The Impossible State: North Korea, Past and Future, Victor Cha, 2012, p116-118.
The third bad decision took place in the 1970s. It related to foreign debt. The DPRK continued the same trends of previous decade as economic resources were diverted to the military. Despite having half the population, North Korean military spending exceeded that of the South every year from 1968 to 1979. The buildup of this decade included increasing the size of the armed forces from 485,000 to 680,000, which was twice that of the ROK. By 1980, troop number stood at 720,000 and continued to swell, with the majority deployed along the thirty-eighth parallel with their sights set on the South. Special forces grew from 15,000(1970) to 41,000(1978)The military began Scud missile development, boosted its submarine and surface flee, and the air force grew to over 200 attack plane. The army added 2,500 armed personnel carriers, about 1,000 heavy tanks, and 6,000 or so artillery tubes and rocket launchers. Military doctrine was revamped to increase the speed, power, and lethality of attacks in combat, focusing on rapid advance advance and infiltration tactics. In spite of its relatively limited technological base, by 1992 the North had twice the number of tanks and artillery that U.S-ROK defenses had in the South.
Academic Lee Hy-Sang, who has written one of the best scholarly treatment of the North Korean economy, has noted that this obsession with aggrandizing the military was driven by ideology as much as it was by external security threats. Self-reliance required the strongest military one could muster. The net effect, however, was an increasingly reckless and irresponsible approach to the economy. In order to offset the strain of the military budget on the economy, the DPRK should have directed efforts at excavating coal and other mineral resources to trade for hard currency, which mighty then have been used to finance heavy industry development, and to address energy shortages. Instead, the government decided to engage in massive borrowing from foreign markets. At the times, it seemed like the right decision. Sino-American rapprochement and U.S.-Soviet detente transformed relations between the East and West, and in this wider political context Western European countries were willing to extend credit to countries like North Korea. More important, the North began looking over its its shoulder as the 1970s saw the gradual acceleration of South Korean growth and development of major heavy industries like the Pohang Steel Complex.
So, in 1972, Pyongyang borrowed $80 million from France to build a fertilizer plant. The following year they borrowed another $160 million, from the United Kingdom to build a cement factory. In 1974, they borrowed $400 million from countries including Japan for large-scale plant equipment. In fact, between 1970 and 1975, the North borrowed approximately $1.2 billion before foreign governments realized that Pyongyang could not service the debt, These numbers do not account for whatever else might have been provided to the North from Eastern bloc countries and China.Thus, in 1976, the debt market dried up for the North as precipitously as it had opened to them six years earlier. Trapped by it own self-reliance ideology, the North could not do things normal nations would, such as issue bonds to finance its debt. Today, North Korea’s external debt is estimated $12.5 billion and no one expects them to pay it off. An attempt was made to pay back some of this in 1990 and 1991, but the DPRK has long since defaulted on its long-term debt. Pyongyang has occasionally asked Russia and former Soviet satellites like Czech Republic to forgive the majority of the debt. In response, these countries have asked for North Korea to repay part of the debt through barter. Pyongyang asked Russia in 2007 to make a “high-level political decision” to forgive $8.8 billion in unpaid debt. In August 2010, Prague asked for zinc ore as repayment for an outstanding $10 million in unpaid loans from the Cold War when it provided Kim Il-sung with machinery and equipment. Pyongyang responded that it would provide four hundred tons of “heavenly ginseng root” worth some $500,000. Since annual consumption of the root in the country was barely two tons, this would have kept Czechs well-stocked with ginseng—which, among its many reported benefits, boasts of enhancing sexual vitality—for two hundred years. As unusual secondary market has emerged for North Korean debt that a few courageous investors have dared to enter. It sells DPRK debt paper at about 6 cents on the dollar, based on the bet not that Pyongyang would ever repay but that under a future unification scenario, South Korea would want to reestablish North Korean creditworthiness as it worked to gradually reintegrate the two systems. If Seoul were to take on this debt, it could repay it all, speculators hope, with only one week’s addition to its foreign exchange reserves. Even if Seoul were to pay off only a portion of the debt, speculators could make six to seven times what they have paid for North Korean paper.
After North Korea’s currency revaluation in 2009, North Korean currency is still unstable and North Korean markets near the DPRK-China border are reportedly filled with Chinese merchandise, with transactions being conducted mainly in Chinese yuan.
An online newspaper, the Daily NK, reported that markets in the city of Hyesan (Ryanggang Province) and surrounding areas are using Chinese yuan as the primary currency for transactions rather than local North Korean won. Rice prices are standard indicators of inflation in North Korea and even rice was reported to be exchanged in yuan. As the monetary value of domestic currency continues to fall, North Korea is experiencing hyperinflation and North Koreans are showing a preference for the more stable Chinese yuan over won.
With an exception of rice, vegetables, and seafood, manufactured goods including confectioneries, the daily necessities for sale in these markets are mostly from China. As well, some South Korean items such as instant noodles, Choco Pies, and butane gas are sold openly in the markets.
Border areas have a higher rate of Chinese yuan usage than inland areas, as for years traders have been buying Chinese goods with Chinese yuan to sell in the domestic markets. However, with the unstable domestic currency, more and more North Koreans have been using Chinese yuan over the last three years. Some report goods bought with North Korean won must be converted to the CNY exchange rate.
As of mid-April, the exchange rate of 100 CNY to KPW was 130,000. However, Pyongsong and Pyongyang cities used mainly US dollars and local won in equal rates.
A video recording obtained by the Daily NK unveiled the landscape of the marketplace and nearby alley markets of Hyesan and surrounding areas. Items for sale include jackets, mufflers, gloves, coats and other winter clothing as well as cosmetics, perfumes, toothpaste, toothbrushes and other daily goods. Transactions were being made in Chinese yuan.
North Korean authorities are waging a crackdown against the use of the yuan in the markets but merchants continue to use yuan in secret.
The high number of Chinese goods in North Korean markets can be attributed to the failed production system of the people’s economy of North Korea, which began to tumble in the late 1990s. As the regime began to invest excessively in its military sector, production in the manufacturing sector declined.
Although North Korean products appear in the markets, most people prefer Chinese goods due to their better quality.
A recent article in the official state economics journal of North Korea, Kyongje Yongu (Journal of Economic Research), criticized the “trade companies for focusing on only one or two countries,” expressing concerns that, “the whole nation may experience political and economic pressure from trade companies that restrict foreign trade to only one country.”
Kim Jong Un has also expressed official disapproval against “import syndrome” of the people and regarded it as an obstacle hindering the development of North Korea’s light industry.
Although no specific country was named, it is believed that China makes up over 80 percent of North Korea’s total foreign trade. North Korea continues to show vigilance against its rising dependence on China.
After Kim Jong Un came to power about a year ago, his main official activities reportedly were focused on the military. The young leader is said to be looking to consolidate control over the military to strengthen the monolithic leadership system.
Recently, South Korea’s Ministry of Unification (MOU) released a report on the first anniversary of Kim Jong Un’s appointment as the first secretary of the Workers’ Party. In the report, Kim Jong Un is reported to have made a total of 192 official activities in which 38 percent (73 activities) were focused on the military while political and economy related activities were 23 percent (45) and 20 percent (37), respectively.
Compared to Kim Jong Il’s record of 145 activities in 2011, in which military related events were 39 while economic and political and entertainment performances were 11 and 29, respectively, Kim Jong Un’s activities were focused more on the military.
In addition, a higher number of military elites were seen accompanying the state leader to these military-related events.
The report also stressed the difficulty in assuming that the North Korean economy drastically improved or deteriorated after Kim Jong Un took power. According to FAO and WFP reports, 2012 to 2013 grain production reached 4.92 million tons, which is an increase of 10.5 percent against the previous year.
This is the third consecutive year where an increase in grain production has been reported; but North Korea still faces a deficit of 210,000 tons, as 5.43 million tons is estimated to be minimum grain requirement (according to FAO) and only 300,000 tons is expected to come in from overseas. However, MOU authorities explain that regardless of the food supply, distribution difficulties still remain in North Korea.
The exchange rates are reported to have been continuously on the rise from last year. As of March of this year, 1 USD exchanged for 8,000 KPW and the price of 1 kg of rice was 5,500 KPW. Considering the average monthly salary of North Korean workers ranges between 3,000 to 4,000 KPW, the food situation for the ordinary people is suspected to still be poor.
The report also did not see any significant signs of changes in North Korean economic policy. In North Korean leader Kim Jong Un’s New Year message, building a strong economic nation was named as the top agenda for the year, with agricultural and light industries as key sectors. However, the national budget recently released by North Korea’s Supreme People’s Assembly (SPA) revealed a decrease in the budget for agricultural and light industries while the defense budget has increased.
According to the data compiled by the Ministry of Unification and based on information provided by foreign institutions, there were minor improvements in grain production and electricity output, but the difference was minimal and may have actually fueled inequality.
“Personally, I see almost no change from a year earlier,” said a ministry official, who did not want to be identified.
The data was released to the press to coincide with the first anniversary of the North Korean leader having assumed the country’s top job. Kim inherited the communist country after the death of his father in late 2011, but became the first secretary of the Workers’ Party of Korea on April 11 of last year.
North Korea’s food production is estimated to have increased 10.5 percent on-year to 4.92 million tons in the 2012-2013 grain year, the official said, adding that this translates into a shortage of 210,000 tons, down from 300,000 tons from the previous year.
The official, however, said foreign data is based purely on information given by Pyongyang, and is not reliable.
“There may be a need to carefully look at the data on grain,” he said, hinting at the fact that there have been numerous cases over the years where official information was not supported by facts.
On power production, the recent opening of the Huichon power station has increased output by 21.1 billion kilowatts, but the benefits are mostly being felt by the elite in Pyongyang. Outside the capital city, other regions are still affected by power shortages, he claimed.
The official added that while Kim has been calling for the bolstering of its agriculture and light industries, funds earmarked for these sectors grew at a slower pace than the overall growth of the budget.
The latest data showed that consumer prices have generally been moving up since last year, potentially putting a greater burden on many people whose salaries have not changed in years, the official said.
Read the full story here:
N.K. economy remains unchanged under new leader: data Yonhap
Rodong Sinmun, the official newspaper of the Workers’ Party declared that North Korea has secured its position as a nuclear state, advancing the nation to concentrate on the economic construction, in an editorial last Friday.
This can be interpreted as North Korea’s intent to place more emphasis on investments towards economic development now that it has “made advancement in nuclear weapons capabilities to respond to any threats from the United States and South Korea.”
The editorial stated, “The tremendous mental and material potentials provided by the great Generalissimos Kim Il Sung and Kim Jong Il, the socialist system of Juche based on collectivism and rich experience made in the effort to build an economic power are precious assets for making a great leaping progress in economic construction.”
This is in line with last month’s plenary meeting of the WPK Central Committee that reiterated the importance of parallel policy of economic construction and nuclear power to compete against the United States.
At the meeting, parallel policy of economy and defense were acclaimed to be superior in its war deterrence and defense capabilities without increasing the defense budget to provide support for economic construction and improve the lives of the people. In addition, agricultural and light industries were named as key sectors and called for improvements in the production of everyday goods for the people and reach the grain production target for this year.
On the other hand, Finance minister Choe Kwang Jin reported at the meeting of the Supreme People’s Assembly on April 1 that 44.8 percent of the national budget was allocated for economic development and improvement of its citizen’s lives.
In addition, the news reported that 38.9 percent of the total expenditures were shifted to social cultural and people policies to implement free compulsory education, healthcare, social insurance and social security systems and secure the development of arts, literature and sports.
The minister added that the rest of the budget was allocated for national defense but no specific amount of defense budget was disclosed.
On March 31, KCNA reported on the recent plenary meeting of the Korean Worker’s Party:
The historic March, 2013 plenary meeting of the Central Committee of the Workers’ Party of Korea took place at the building of the WPK Central Committee, supreme staff of the Korean revolution, on Sunday.
First Secretary of the WPK Kim Jong Un guided the meeting.
Present at the meeting were members and alternate members of the WPK Central Committee and members of the Central Auditing Commission of the WPK.
Present there as observers were senior officials of ministries, national institutions, provincial, city and county committees of the WPK, complexes, major munitions factories and enterprises.
The participants paid silent tribute to President Kim Il Sung and leader Kim Jong Il.
Taken up for discussion at the meeting were the following agenda items “1. On tasks of our Party on bringing about a decisive turn in accomplishing revolutionary cause of Juche as required by the present situation and the developing revolution”, “2. On personnel affairs issue to be submitted to the 7th Session of the 12th Supreme People’s Assembly” and “3. On organizational matter”.
Kim Jong Un made a report and concluding speech on the first agenda item.
The plenary meeting set forth a new strategic line on carrying out economic construction and building nuclear armed forces simultaneously under the prevailing situation and to meet the legitimate requirement of the developing revolution.
This line is a brilliant succession and development onto a new higher stage of the original line of simultaneously developing economy and national defence that was set forth and had been fully embodied by the great Generalissimos.
It was stressed at the meeting that the party’s new line is not a temporary countermeasure for coping with the rapidly changing situation but a strategic line to be always held fast to, in the supreme interests of the Korean revolution.
The nuclear weapons of Songun Korea are not goods for getting U.S. dollars and they are neither a political bargaining chip nor a thing for economic dealings to be presented to the place of dialogue or be put on the table of negotiations aimed at forcing the DPRK to disarm itself.
The DPRK’s nuclear armed forces represent the nation’s life which can never be abandoned as long as the imperialists and nuclear threats exist on earth. They are a treasure of a reunified country which can never be traded with billions of dollars.
Only when the nuclear shield for self-defence is held fast, will it be possible to shatter the U.S. imperialists’ ambition for annexing the Korean Peninsula by force and making the Korean people modern slaves, firmly defend our ideology, social system and all other socialist treasures won at the cost of blood and safeguard the nation’s right to existence and its time-honored history and brilliant culture.
When the party’s new line is thoroughly carried out, the DPRK will emerge as a great political, military and socialist economic power and a highly-civilized country which steers the era of independence.
The meeting set forth tasks for carrying out the new line and ways for doing so.
All the officials, party members and other people should wage bold offensive and all-people decisive battle with faith in sure victory and strong determination and thus make the flame of miracle and innovation sweep all fields of national economy.
The pilot fields of the national economy, the basic industrial fields should be drastically developed and production be increased to the maximum. Forces should be directed to agriculture and light industry, key fields in building an economic power to improve and put on a stable basis the people’s living standard at the earliest possible date.
The self-reliant nuclear power industry should be developed and the work for developing light water reactor be dynamically promoted to actively contribute to easing the strain on the electricity problem of the country.
Spurs should be given to the development of space science and technology and more advanced satellites including communications satellites be developed and launched.
The country’s economy should be shifted into knowledge-based economy and the foreign trade be made multilateral and diversified and investment be widely introduced.
The economic guidance shall be fundamentally improved as required by the new situation and Korean-style advantageous economic management methods be completed by embodying the Juche idea.
The DPRK’s possession of nukes should be fixed by law and the nuclear armed forces should be expanded and beefed up qualitatively and quantitatively until the denuclearization of the world is realized.
The People’s Army should perfect the war method and operation in the direction of raising the pivotal role of the nuclear armed forces in all aspects concerning the war deterrence and the war strategy, and the nuclear armed forces should always round off the combat posture.
As a responsible nuclear weapons state, the DPRK will make positive efforts to prevent the nuclear proliferation, ensure peace and security in Asia and the rest of the world and realize the denuclearization of the world.
Institutions in charge of security and safeguard, judicial and prosecution and people’s security and the Korean People’s Internal Security Forces should resolutely foil the vicious moves of the imperialist reactionaries and class enemies, devotedly defend the party, social system and people and surely guarantee the new line of the party with arms and by law.
The party and working people’s organizations and power bodies should increase their militant function and role in every way in the struggle for implementing the party’s line.
The meeting entrusted the Presidium of the SPA and the Cabinet with the matters of taking legal, administrative and technical measures for implementing the tasks.
At the meeting a decision on the first agenda item “On carrying out economic construction and building nuclear armed forces simultaneously and thus bringing earlier the final victory in the cause of building a thriving socialist nation” was adopted with unanimous approval.
The second agenda item, personal affairs issue to be submitted to the 7th Session of the 12th SPA, was discussed and decided at the meeting.
The meeting also dealt with an organizational matter, its third agenda item.
Members of the Presidium of the Political Bureau of the WPK Central Committee, members and alternate members of the Political Bureau were recalled and new ones were elected to fill vacancies.
Pak Pong Ju was elected to fill a vacancy of a member of the Political Bureau of the WPK Central Committee.
Hyon Yong Chol, Kim Kyok Sik and Choe Pu Il were elected to fill vacancies of alternate members of the Political Bureau of the WPK Central Committee.
Members and alternate members of the WPK Central Committee were recalled and new ones were elected to fill vacancies.
Upon authorization of Kim Jong Un, Paek Kye Ryong was appointed as director of the Light Industrial Department of the WPK Central Committee and Yun U Chol as editor-in-chief of Rodong Sinmun, organ of the WPK Central Committee.
Members of the Central Auditing Commission of the WPK were also recalled and new ones were elected to fill vacancies.
Central Committee of the Workers’ Party of Korea Stresses Development of Agricultural, Light, and Nuclear Industries
Institute for Far Eastern Studies (IFES)
The Korean Central News Agency (KCNA) reported on March 31 that a plenary meeting of the Central Committee of the ruling Workers’ Party of Korea was held. At the meeting, a new strategic line was announced to have been set, which called for building a stronger economy and nuclear arsenal. This meeting is drawing attention as it is suspected that Pyongyang will pursue a new economic policy.
The news described the new strategic line as, “most revolutionary and people oriented policy for the construction of a powerful socialist nation by consolidating defense capacity through development of defensive nuclear weapons and economic construction.”
It stressed that this policy is significant as a “creative and parallel policy for defense and economy continuing the policies of Kim Il Sung and Kim Jong Il, which must be adopted as a permanent strategy.”
At the plenary meeting, the main agendas for the parallel policy of economy and defense were announced as: 1) Improvement of the production of people’s economy and capacity enhancement for agricultural and light industries to stabilize prices to improve the lives of the people; 2) development of self-reliant nuclear power industry and light water reactors; 3) development and launch of more satellites including communication satellites through advancement in space science and technology; 4) transition to knowledge economy and diversification of foreign trade to vitalize foreign investments; and 5) establish legislation to be recognized as a nuclear state and develop nuclear arsenal both in quantity and quality until denuclearization is realized worldwide.
At the plenary, the new parallel policy was commended, “The supremacy of the policy is demonstrated by expanding capability in war deterrence and national defense without increasing defense budget and enabled concentration on economic development and improvement of the lives of the people.”
The statement released by the KCNA stated that the plenary meeting’s emphasis on transition to knowledge economy and diversification of foreign trade as the main tasks and appears to be pursuing a “fundamental improvement in economic leadership.”
In addition, the plenary assigned the presidium of the Supreme Peoples’ Assembly and the Cabinet to serve as the economic control tower to oversee the future projects decided at the plenary meeting.
North Korea is continuing to place emphasis on light and agricultural industries. The Kim Jong Un regime entered its second year. The leader was reported to have attended the light industry conference, which was held for the first time in ten years and underscored the importance of concentrating on development of the capacity of light industry.
The new Korean line, 병진 (Pyongjin, Byungjin) is the simultaneous development of nuclear weapons and the economy. Learn more about it here.
Following the central committee plenary meeting, the 7th Session of the 12th Supreme People’s Assembly was held. According to KCNA:
The Seventh Session of the 12th Supreme People’s Assembly (SPA) of the DPRK took place at the Mansudae Assembly Hall Monday.
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, was present at the session.
Present there were deputies to the SPA.
Also present there as observers were officials of party, armed forces and power bodies, public organizations, ministries and national institutions and those in the fields of science, education, literature and art, public health and media.
All the participants observed a moment’s silence in memory of President Kim Il Sung and leader Kim Jong Il in humblest reverence.
The session decided the following agenda items of the Seventh Session of the 12th SPA of the DPRK:
1. On amending and supplementing some contents of the Socialist Constitution of the DPRK
2. On adopting the DPRK Law on the Kumsusan Palace of the Sun
3. On adopting the ordinance of the SPA of the DPRK “On Consolidating the Position of Nuclear Weapons State for Self-Defence”
4. On adopting the DPRK Law on Developing Space
5. On adopting the decision of the SPA of the DPRK “On Setting up the DPRK State Space Development Bureau”
6. On the work of the DPRK Cabinet for Juche 101 (2012) and its tasks for Juche 102 (2013)
7. On the review of the fulfillment of the DPRK’s state budget for Juche 101 (2012) and state budget for Juche 102 (2013)
8. Organizational matter
The session discussed the first and second agenda items.
Deputy Kim Yong Nam, president of the Presidium of the DPRK SPA, made a report on amendment and supplement to some contents of the Socialist Constitution of the DPRK and on adopting the law on the Kumsusan Palace of the Sun.
Then followed speeches on the first and second agenda items.
Deputy Kim Ki Nam, secretary of the WPK Central Committee, spoke on behalf of the WPK, Deputy Choe Ryong Hae, director of the General Political Bureau of the KPA, on behalf of the KPA and Deputy Jon Yong Nam, chairman of the C.C., the Kim Il Sung Socialist Youth League, on behalf of the youth.
The speakers fully supported and approved of deliberation and adoption of the draft amendment and supplement to the Socialist Constitution of the DPRK and the law on the Kumsusan Palace of the Sun at the current SPA session reflecting the unanimous feelings of all party members, service personnel and youth across the country.
The ordinances of the SPA of the DPRK “On Amending and Supplementing Some Contents of the Socialist Constitution of the DPRK” and “On Adopting the DPRK Law on the Kumsusan Palace of the Sun” were adopted at the session with the approval of all deputies.
The session discussed the third, fourth and fifth agenda items.
The ordinances of the SPA of the DPRK “On Consolidating the Position of Nuclear Weapons State for Self-Defence” and “On Adopting the DPRK Law on Developing Space” and the decision of the SPA of the DPRK “On Setting Up the DPRK State Space Development Bureau” were adopted at the session with the approval of all deputies.
Deputy Choe Yong Rim, premier of the Cabinet, made a report on the sixth agenda item.
Deputy Choe Kwang Jin, minister of Finance, made a report on the seventh agenda item.
Then followed speeches on the sixth and seventh agenda items. Written speeches were presented at the session.
The speakers noted that the Cabinet work and the fulfillment of the state budget for last year were correctly reviewed and summed up, clear tasks of the Cabinet were set forth to meet the requirements of the general offensive to open an epochal phase in building an economic power at the final stage of the all-out action against the U.S. and the state budget was correctly shaped. They expressed full support and approval of them.
They expressed their determination to reenergize the overall economy of the country, step up the grand advance for improving the standard of people’s living to make loud shouts of hurrah for the Workers’ Party and socialism heard this year marking the 65th anniversary of the DPRK and the 60th anniversary of the victory in the Fatherland Liberation War, true to the historic New Year Address of Kim Jong Un and the decision of the March, 2013 plenary meeting of the WPK Central Committee.
The decision of the SPA of the DPRK “On Approval of the Report on the Work of the DPRK Cabinet and the Review of the Fulfillment of the State Budget for Juche 101 (2012)” and the ordinance of the SPA of the DPRK “On the DPRK’s State Budget for Juche 102 (2013)” were adopted at the session with the approval of all deputies.
The session discussed the organizational matter.
At the session Deputy Choe Yong Rim was recalled from the post of premier of the DPRK Cabinet and Deputy Pak Pong Ju was elected premier of the DPRK Cabinet at the proposal of the WPK Central Committee.
Choe Yong Rim was elected honorary vice-president of the Presidium of the DPRK SPA.
Deputies Kim Jong Gak and Ri Myong Su were recalled from the posts of member of the DPRK National Defence Commission (NDC) due to the transfer to other jobs.
Deputies Kim Kyok Sik and Choe Pu Il were elected members of the DPRK NDC to fill vacancies at the proposal of the WPK Central Committee and the WPK Central Military Commission.
Deputy Thae Hyong Chol was recalled from the post of secretary general of the Presidium of the DPRK SPA and Deputy Hong Son Ok was elected secretary general of the Presidium of the DPRK SPA.
Some members of the Cabinet were relieved of their posts and appointed at the session.
Deputy Pak Pong Ju, premier of the DPRK Cabinet, took an oath at the SPA.
KCNA also issued several reports that stemmed from the SPA meeting:
Report on Adopting Draft Amendment and Supplement to Socialist Constitution and Law on Kumsusan Palace of Sun
Pyongyang, April 1 (KCNA) — Kim Yong Nam, president of the Presidium of the Supreme People’s Assembly, made a report on adopting the draft amendment and supplement to the Socialist Constitution of the DPRK and the law on the Kumsusan Palace of the Sun.
According to the report, the draft amendment and supplement to the Socialist Constitution and the law on the Kumsusan Palace of the Sun to be submitted to the session for discussion will legalize the plan and intention of the Workers’ Party of Korea to fix by law the shining achievements made in accomplishing the cause of perpetuating the memory of the leaders and complete it on a new higher stage.
To be supplemented to the preface of the Socialist Constitution is the sentence which says that the Kumsusan Palace of the Sun where President Kim Il Sung and leader Kim Jong Il lie in state is a grand edifice for the immortality of the leaders, a symbol of the dignity of the whole Korean nation and its eternal sacred temple.
The law on the Kumsusan Palace of the Sun specifies that its noble mission is to preserve and glorify forever the palace, which is the supreme temple of Juche, as the eternal temple of the sun of the entire Korean nation.
The law stipulates that Kim Il Sung and Kim Jong Il will be held in high esteem forever as in their lifetime at the Kumsusan Palace of the Sun and that it is the obligation of all the Koreans to regard the Palace as a symbol of dignity and a great pride of the nation.
It also specifies the state duty to spruce up the Palace in a sublime and perfect way with the state, all-people and nationwide efforts and devotedly safeguard the Palace in every way so that no one can violate.
Also stipulated in the law are matters for carrying out the work of eternally preserving the Palace as the most important state work with consistency, organizing the committee for the eternal preservation of the Palace and preserving for photos, train coaches, cars, boat and other relics and orders which represent the noble lives of the great Generalissimos.
Orders were also set so that Korean people, overseas Koreans and foreigners can pay respects to the great Generalissimos at the Kumsusan Palace of the Sun.
Also mentioned in the law are the matters of establishment of special sanctuary of the Palace for its protection and management as well as the management of buildings in the premise of the palace, park, arboretum, outdoor lighting and lighting facilities and orders concerning the operation of the plaza and the park of the Palace.
It was specified in the law that electricity, facilities, materials and other supplies needed for the Palace shall be planned separately and be provided without fail on a top priority basis. The law also set the duty to be fulfilled by relevant institutions to strictly supervise and control on a regular basis the work for safeguarding, eternally preserving and providing the conditions for the management and operation of the Palace.
The reporter said that the law on the Kumsusan Palace of the Sun is the unique code for the immortality of the leaders, adding that it is the biggest honor for the army and people of the DPRK to have the legal weapon for the immortality of the leaders.
The adoption of the law will serve as a historic occasion for defending and further glorifying the idea on perpetuating the memory of the leaders clarified by the dear respected Kim Jong Un, he stressed.
The reporter said that the Presidium of the Supreme People’s Assembly of the DPRK submits the draft amendment and supplement to the Socialist Constitution and the draft law on the Kumsusan Palace of the Sun to the SPA session for discussion according to Article 95 of the Socialist Constitution.
DPRK’s Law on Kumsusan Palace of Sun Adopted
Pyongyang, April 1 (KCNA) — The DPRK’s Law on the Kumsusan Palace of the Sun was adopted.
The ordinance of the DPRK Supreme People’s Assembly on it was promulgated Monday.
The Kumsusan Palace of the Sun where President Kim Il Sung and leader Kim Jong Il lie in state is the
eternal temple of the sun of the whole Korean nation.
The ordinance says that the SPA decides to adopt this law to eternally preserve and glorify forever the
Kumsusan Palace of the Sun as a grand edifice for the immortality of the leaders symbolic of Kim Il Sung’s and Kim Jong Il’s Korea.
Law on Consolidating Position of Nuclear Weapons State Adopted
Pyongyang, April 1 (KCNA) — A law on consolidating the position of nuclear weapons state for self-defence was adopted in the DPRK.
An ordinance of the Supreme People’s Assembly of the DPRK in this regard was promulgated on Monday.
The ordinance said as follows:
The DPRK is a full-fledged nuclear weapons state capable of beating back any aggressor troops at one strike, firmly defending the socialist system and providing a sure guarantee for the happy life of the people.
Having an independent and just nuclear force, the DPRK put an end to the distress-torn history in which it was subject to outside forces’ aggression and interference and could emerge a socialist power of Juche which no one dares provoke.
The Supreme People’s Assembly of the DPRK decides to consolidate the position of the nuclear weapons state as follows:
1. The nuclear weapons of the DPRK are just means for defence as it was compelled to have access to them to cope with the ever-escalating hostile policy of the U.S. and nuclear threat.
2. They serve the purpose of deterring and repelling the aggression and attack of the enemy against the DPRK and dealing deadly retaliatory blows at the strongholds of aggression until the world is denuclearized.
3. The DPRK shall take practical steps to bolster up the nuclear deterrence and nuclear retaliatory strike power both in quality and quantity to cope with the gravity of the escalating danger of the hostile forces’ aggression and attack.
4. The nuclear weapons of the DPRK can be used only by a final order of the Supreme Commander of the Korean People’s Army to repel invasion or attack from a hostile nuclear weapons state and make retaliatory strikes.
5. The DPRK shall neither use nukes against the non-nuclear states nor threaten them with those weapons unless they join a hostile nuclear weapons state in its invasion and attack on the DPRK.
6. The DPRK shall strictly observe the rules on safekeeping and management of nukes and ensuring the stability of nuclear tests.
7. The DPRK shall establish a mechanism and order for their safekeeping and management so that nukes and their technology, weapon-grade nuclear substance may not leak out illegally.
8. The DPRK shall cooperate in the international efforts for nuclear non-proliferation and safe management of nuclear substance on the principle of mutual respect and equality, depending on the improvement of relations with hostile nuclear weapons states.
9. The DPRK shall strive hard to defuse the danger of a nuclear war and finally build a world without nukes and fully support the international efforts for nuclear disarmament against nuclear arms race.
10. The related institutions shall take thorough practical steps for implementing this ordinance.
DPRK Law on Developing Space Adopted
Pyongyang, April 1 (KCNA) — The Law on Developing Space was adopted in the DPRK.
The ordinance of the DPRK Supreme People’s Assembly on it was promulgated Monday.
DPRK SPA Decides to Set Up State Space Development Bureau
Pyongyang, April 1 (KCNA) — The DPRK decided to set up the State Space Development Bureau.
The decision of the Supreme People’s Assembly (SPA) of the DPRK promulgated on Monday said:
The DPRK is a full-fledged satellite manufacturer and launcher.
It is an invariable stand of the DPRK to develop the country into a world-class space power by exercising its legitimate right to space development for peaceful purposes.
To step up economic construction and improve the people’s standard of living by radically developing the space science and technology of the country and guide and manage all the space activities of the DPRK in a uniform way, the SPA decides as follows:
1. The DPRK State Space Development Bureau shall be set up.
2. The bureau is a state central institution which guides and manages the supervision and control over the working out of a space development program and its implementation and space development work in a uniform way.
3. The Cabinet of the DPRK and other institutions concerned shall take practical measures to implement this decision.
Work of Cabinet for Last Year and Tasks for This Year
Pyongyang, April 1 (KCNA) — At the 7th Session of the 12th Supreme People’s Assembly held on Monday, Deputy and Premier Choe Yong Rim made a report on the last year’s work of the DPRK Cabinet and this year’s tasks.
According to the report, last year electricity and coal production and the volume of railway freight transport increased amid the endeavors to shore up the four pilot fields of the national economy. Increase was also made in the production of a variety of industrial goods, the report said, and went on:
The Kumsusan Palace of the Sun was remodeled to be the supreme temple of Juche, the National Gifts Exhibition House, Pyongyang Folklore Park, Changjon Street, Rungna People’s Pleasure Park and other big edifices in the era of Songun have been built.
Big industrial projects such as the Huichon Power Station, Tanchon Port, Taedonggang Building Materials Factory were completed and technological updating and modernization of major factories and enterprises in the field of metal, machine, chemical and light industries have been pushed forward, consolidating the material and technological foundation of the national economy.
Satellite Kwangmyongsong 3-2 was successfully manufactured and launched and the third underground nuclear test by the use of smaller and lighter A-bomb of great explosive power was successfully conducted.
The bases for the production of cutting-edge technical goods were built and projects for the development of science and technology have been successfully carried out and the modernization of the information and communications field have been stepped up.
A law on the enforcement of the universal 12-year compulsory education was promulgated. This paved a wide avenue for consolidating the socialist education system and raising the quality of education.
In the field of health care, a telemedicine service has been successfully introduced. The DPRK’s players glorified the honor of the country at major international sports events including the 30th Olympic Games and other signal achievements were made in the field of cultural construction.
The reporter said that this year’s tasks are to realize at an early date the lifetime desire of President Kim Il Sung and leader Kim Jong Il, who devoted their whole lives to putting the country’s economy on the level of a prosperous and powerful country and to making the people live with no more to desire in the world.
According to the report, this year the Cabinet will organize the economic work with a main emphasis on solving issues arising in the people’s living by shoring up the pilot fields, the basic industrial field, consolidating the springboard for building an economic power and concentrating all efforts on agriculture and light industry while regarding coal industry and metal industry as key fields.
It is necessary to increase the production of coal.
Technological updating and modernization of iron works and steel works will be stepped up while improving the bases for the production of Juche iron which have already been built in the field of metal industry. Strict measures for supplying raw materials and fuel should be taken to increase the production of rolled steel more than 3.5 times as compared with last year and thus meet the need for steel.
The field of railway transport will ease strain on transport by consolidating the material and technical foundation of railways.
The grain production plan for this year should be carried out without condition.
The whole country should make efforts for the reclamation of Sepho Tideland and the construction of stock-breeding bases and thus complete the creation of grassland within this year.
The production should be put at a high rate at major chemical factories and the percentage of locally available raw materials should be significantly increased. The production at mines, factories and enterprises in Tanchon area should be increased and exports be boosted to ensure in a responsible manner funds for improving the people’s living standard.
Big efforts should be directed to the construction of dwelling houses. Wonsan area should turn into a world-level resort and tourist destination and living environment and conditions be improved in provinces, cities and counties.
The state investment in the field of science and technology should be increased and the flame of industrial revolution in the new century be raised so as to bring about a decisive turn in building an economic power by dint of science and technology.
Ultra-modern technological goods of high competitiveness should be massively researched and developed. Scientific and technological issues arising in the technological updating and modernization of the national economy should be satisfactorily solved.
The state investment will be increased in education and the preparations for enforcing the universal 12-year compulsory education system be rounded off within this year and fresh progress be made in education, public health, literature, arts, sports and all other fields of cultural construction.
All the fields and units of the national economy should build under a long-term plan export bases for producing second-stage and third-stage processed goods and finished goods of high competitiveness at international markets by relying on locally available resources and indigenous technology. Latest scientific and technological achievements should be positively introduced to increase the varieties of exports and remarkably raise their quality.
Trade should be made diversified and multilateral while conducting a variety of trade activities. The joint venture and collaboration should be actively promoted and the work for setting up economic development zones be pushed forward.
Review of Fulfillment of State Budget for Last Year and State Budget for This Year
Pyongyang, April 1 (KCNA) — Deputy Choe Kwang Jin, minister of Finance, made a report on the review of the fulfillment of state budget for last year and the state budget for this year at the 7th Session of the 12th Supreme People’s Assembly held on Monday.
According to the report, the state budgetary revenue last year was over-fulfilled by 1.3 percent, an increase of 10.1 percent over the previous year.
The plan for local budgetary revenue was carried out at 113.8 percent.
The state budgetary expenditure was implemented at 99.6 percent, an increase of 9.7 percent over that in the previous year.
44.8 percent of the total state budgetary expenditure for the economic development and improvement of people’s living standard was used for funding the building of edifices to be presented to the 100th birth anniversary of President Kim Il Sung, the consolidation of the material and technological foundation of Juche-based, modern and self-supporting economy and the work for face-lifting the country.
38.9 percent of total expenditure was spent for enforcing popular policies and measures for social culture under socialism such as the universal free compulsory education system, free healthcare, social insurance and social security, recuperation and relaxation systems as well as those for development of literature and art and building of a sports power.
Some of the total state budgetary expenditure went to national defence.
According to the report, this year’s state budgetary revenue and expenditure have been shaped in such a way as keeping the overall economy afloat and bringing about a decisive turn in stabilizing and improving the standard of people’s living.
The state budgetary revenue is expected to increase 4.1 percent over that last year.
Out of this, the transaction tax, main source of budgetary revenue, is expected to grow 3.5 percent, the revenue from the profits of state enterprises 6 percent, revenue from the profits of cooperative enterprises 5.3 percent, the revenue from the depreciation 2.8 percent and revenue from real estate rent 3.4 percent.
In the total state budgetary revenue, national budgetary revenue will account for 83 percent and local budgetary revenue 17 percent.
Provinces, cities and counties are envisaged to ensure expenditure with local import and put a huge amount of fund into national budget.
The state budgetary expenditure is expected to grow 5.9 percent over last year.
It was decided to increase expenditure in the field of coal, electricity, metal and railway transport 7.2 percent, the field of agriculture and light industry 5.1 percent, basic investment in capital construction and big overhaul 5.8 percent, the field of science and technology 6.7 percent, the field of education 6.8 percent, the field of public health 5.4 percent, the field of social insurance and security 3.7 percent, the field of sports 6.1 percent and the field of culture 2.2 percent.
Some of the total state budgetary expenditure will go for national defence.
A large amount of educational aid fund and stipends will be sent for the education of Korean children in Japan to promote the development of the democratic national education of the General Association of Korean Residents in Japan.
The reporter called for working hard to glorify this significant year marking the 65th anniversary of the DPRK and the 60th anniversary of the victory in the Fatherland Liberation War as a year of gigantic creation and innovations, in hearty response to the historic New Year Address by Kim Jong Un and the decision made at the March, 2013 plenary meeting of the WPK Central Committee.
Here is what Yonhap had to say about the DPRK’s defense budget:
North Korea is expected to spend 16 percent of its budget on national defense in 2013, up 0.2 percentage point from the year before, the country’s state media said Tuesday.
According to the Rodong Sinmun, an organ of the North’s ruling Workers’ Party, Finance Minister Choe Kwang-jin reported to a meeting of the Supreme People’s Assembly in Pyongyang on Monday that the money is needed to effectively cope with “indiscriminate” provocations by the United States and its followers.
The paper, however, did not disclose the exact size of the defense budget, although South Korea’s unification ministry speculated that last year’s military budget totaled US$910 million.
The proportion of the spending plan compared to the overall budget, is the highest tallied since 1998, according to South Korean analysts.
From 1998 through 2002, the North is estimated to have spent 14.4 percent to 14.5 percent of its annual budget on defense, with numbers going up and being fixed at 15.8 percent in the 2007-2012 period, they said.
1. Here and here is KCTV footage of the SPA meeting.
The Wall Street Journal offers an interesting story on American investor Jim Rogers. Here is an excerpt from the article:
By Sunday, Pyongyang-based Korea Pugang Coins Corp. had sold its entire stock of coins, which included 20 one-ounce gold coins featuring mostly century-old generals as well as several hundred silver coins featuring North Korean sports achievements, cultural landmarks and national animals.
Most of the coins were purchased by Mr. Rogers, an American commodities investor now based in Singapore, said a Korea Pugang Coins representative, who didn’t give her name. The company knows Mr. Rogers from last year’s fair, when he bought the entire lot of North Korean coins offered.
Mr. Rogers, who started the Quantum Fund with George Soros in the 1970s, couldn’t be reached for comment, but had said in a previous interview: “Coins and stamps are the only way I can invest in North Korea.”
By invest in, Mr. Rogers means he wants to wager against the long-term prospects for the isolated, economically struggling country. He views his purchase as a bet on the collapse of North Korea.
“At some point down the line, North Korea will cease existing as a country. Then the value of the coins will go up,” Mr. Rogers said.
According to North Korea’s state-controlled news agency, a special series of gold coins were minted last year to commemorate Kim Jong Il, the country’s leader who died in late-2011. The inscription: “The Great Leader Comrade Kim Jong Il Will Always Be Alive.” However, none of those coins were put up for sale at the Singapore fair.
Mr. Kim was succeeded by his son, Kim Jong Eun.
Situated next to the American Numismatic Association, the North Korean stand drew immediate attention from many visitors, when the Singapore International Coin Fair opened its doors Friday morning. By lunchtime, the sales team, wearing Kim Jong Il pins on their jackets, hardly found time to finish their sandwiches and cans of Coca-Cola KO -0.59% .
Thirteen of the gold coins were purchased by an assistant of Mr. Rogers, said a representative of state-owned Korea Pugang Coins. “He wanted to buy more, but we only had 13 left,” she said. The company offered the gold coins for 2,500 Singapore dollars, or $2,014—well above Friday’s closing gold price of $1,598.25 an ounce.
Mr. Rogers is a fervent believer that the commodities bull-run will continue and that China and other Asian nations will set the global economic agenda for this century. He advocates investing in frontier markets such as Myanmar and Cambodia, and in 2007, sold his New York mansion and moved to Singapore, in part because he thinks it is crucial for his children to learn Mandarin.
Korea Pugang Coins has minted coins in Pyongyang since 1987, but the mintage is only around 2,000 each year, as North Korea’s own gold resources are limited.
The coins draw only a limited amount of buyers within North Korea and are mainly sold to international investors and collectors at fairs in Hong Kong, Beijing and Singapore, the company said.
Estonia-based Tavex Group, a company that specializes in gold and currencies, made a deal with Pyongyang in 2008 to sell North Korean gold coins.
But the North Koreans ended it after the first shipment of coins from a 2007 series featuring elephants, rhinos, owls, lions and buffalos.
“We sold them at a relatively high price to collectors, but demand was not big,” says Tomas Pavelson, who works in sales at Tavex Group.
North Korea announced that it has instituted a new law to begin levying tax in the Mount Kumgang Tourist Zone which has been — until now — a tax-free zone. In addition, a personal protection regulation for tourists was also added to its tourism regulations. North Korea has been modifying laws pertaining to the Mt. Kumgang area in order to develop it as a special tourism zone.
Last week, Yonhap News reported that it had obtained from North Korea a book that was released last November on North Korea’s laws and regulations on international economic policy. According to the book, North Korea adopted in June 2012 a new tax regulation for the Special Zone for International Tour of Mount Kumgang. The law was passed by the Presidium of the Supreme People’s Assembly.
The new tax regulation stipulated that any companies or individuals (foreigners and oversees Koreans) who conduct business transactions or make profit from the Special Zone for International Tour of Mount Kumgang are subjected to tax.
The business income tax applied in the Mount Kumgang zone are on average about 14 percent of one’s yearly profit (infrastructure projects including airport, railways, roads, and port construction only pay 10 percent) and individual income tax ranges from 5 to 30 percent when monthly income is 300 euros (approximately 430,000 KRW).
The tax regulation also covers property, inheritance, transaction, business, and local tax. This comes as a subordinate law under the Special Law for International Tourism in Mount Kumgang, which was enacted in May 2011 and subsequently revoked the monopoly rights of Hyundai Asan.
As such, this law likely will impact South Korean investment in the Mount Kumgang tourism industry.
In the past, working closely with Hyundai Asan, North Korea designated the tourist area as a tax-free zone. There were also no separate laws regarding the levying of taxes on foreigners except for South Korean tourists, who were required to pay 50 USD per person.
In the ‘Tourism Regulations of Mount Kumgang International Tourism Zone,’ a clause was added that specified the special travel bureau for international tourism was responsible for the protection of personal safety and property of tourists in Mount Kumgang. The special travel bureau for international tourism is under the jurisdiction of the Guidance Bureau of the Special Zone of Mount Kumgang International Tourism.
North Korea’s decision to insert a clause ensuring the safety of tourists is likely due to the fact that this issue has continually been raised as a main concern since the death of a South Korean tourist in the zone in July 2008 and subsequent halt of inter-Korean cooperation in the Mount Kumgang project.
In addition to the new tax and tourism regulations, North Korea also made new regulations pertaining to the foundation and management of enterprises; customs; access, visitation, and housing; insurance, and environmental protection, among others.
North Korea’s regime is distributing special monthly payments in U.S. currency via a cash card system to high-ranking military officers in a bid to maintain loyalty, according to a source inside the country.
The payments can be spent at stores and restaurants equipped with card readers which accept foreign currency, the source told RFA’s Korean Service Wednesday, speaking on condition of anonymity.
“Since last year, North Korean generals in the military have been receiving a U.S. dollar cash cards every month,” said the source, who claims to have wide knowledge of the North Korean military.
“This is Kim Jong Un’s new instruction to guarantee a good lifestyle for the generals,” he said, referring to the country’s young “Supreme Leader” who took power after his father Kim Jong Il’s death in December 2011.
According to the source, four-star generals in the North Korean military receive around U.S. $1,200 each month on their cards, while three-star generals get U.S. $1,000 and two-star generals make U.S. $700. These payments are on top of their monthly salaries.
The special payments drawn by the generals dwarf the average government worker’s monthly salary of about 2,000 to 6,000 won (U.S. $0.70 to $2 based on prevailing market rates).
“The amount of cash on the card depends on the person’s level in the military,” the source said.
“When you have spent all of the cash, the card gets recharged again the following month. I’m not sure whether the provider is ‘Office 39’ of the Workers’ Party or the General Logistics Bureau.”
Office 39 of the ruling Workers Party is believed to maintain a foreign currency slush fund, while the General Logistics Bureau controls logistics, support, and procurement activities for the massive North Korean military.
The source said that recipients of the cash card are not limited to generals, but also include other high-level officers from a unit that directs infiltration activities by North Korean military agents in South Korea and another unit that is in charge of “electronic combat” in the General Reconnaissance Bureau.
“A colonel in the General Reconnaissance Bureau is able to spend up to U.S. $400 a month on the card,” the source said.
“A high-ranking military officer who is not a general can receive U.S. currency on a card if he is in charge of an important duty.”
There are a number of stores and restaurants where recipients can spend their cash in the capital Pyongyang, the source said.
Generals can also use their cards at guesthouses in seaside resort cities like Cheongjin in North Hamgyong province and Hamheung in South Hamgyong province, which only cater to officers of their rank.
For their convenience, card readers have been set up at places where foreign currency is traded, he said.
I have previously posted on the DPRK’s debit card system here, here, and here.
There are a number of reasons why this makes a particularly effective control tool. To begin with, the military senior staff are dependent on the party to receive their elite consumer goods. Additionally, these money balances cannot be directly spent in the markets or easily transferred to third parties. Finally, in theory, all purchases can be audited. FECs (FOreign Excahnge Certificates) on speed.
Read the full story here:
North Korean Generals Get Cash Cards for Loyalty RFA
A year has passed since Kim Jong Un took power, yet that has not prevented instability to continue in the price of rice and foreign exchange rates in North Korea, having doubled in some cases compared to last year.
According to “North Korean Market Trends,” published by the online newspaper Daily NK, the price of rice per kg from January 2 to 9, 2013 in Pyongyang, Sinuiju, and Haesan was 6,700 KPW, 7,000 KPW, and 6,600 KPW, respectively. This was a rise of 300 KPW, 200 KPW, and 100 KPW in just two weeks.
During the same period, the foreign exchange rates in Pyongyang, Sinuiju, and Haesan also escalated to 9,100 KPW, 8,950KPW, and 8,750 KPW, a rise of 1,300 KPW, 950KPW, and 300 KPW, respectively.
This is the highest recorded price for rice and exchange rates. Last year from January 15 to 21, the price of rice in Pyongyang was 3,200 KPW and the exchange rate was 4,400 KPW. Compared to current prices, the price has more than doubled.
Prices began to escalate drastically from April 2012. Recorded highs were recorded from September 24 to 27 (at 6,800 KPW). Since then they have continued to remain high.
The Daily NK interpreted the increase in rice prices and exchange rates to be consequential of the political events that resulted in a decrease in food transactions and North Korean residents’ preference for US dollars.
Instability in rice prices and exchange rates are expected to continue as the international community adopted a new resolution to impose sanctions against North Korea in response to North Korea’s “long-range rocket launch” (December 2012) and recent announcement that it is preparing to conduct another nuclear test.
*(NKeconWatch) Another cause of the price increases is inflationary public finance in the DPRK.