Archive for the ‘DPRK Policies’ Category

8.3 movement evolves in DPRK

Tuesday, August 5th, 2014

According to the Daily NK:

The meaning of August 3rd has changed since the creation of the 8.3 Movement in the 1980s, taking on connotations of areas of previously unavailable liberty, at least in the workplace.

“The term ’8.3′ used to just mean products that were not manufactured in factories,” a source in North Pyongan Province told Daily NK on August 4th. “Say it now, though, and a lot of people will interpret it as a sign of market influence.”

The 8.3 Movement was a state-led attempt to increase provision of consumer goods by having factories and enterprises source their own inputs, and production facilities produce commodities beyond the remit of central planners. The movement was named after the date Kim Jong Il ordered it, August 3rd, and goods manufactured under its rubric came to be known as “8.3 consumer goods.”

Consumers could not purchase 8.3 consumer goods in subsidised state shops; rather, they were sold directly at market prices. As the movement grew in scale and state-run enterprises pushed to increase productivity, so 8.3 Workers and even 8.3 Work Units were formed.

As factory production slumped in the 1990s, a situation that persisted into the 2000s, workers took to dodging their work duties and mass mobilization orders so as to engage in cottage industries: making their own goods to sell. A portion of their income went back to the state, a de facto tax, and this became known as 8.3 Money.

“As recently as a few years ago, the 8.3 Work Unit in a cement factory in South Pyongan Province would produce roof tiles and slates and sell them to construction firms at market prices,” the source said. “But now, doing private business to make 8.3 Money is getting to be more popular than working in the designated 8.3 Work Unit.”

According to the source, payments of 8.3 Money can be as little as 20,000 KPW per calendar month all the way up to 200,000 KPW, the equivalent of paying for 40kg of rice in a public market.

“8.3 Money sucks up about 5-10% of the earnings of a person working that way,” the source explained. “This means they could be earning up to 2,000,000 KPW per month.” People in this upper earnings bracket do things like trade bicycles or motorcycles, or sell hand-crafted furniture, she said.

Even organs of citizen control and regulation are influenced by 8.3 Money. The Korean Democratic Women’s Union [KDWU] is one such example. An organization dealing with family matters, the organization technically demands that all women over 30 be members; however, participation can be waived in exchange for a share of 8.3 Money.

“There are three tiers of 8.3 money contributors, dependent on their financial capabilities,” the source explained. “The ones that have complete freedom and are exempt from all duties pay the most. Then there are some who only participate in monthly studies and others who are only exempt from mobilization.”

This complete freedom comes at a price ranging from 240,000-480,000 KPW per quarter, but is seen as a worthwhile outlay. In effect, 8.3 Money marks out a certain type of class stratification.

“Workers who pay a lot of 8.3 money receive protection from [the Party] despite skipping mandatory self-criticism meetings. Those who don’t pay much have to attend all study sessions and mandatory meetings,” the source said.

“Factories are in competition to get the greatest amount of funds possible from workers, but workers want to move to factories where they have to pay the least 8.3 Money,” he added.

A North Korean friend once told me an 8.3 joke. If someone was “low-quality” they were personally referred to as “August 3rd” person. I wonder if 8.3 goods are still perceived as low-quality.

Read the full story here:
Culture of August 3rd Changing with the Times
Daily NK
Seol Song Ah
2014-8-5

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Kim Jong-un’s letter to participants in the National Conference of Agricultural Subworkteam Leaders

Friday, February 7th, 2014

UPDATE (2014-2-26): 38 North has posted an article on Kim’s agriculture speech here.

ORIGINAL POST (2014-2-7): You can download an English-language PDF of the letter here (copied directly from Rodong Sinmun). The bold/underlining was added by me as I read the article. Here is coverage by KCNA.

The speech does not really refer to any “paradigm-changes” in agricultural policy. As usual the emphasis is on raising output by increasing technology inputs and fortifying ideological strength. That being said, the letter does refer to a new policy intended to improve land management:

The subworkteam management system created by the President is an excellent form of production organization and a superior method of management, in that it encourages farmers to take part in production and management as befitting masters with the feeling of attachment to the collective economy. Its advantages have clearly been proved through practice.

By operating the system efficiently as required by the developing reality, the agricultural sector should bring the sense of responsibility and creative zeal of farmers into full play. It should give farmers clear-cut tasks related with soil management, farming operations and production plan and review their results in time and in a substantial way, thus encouraging them all to work in a responsible manner with consciousness and high enthusiasm as befitting masters. Recently a measure has been taken to introduce a field-responsibility-system within the framework of the subworkteam management system so as to inspire farmers with enthusiasm for production. By applying the system correctly in conformity with their actual conditions, cooperative farms should make it prove effective in agricultural production.

I am not the most qualified person to divine meaning from official pronouncements (particularly from the English translation) but this does seem to indicate that efforts have been made to introduce a new “field-responsibility-system”. This appears to be a change in the measurements by which members if a work team are evaluated. Rather than being rewarded for simple output quotas, there are now measurements for soil management and farming operations–coupled with timely and accurate measurement by work team leaders. There is no specific mention of reducing the number of individuals in a work team or other supposed policies associated with the nebulous 6.28 measures.

Interestingly in the very next paragraph, Kim Jong-un highlights one of the most persistent problems in socialist economics: poor labor incentives. He correctly notes that equal distributions to the workers irrespective of effort and quality will create unmotivated workers and production will fall. He notes that hard/effective work should be rewarded:

What is important in operating the subworkteam management system is to strictly abide by the socialist principle of distribution. Equalitarianism in distribution has nothing to do with the socialist principle of distribution and has a harmful effect of diminishing farmers’ enthusiasm for production. Subworkteams should assess the daily work-points of their members accurately and in good time according to the quantity and quality of the work they have done. And they should, as required by the socialist principle of distribution, share out their grain yields to their members mainly in kind according to their work-points after counting out the amounts set by the state. The state should define reasonable amounts of grains for compulsory delivery on the basis of accurate calculation of the country’s demand for grains, interests of farmers and their demands for living, thereby ensuring that they make redoubled efforts with confidence.

This, however, is basically a restatement of official policy. The state gets first claim on the output, the farmers fight for the leftovers….

Here is coverage in the Daily NK.

Addendum: Here is KCNA (2014-2-11) on the origins of subworkteam units:

Subworkteam Management System in DPRK

Pyongyang, February 11 (KCNA) — The national conference of subworkteam leaders in the agricultural sector was held successfully in the DPRK.

The conference underscored the need for the subworkteam leaders to bring into full play the advantages of the subworkteam management system, in order to carry out the theses on the socialist rural question in the country.

The subworkteam management system created by President Kim Il Sung is an excellent form of production organization and a good method of management which encourages farmers to take part in production and management in a responsible manner, attaching themselves to the collective economy.

One day in May Juche 54 (1965), Kim Il Sung went to Phochon-ri, Hoeyang County, Kangwon Province.

There he acquainted himself with farming, living conditions and management situation of workteams and subworkteams of the farm.

As workteam leaders had many people to deal with and many things to do, they were unable to properly manage manpower and production of their workteams.

Evaluation on labor was mostly done in an equal way, failing to enhance farmers’ production zeal.

That was the reason for low grain yield in the farm.

The same was true for other farms.

On the basis of deep analysis of the farm’s situation, he found out that the subworkteam management system was suitable for group’s working, instead of the workteam management system.

He saw to it that the subworkteam management system was introduced first in some co-op farms in Kangwon and other provinces.

Then, at the 12th Plenary Meeting of the 4th Central Committee of the Workers’ Party of Korea held in November Juche 54 (1965), he took measures to apply it to all other co-op farms throughout the country.

With the introduction of the system, the guidance and management system over the socialist rural communities was orderly established from grassroots units to state-level organs, which served as an impetus to bringing about upsurge in agricultural production.

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North Korean academic journal suggests conditions for attracting foreign capital

Thursday, January 23rd, 2014

Institute for Far Eastern Studies (IFES)
2014-1-23

North Korea is promoting stable “political and military environment” as a necessary component to attract foreign investment and regional development through advancement in economic development zones (EDZs).

The Academy of Social Sciences’ newspaper (November 15, 2013 edition) published an article entitled “The Critical Issues in Advancement of Economic Development Zones to Construct a Powerful Economy.” Five major challenges were identified, which included the “creation of a favorable political and military environment.”

As the newspaper explained, “Investors take into consideration the political and military environment of the countries that they will invest in,” and “our fundamental objective is to ensure stability of investments through favorable political and military environment in the EDZs.” Other important issues raised in the article included the creation of a stable political situation, removal of the risk of war, and strengthening of military power.

This corroborates the reality that North Korea is faced with, as the country must create favorable political and military environment as the Kim Jong Un regime pursues its stated national goals of improving the lives of its people and the construction of a powerful economy.

In his New Year address, Kim Jong Un emphasized the need to improve inter-Korean relations and urged the South Korean government to positively respond to this effort. He also refrained from using confrontational remarks. North Korea seems to be demonstrating a willingness to manage the political atmosphere on the Korean peninsula.

North Korea is seeking to mollify the turmoil that followed the regime’s execution of Kim Jong Un’s uncle, Jang Song Thaek, last month, and to encourage favorable atmosphere necessary for economic development.

In addition, the newspaper described the four other major tasks for the advancement of EDZs: infrastructure maintenance of railway, roads, airfields, ports, power plants, water and sewage, hotels, and postal services; enactment of EDZ laws that take into consideration the interests of the state and the investors; provisions for preferential treatment for foreign investors; and business management and operation that fully take into consideration regional characteristics.

In May 2013 North Korea enacted its new EDZ law and announced plans to install special economic zones across the country. In November 2013 the names of 13 EDZs were announced*, with each one said to be tailored to its own area’s local characteristics and environment.

*NKeconWatch: 14 zones were announced.

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North Korea’s ‘New Economic Management System’: Main Features and Problems

Wednesday, January 8th, 2014

Korea Focus
Park Hyeong-jung
Senior Research Fellow
Korea Institute for National Unification

Here is the summary/assessment:

The objective of the New Economic Management System in North Korea is the building of an “unplanned socialist economy,” or something similar to the “socialist commodity economy” China implemented between 1984 and 1992. Agricultural, industrial and financial measures that North Korea is trying to introduce along with the installation and expansion of special development zones under the New Economic Management System are mutually connected and therefore need to be simultaneously implemented.

North Korea has the conceptual blueprints for each economic measure and its leadership includes individuals who are interested in promoting the areas where they are specialized. However, the country apparently lacks the capabilities to create the proper economic and political conditions for these measures. Against this backdrop, production increase and overall economic growth cannot be expected and confusion would intensify.

North Korea had not made sufficient preparations economically and politically before the introduction of the New Economic Management System. Introduction of new measures inevitably affects the interests of those who had been active under the old system. Transitional imbalance may arise in the process of putting the new system into practice. Reserve resources are necessary to address such problems.

The sub-unit management system in the agricultural sector showed how the reform effort can be stymied. This new system spurs independent efforts of farmers and stimulates their motivation for production increase but it invited the resistance of agricultural bureaucrats. When the state and farmers begin to share products by a ratio of 7:3 instead of the previous ratio of 9:1, imbalance will emerge somewhere in the distribution of farm products. Reserve resources are necessary for such a sudden change. The same is expected of the industrial management system. Factory enterprises were given autonomous operation rights but the new system did not result in production increase. Reserve resources are needed here, too.

The new policy under the Kim Jong-un rule lacked consistency and often exposed zigzagging directions. Officials responsible for the implementation of the new policy were unable to win over dissenters and failed to secure reserve resources needed to overcome the material imbalance in the transition period.

Eventually, the management reform at factory enterprises and experiments with sub-units in farming areas were virtually abandoned. The sub-unit management failed because of resistance from agricultural bureaucrats, the authorities` unease about relaxation of peasant control and uncertainty about the food security for the privileged class. The sub-unit management system most seriously threatened the stockpiling of food grain for the military and the power elite. It is certain that the military was the biggest opponent to the new agricultural management system.

The New Economic Management System accompanied policies that reduced the privileged role of the military in the economy. Similar problems were certainly exposed in the reform of industrial and financial management, such as non-cooperation from the privileged group, concerns about loosening control of workers and managers, and lack of guarantees for special interests.

Yet, the sub-unit management in farms and increased autonomy of factory enterprises were not entirely meaningless. Interestingly, some in North Korea`s leadership believed that the sub-unit system with incentives to individual farmers was necessary despite many problems attached to the farmers` self-interests. Although it was not successfully implemented, it did help farmers gain more independence from state control.

The unavoidable trend of changes in the North calls for systemic reforms like the sub-unit management just as youths grow up to become adults and then to the middle age. The problem is how to operate the changed system to achieve production increase. To be successful, those in the North Korean leadership who advocate the New Economic Management System should be able to politically suppress those opposing it or win them over economically by assuring them of the distribution of surplus. What has happened to date shows that the new system has failed to make much progress in that direction.

Concerning the projects of building special economic development zones, similar problems have been detected. The Workers` Party Central Committee decided in a plenary meeting in March 2013 to take measures to diversify foreign trade, develop new tourist zones, and build special economic zones suitable for the specific conditions of each province. The Economic Zones Development Act was enacted in May and, as of October 2013, each province is boosting efforts to attract foreign investment and create new economic development zones.

The concept of special economic development zone can be defined as conforming to the “unplanned socialist economy” or the “socialist commodity economy.” But the success of special economic zones needs the three steps that were required to tackle the problems faced by the sub-unit farm management and the autonomous operations of factory enterprises as observed above.

MY NOTES:

This paper is the most comprehensive assessment of the origination and implementation of the DPRK’s “June 28″ policies.

The author classifies the June 28 policies as an attempt to transform the DPRK from a system composed of KWP rule + decentralized reform + state ownership of production means to KWP rule + coexistence of market and planned economies + state ownership of production means. This state is called “socialist commodity economy” or “unplanned socialist economy”. The transition involves moving management to enterprises and farms where production is carried out on the basis of contract and state planning.

The plan was carried out by a group under the cabinet led by Ro Tu-chol.

ENTERPRISE SECTOR:
* No more production quotas/Enterprises make own plans and profit distribution
* Raw materials are traded firm to firm via “direct supply centers” (intended to provide nominal state oversight of firm-to-firm transactions)
* Enterprise officials appointed/fired by KWP
*30% profit tax

AGRICULTURE SECTOR
*70/30 split of output (previously state took fixed share regardless of output)
*Smaller collective farm sub ubits
*Smaller private plots and kitchen gardens.

FOOD MANAGEMENT:
*PDS do be abolished but increased control of markets
*Government employees (teachers/doctors) to buy food at “food supply centers” (where all food producers sell supplies).
*military personnel are to buy food at subsidized/fixed price
*”Independent accounting enterprises” (August 3rd?) employees are to be paid in cash and buy food. Enterprises still controlled by state to get rations.

Stephan Haggard wrote about the paper here and here.

All posts on the June 28 policy can be found here.

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North Korea’s evaluation of its 2013 economic policy

Friday, January 3rd, 2014

Institute for far Eastern Studies (IFES)
2014-1-3

North Korea concluded that despite international economic sanctions, its economic revitalization policy of 2013 was delivered as planned.

A report on the comprehensive evaluation of North Korean economy was featured in the Choson Sinbo, pro-North Korean newspaper based in Japan, on December 24. It pointed out that although DPRK-US relations worsened and resulted in tougher measures, “it provided the opportunity to mobilize the potential of the national economy.”

It reported that to be ready for a potential war, the farming process at cooperative farms was carried out early from the beginning of the year. In light industry and food industry, “stabilization of people’s lives” was championed as the main slogan in the drive to normalize raw material acquisition and production.

The news also reported, “factories, enterprises and cooperative farms are provided with conditions to conduct independent business activities,” and “economic management method was improved based on the principles that firmly adhere to the socialist economic system and the working mass as the owners of production activities to ensure the roles and responsibilities.”

In other words, the reinforcement of self-supporting system and introduction of a new method of operating a separate garden as a component of cooperative farms resulted in improved production and a 5 to 10 percent increase in the grain harvest per unit against the previous year.

In particular, the news emphasized that “this year is considered as the year of construction,” and boasted the construction of high-rise apartments and various cultural and sports facilities including horse riding tracks and water parks. Especially, Masikryong Ski Resort in Gangwon Province was announced to have gathered national and international attention.

Furthermore, the news recaptured the new policy of parallel “economic construction and nuclear arms development” announced in March 2013 and reported that “despite the hostile forces that concluded that the policy of parallel development was ‘infeasible’, the people are witnessing and feeling the changes taking place in the capital city through the new policy of parallel development that strengthened national defense with reduced cost to fully exert all efforts to rehabilitate the economy.”

In addition, the news also reported on the 13 economic development zones (EDZs) and analyzed that the EDZ policy “laid the foundation for foreign economic development that incorporated the changes in the international situation.”

Meanwhile, the Korean Central News Agency (KCNA) reported on December 28 that an enlarged meeting for the plenary of the Cabinet was recently opened to discuss the issues of resolving the food crisis through improved agricultural production and new agricultural sector tasks for 2014. This is rare for a Cabinet plenary meeting to be held exclusively to discuss the agricultural issue, as all economic issues are normally handles at this meeting.

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DPRK insists Jang purge will not lead to economic policy change

Sunday, December 15th, 2013

Following Jang’s purge, there has been speculation about what exactly will happen to economic relations between China and the DPRK and with ongoing efforts to introduce economic reform measures in the DPRK. According to the People’s Daily (China):

The execution of the uncle of Pyongyang’s top leader may temporarily affect some cooperation projects with China, but economic ties between the neighbors will remain stable in the long run, analysts say.

The Democratic People’s Republic of Korea’s official news agency KCNA reported on Friday that Jang Song-thaek, uncle of supreme leader Kim Jong-un, was executed on Thursday for being a traitor.

Jang was in charge of economic affairs and cooperation with China.

“Following Jang’s execution, the DPRK is likely to review cooperation projects with China,” said Gao Haorong, an expert on DPRK studies at the Xinhua Center for World Affairs Studies, a think tank under Xinhua News Agency.

Jang led delegations to China for negotiations on economic projects, including Hwanggumpyong Island, a special economic zone near Dandong in Liaoning province.

Chen Qi, a professor in international affairs at Tsinghua University, said that after Jang’s execution, China and the DPRK may need some time to rebuild connections to continue cooperation on such projects and to further their economic cooperation.

But Wang Junsheng, a researcher in East Asian studies at the Chinese Academy of Social Sciences, said the impact will be short-term and limited.

“Pyongyang needs China to support its economic development, and this offers opportunities for Chinese companies, so both sides want to advance ties,” Wang said.

“Both countries have the will to consolidate their relations, given frequent high-level visits,” he said.

The latest such exchange saw Chinese Assistant Foreign Minister Zhang Kunsheng meet a visiting delegate from the DPRK’s Foreign Ministry on Friday.

At a news briefing on Friday, Chinese Foreign Ministry spokesman Hong Lei said China hopes and believes that economic relations between the two countries will continue to advance.

Hong said it is in line with the interests of both to develop economic ties. China will further promote economic cooperation with the DPRK.

He described Jang’s execution as “an internal affair” of the DPRK.

In response, the DPRK has started sending signals that Jang’s purge will not lead to any surprises. Eric Talmadge writes for the Associated Press:

The execution Friday of Jang, considered to be North Korea’s second most powerful man and a key architect of the country’s economic policies, should not be taken as a sign that the North will change its economic course or its efforts to lure foreign investment, Yun Yong Sok, a senior official in the State Economic Development Committee, said in an interview with The Associated Press in Pyongyang.

“Even though Jang Song Thaek’s group caused great harm to our economy, there will be no change at all in the economic policy of the Democratic People’s Republic of Korea,” Yun said. “It’s just the same as before.”

Jang’s sudden purge and execution for allegedly trying to overthrow the government has raised questions about how solid the North Korean regime is and whether it will be able to stay the course on policies aimed at raising the country’s standard of living.

The North has shown no willingness to abandon its nuclear weapons program to get out from under international trade sanctions. That makes investment or financing from major international organizations difficult if not impossible.

It also means the success of the zones hinges on China, North Korea’s only major ally, and Jang was seen as a crucial conduit between Pyongyang and Beijing, along with being a supporter of China-backed reforms, such as the zones, to revive the North’s moribund economy.

Jang met with top Chinese officials during their visits to Pyongyang, and in 2012 traveled to China as the head of one of the largest North Korean delegations ever to visit the Chinese capital to discuss construction of the special economic zones, which Beijing hopes will ensure North Korea’s stability.

Yun, however, downplayed Jang’s importance in policymaking and said his removal would instead speed progress on the economic front because he was a threat to the unity of the nation. He said Jang’s execution should not scare away Chinese investment, which is crucial to the success of the zones.

“By eliminating the Jang Song Thaek group, the unity and solidarity of our party and people with our respected marshal at the center has become much stronger, our party has become more determined and the will of our soldiers and people to build a prosperous socialist country has been strengthened,” Yun said. “Our State Economic Development Committee welcomes investment and business from any country to take part in the work of developing our new economic zones.”

Yun said local officials have been tasked with drawing up the plans for the zones in their jurisdictions and are likely to formally submit them for approval to his commission within the next few months.

At the same time, rumors from the South Korean media indicate that North Korean businessmen in China are returning home in large numbers. According to Yonhap (2013-12-14):

North Korean businessmen in China have been summoned back to their country in large numbers in connection with the execution of North Korea’s No. 2 man two days ago, sources familiar with the issue said Saturday.

The businessmen worked out of the northeastern Chinese cities of Shenyang and Dandong to facilitate trade between the two countries and attract Chinese investment in North Korea, according to the sources.

The top North Korean official in charge of promoting economic ties with China is believed to have been Jang Song-thaek, the once-powerful uncle of North Korean leader Kim Jong-un.

With Jang’s execution on Thursday, however, North Korea appears to be cracking down on those loyal to him by summoning them back to their country, the sources said.

Jang was executed immediately after a special military tribunal found him guilty of treason, according to the North’s state media.

“Large numbers of North Korean businessmen in Shenyang and Dandong have gone home in a hurry this week,” said one source, who declined to be identified.

“Judging from their numbers and the fact that it was so sudden, it doesn’t appear to be related to the second anniversary of (the death of former North Korean leader) Kim Jong-il on Dec. 17,” the source said, referring to the late father of the current leader.

According to another source, Norea Korea plans to summon all of its officials and staff from China in stages.

“The ostensible reason will be to educate them on the government’s policies, but (in fact), those classified as having connections to Jang Song-thaek will never be able to go abroad again and will be purged,” the source said, also requesting anonymity.

On Chinese report insinuated that Jang’s ouster could affect Chinese investment in the Hyesan Youth Copper Mine. According to Shanghai Metals Market:

 North Korea’s Zhang Chengze [Jang Song-thaek]  event might undermine Wanxiang Group’s 500-million-yuan ($81.6 million) investment in Huishan copper mine [Hyesan Youth Copper Mine], according to a report by the business magazine China Entrepreneur.

Back in 2004, Wanxiang Group’s chairman Lu Guanqiu started investing in Huishan copper mine with a joint venture company Sino-Mining International Investment Co. and added up total investments to 560 million yuan over the years, according to the report.

The mine, said to have a copper reserve largest in Asia and located just 10 kilometers from the China-North Korea border, was put into production in 2011. Yet daily operations met with many political hurdles since, the report said.

Zhang Chengze, North Korea’s young leader Kim Jeong-eun’s uncle and close aid with a pro-China view, was executed by Kim earlier this month.

Both the Rason and Hwanggumphyong Special Economic Zones have been brought to a standstill following Jang’s purge. Leaders from both projects have been called back to Pyongyang.

You can read posts related to Jang’s purge here.

Click to read posts on the Economic Development Zones and the new Law on Economic Development Zones.

Read the full story here:
N Korean Official: Purge Won’t Hurt Economic Policy
Associated Press
Eric Talmadge
2013-12-15

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The aim of North Korea’s economic development zone: Regional balanced development and improvement of people’s livelihoods

Friday, December 6th, 2013

Institute for Far Eastern Studies (IFES)
2013-12-06

North Korea is pushing ambitious development of local economic development zones, purportedly with the aim of promoting balanced development of the local economy and improving the lives of ordinary people.

On November 29, 2013, the Choson Sinbo, a pro-North Korean newspaper based in Japan, reported details of North Korea’s proposed 13 economic development zones (EDZs) by province, including the characteristics of the plans, goals, and outlook. It specified that the main objectives of this project are to promote a “balanced local economy development and improve the lives of residents.”

To enhance the effectiveness of the EDZs, each region’s characteristics were incorporated into the development strategy.

The existing Rason and the Hwanggumpyong Special Economic Zones are comprehensive and large in scale, covering production and processing, transport, commerce, and tourism sectors. The local-level EDZs, on the other hand, reflect each area’s local economy and culture and more narrowly focus on local industries.

For example, the EDZ slated for Pukchong in South Hamgyong Province is an agricultural zone; Onsong in North Hamgyong Province is for island tourism; and Waudo in Nampo City is an export processing zone. He one reflects its region’s characteristics.

The (North) Korean Association of Economic Development Director Yun Yong Sok, who is in charge of attracting investment from foreign companies, said, “By integrating the unique features of each region, it can benefit the local economy through acquiring necessary technology for the development and also earn foreign currency contributable to improving the lives of the people.”

He also said that “The goods produced in the EDZs will be exported to other countries but at the same time will be able to meet domestic demand,” and “the development of EDZs will center on the border areas adjacent to China and Russia.”

In addition, each province was encouraged to develop plans according to the region’s environment and apply to the People’s Committee in each province. Plans were then sent to the State Economic Development Commission for in-depth deliberations.

North Korea has upgraded the State Economic Development Commission (from its previous designation as the State Economic Development Board) in October 2013 to become a direct mechanism under the Cabinet that oversees the establishment and management of EDZs.

This commission is responsible for developing national strategies relevant to special economic zones such as selection process of provincial EDZ establishment, preparation to state evaluation, modification and supplementation of laws and regulations, and the entire process for implementation.

As predicted by Ri Sun Chol, International Economic Relations Research Director at the Economic Institute in the Academy of Social Sciences, “Once the economic development zones are established in each province, it will greatly expand the breadth of the foreign economic cooperation and will provide a fundamental opportunity to invigorate investment activities.”

The Choson Sinbo reported that while some might take a pessimistic outlook on the new EDZs, the new project is attracting interests from various countries such as Hong Kong and Singapore, and the local and central governments are working closely to promote this project.

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DPRK harvest up 5% for third year, but chronic malnutrition persists

Thursday, November 28th, 2013

“Speical Report: FAO/WFP crop and food security assessment mission to the Democratic People’s Republic of Korean”
Read the full report here (PDF)Previous reports here.

According to the UN WFP/FAO Press Release (on Thanksgiving day!):

ROME/PYONGYANG – A nationwide assessment by two United Nations agencies shows an increase in staple food production in the Democratic People’s Republic of Korea (DPRK) for the third year running.

The report, however, notes that although rates of child malnutrition have steadily declined over the past 10 years, rates of stunting caused by malnutrition during the first 1,000 days of a child’s life remain high and micronutrient deficiencies are of particular concern.

The joint Crop and Food Security Assessment Mission to the DPRK by the Food and Agriculture Organization (FAO) and World Food Programme (WFP) visited all nine agricultural provinces in late September and early October around the main annual cereal harvest.

Total food production is estimated at about 5.03 million metric tons (including milled rice) in 2013, which is about a 5 percent increase over the previous year. Despite the improved harvest, the food security situation is still unsatisfactory with 84 percent of households having borderline or poor food consumption.

The mission observed immense logistical challenges for the public food distribution system and expressed concerns about the timeliness and consistency of distributions. Markets and informal mechanisms of bartering and other forms of exchange are believed to be of increasing importance for access to food by families, particularly in urban areas.

“Despite continued improvement in agricultural production, the food system in the DPRK remains highly vulnerable to shocks and serious shortages exist particularly in the production of protein-rich foods,” said Kisan Gunjal, FAO economist and co-leader of the mission. “In the interest of increased protein consumption and to reverse the downward trend of soybean production, the price paid to farmers for soybean should be increased.”

Since 1998, WFP in partnership with the government has produced blended fortified foods and nutritious biscuits for children and pregnant or nursing women. WFP has recommended a shift to a new product – Rice Soya Milk Blend – for children in nurseries to reduce stunting and wasting.

“Improving the diversity and quality of food provided through the child institution system is essential to improving children’s nutrition,” said WFP DPRK Country Director Dierk Stegen. “We want to produce Rice Soya Milk Blend but can only do so if we receive sufficient donor support.”

Despite a small reduction in the area planted, overall crop production in 2013/14 is estimated to increase due to generally favourable weather conditions that resulted in a higher rice crop.

The aggregate production from cooperative farms, plots on sloping land and household gardens estimated by the mission includes the 2013 main season harvest and the forecast for 2014 early season crops. Unusually early and heavy rains in July and early August compromised maize and soybean yields but had little effect on paddy.

The report estimated cereal import requirements at 340,000 metric tons for the 2013/14 marketing year (November/October). Assuming the official import target of 300,000 metric tons of cereals is met, there remains an uncovered food deficit of 40,000 metric tons for the current marketing year.

While this food gap is the narrowest in many years, it needs to be bridged either through additional purchases by the government and/or international support to avoid increased undernourishment during the current marketing year.

To improve food security and nutrition, the report recommends national and international support for sustainable farming practices, better price and market incentives for farmers and improvements in farm mechanization.

In nutrition, the report recommends that efforts should go toward improving dietary diversity and feeding practices for young children and women through strategies such as behavioural change, market reform and encouraging livestock and fish production; strengthening treatment of severe and moderate acute malnutrition; and better hygiene and sanitation practices.

ADDITIONAL INFORATION:

1. Here is a follow up report in 38 North by Randall Ireson.

2. Here is coverage in the Wall Street Journal and Assocaited Press.

3. High-Resolution photographs from DPRK can be downloaded here.

 

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Special Economic Zones (SEZs) and Economic Development Zones

Thursday, November 21st, 2013

UPDATE 1 (2013-11-29): New economic zones are under development at provincial level – development of Sinuiju special zone officially announced (IFES):

North Korea has enacted the Economic Zone Development Act on May 29 this year and explained, “The economic development zones are special economic zones where preferential treatments are guaranteed in accordance with appropriate laws as provided by the state.” It also elucidated that the provincial level SEZs were to be managed differently from the central-level SEZs.

On October 16, the institution in charge of the central-level economic development zones, the General State Economic Development Department, was upgraded to become the State Economic Development Commission, with Kim Ki Sok appointed as the commission’s chairman. Kim served as the vice-chairman of the Joint Investment Committee of Korea. In addition, the Korean Economic Development Association was established as a private organization, with Yun Yong Sok being named as president.

Provincial-level economic development zones will be open to joint venture company or independent investment by a foreign company and 50 years are guaranteed as the cooperation period. Each of the 13 SEZs in each province will be developed incorporating the special characteristics of each region. The total amount of investment permitted in this area will range from 70 million USD to 240 million USD. The provincial-level SEZs will be managed by the Economic Zone Development Bureau.

With the announcement of the names of the 13 SEZs, it is likely the development plans is likely to proceed rather rapidly.

On the other hand, Sinuiju SEZ is reported to be developed as a central-level zone. In 2002, Sinuiju already had received the title as a special administrative region but after the arrest of the Administrative Minister Yang Bin, the development of this area came to a halt.

The plan for Sinuiju SEZ is likely to be developed as state-of-the-art, comprehensive special zone modeled after China’s Shenzhen SEZ.  A Joint Venture Investment Committee and an international group from Hong Kong will hold 50:50 shares and establish a new joint venture company.

Sinuiju is especially located in a geographically advantageous area, adjacent from Dandong City divided by the Amnok (Yalu) River and it is well connected through railway and bridge that connects the two cities. The currently under construction New Yalu River Bridge is also in progress and expected for completion early next year.

ORIGINAL POST (2013-11-21): Until this year, there were four Special Economic Zones (SEZs) in the DPRK: Hwanggumphyong and Wihwado Economic Zones, Kaesong Industrial Zone, Mt. Kumgang Tourist Special Zone, Rason Economic and Trade Zone.

There is also a new “Kaesong Latest Science, Technology Development Zone” under construction.

On November 21, 2013, KCNA reported additional information on the continuing evolution of the DPRK’s Special Economic Zones (특수경제지대) and Economic Development Zones (경제개발구).

KCNA reported again that Sinuiju will be the site of a Special Economic Zone:

DPRK to Set Up Special Economic Zone in Sinuiju

Pyongyang, November 21 (KCNA) — The DPRK decided to set up a special economic zone in some part of Sinuiju, North Phyongan Province.

The sovereignty of the DPRK will be exercised in the zone.

A relevant decree of the Presidium of the Supreme People’s Assembly of the DPRK was released on Thursday.

Here is the same article in Korean:

신의주시의 일부 지역에 특수경제지대 내오기로 결정

(평양 11월 21일발 조선중앙통신)조선에서 평안북도 신의주시의 일부 지역에 특수경제지대를 내오기로 하였다.

특수경제지대에는 조선민주주의인민공화국 주권이 행사된다.

이와 관련한 조선민주주의인민공화국 최고인민회의 상임위원회 정령이 21일에 발표되였다.(끝)

Sinuiju has been proposed as a Special Administrative Region (SAR) before. You can read all Sinuiju SAR posts hereHere is the announcement in KCNA from 2002-9-20 announcing the SAR. Ultimately the endeavor was not successful, thought it ultimately led to the creation of the nearby Hwanggumphyong and Wihwado Economic Zones

On the same day that KCNA made this announcement, they also offered more information on the new provincial level “Economic Development Zones (경제개발구). I am unsure of the relationship between “Special Economic Zone” and “Economic Development Zone”.

According to the KCNA article:

The DPRK is to set up economic development zones in provinces.

A decree of the Presidium of the Supreme People’s Assembly of the DPRK was released Thursday.

According to the decree, some part of Ojok-ri, Uiju County, North Phyongan Province will come under the jurisdiction of Ryongun-ri. Ryongun-ri will belong to Sinuiju and be called North Phyongan Provincial Amnokgang economic development zone [압록강경제개발구].

Jagang Provincial Manpho economic development zone [자강도 만포경제개발구] will be established in some areas of Mitha-ri (including Poldung Islet) and Phosang-ri, Manpho City, Jagang Province and Jagang Provincial Wiwon industrial development zone [자강도 위원공업개발구] will be set up in areas covering part of Tokam-ri and part of Kosong-ri, Wiwon County.

North Hwanghae Provincial Sinphyong tourist development zone [황해북도 신평관광개발구] will appear in some areas of Phyonghwa-ri, Sinphyong County, North Hwanghae Province and North Hwanghae Provincial Songrim export processing zone [황해북도 송림수출가공구] will be set up in some areas of Sosong-ri, Songrim City.

Kangwon Provincial Hyondong industrial development zone [강원도 현동공업개발구] will be set up in some areas of Hyondong-ri, Wonsan City, Kangwon Province.

South Hamgyong Provincial Hungnam industrial development zone [함경남도 흥남공업개발구] will take its shape in some areas in Haean District, Hamhung City, South Hamgyong Province and South Hamgyong Provincial Pukchong agricultural development zone [함경남도 북청농업개발구] will be created in areas covering part of Mundong-ri, Pudong-ri and Jongsan-ri of Pukchong County.

North Hamgyong Provincial Chongjin economic development zone [함경북도 청진경제개발구] will be set up in areas covering part of Wolpho-ri, Susong-dong and Namsok-ri, Songphyong District, Chongjin City, North Hamgyong Province. North Hamgyong Provincial Orang agricultural development zone [함경북도 어랑농업개발구] will appear in some areas of Ryongjon-ri, Orang County. North Hamgyong Provincial Onsong island tourist development zone [함경북도 온성섬관광개발구] will be formed in some areas of Onsong township, Onsong County.

Ryanggang Provincial Hyesan economic development zone [량강도 혜산경제개발구] will appear in some areas of Sinjang-ri, Hyesan City, Ryanggang Province.

Some areas of Ryongnam-ri, Waudo District, Nampho City will turn into Nampho City Waudo export processing zone [남포시 와우도수출가공구].

The sovereignty of the DPRK will be exercised in the provincial economic development zones.

The Korean version of this article can be found here. The DPRK announced there would be 14 SEZ/Economic Development Zones. With the inclusion of the Sinuiju Special Economic Zone with the KCNA list of 13 economic development zones, you will get 14. However, there are other economic development zones that have been announced that are not included on this list. By my count there are  at least 18. If one is to be in each province, then zones in South Phyongan and South Hwanghae have yet to be announced.

As mentioned before, these economic development zones are supposed to be governed by the Law on Economic Development Zones and the Economic Development Commission/Association.

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Data on the DPRK’s informal economy

Saturday, November 16th, 2013

According to the Choson Ilbo:

The belief that money can buy anything is rife in North Korea. Farmers can buy membership of the Workers Party, the gateway to the elite, from a senior party official for about $300. Factory or company workers or soldiers have to pay about $500 for party membership. College admission can also be bought with a bribe.

“Anybody can buy admission to Pyongyang Medical University for $10,000 and to the law or economics departments of Kim Il-sung University for between $5,000 and $10,000,” said a South Korean government source.

The opportunity to work overseas costs $3,000, plus an extra $1,000 if workers want their stay extended another year.

Currently, a U.S. dollar is worth about 7,000 North Korean won. Would-be defectors pay border guards $40 to cross the Apnok or Duman rivers, and $60 to carry old or feeble people on their back.

Asked about the monthly average household income, 31.7 percent said they earned up to 300,000 North Korean won. Next came up to 100,000 won for 16.6 percent, up to 500,000 won for 13.7 percent, and up to 1 million won for 13.2 percent.

But their official salary for their work is a mere 3,000 to 5,000 won, meaning they earned the rest of their income chiefly in the informal economy.

The most popular means of earning money are small shops or restaurants, cottage industries like making clothes and shoes, and private tutoring and private medical services.

Farmers can earn 60,000 to 80,000 won a month by harvesting 700 kg of beans and corn annually from their allocated field and raising five chickens and a dog.

Recently, a growing number of people are getting into the transportation business by illegally registering vehicles or boats, which are banned from private ownership, in the name of agencies or companies and appropriating their profits.

They also make money from smuggling. Repairing computers or mobile phones has become a popular job as well as repairmen can earn $5 to $10 per job.

Read the full story here:
N.Korea’s Informal Economy Thrives
Choson Ilbo
2013-11-16

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