supply of yuan into the country.”

Representative Yoon said the popularity of the yuan in North Korea also suggests more capitalist activity going on. “In a society that strictly bans the circulation of foreign currency, a wide range of individual transactions using a foreign currency is happening,” Yoon said.

“In some border regions with China, commercial transactions are increasing. The so-called Yuanization phenomenon – in which the yuan replaces a local currency – is happening in North Korea.”

Analysts in Seoul say the influence of China on the North Korean economy is ever expanding. “A strong yuan in North Korea indicates the regime is heavily dependent on the Chinese currency,” Kim Yong-hyun, a professor of North Korean affairs at Dongguk University, said. “That means that if China imposes economic sanctions on the regime, it would be a big blow to its economy.”

“As North Korea has no credit policies or system for financial transaction, residents are dependent on foreign currency for commercial activities,” Yoon said.

“As provocations by North Korea are putting its economy at risk, North Korea should stop all provocations, restore the value of its weak currency and stabilize its market.”

The Daily NK tracks the exchange rate of the DPRK won here.

Read the full story here:
North’s won tumbled against yuan, says Rep
JoongAng Ilbo
Kim Kyung-jin
2013-10-18

Share