North Korean Economy Watch

Daily NK
Sohn Kwang Joo
12/6/2007

It was in Yanji where I met the 25-year-old defector, Kim Soo Mee. She was born and raised in the mountains that separated her village from larger towns in Hamkyung Province.

Because of her mother’s ferver for educating her children, Kim Soo Mee was able to attend the First Senior Middle School, a specialized school for gifted students, following her timely graduation from primary school.

When she was 12 years old, the national famine greatly affected her town. People scattered about the streets looking for food, and dead bodies could be seen everywhere. Many students stopped going to school and instead spent their days searching for food. However, Soo Mee’s mother urged her to continue with her studies. With her mother’s encouragement, Soo Mee gained acceptance into a prestigious university in North Korea.

She received good grades at the university and had high hopes of working in a well-established company in Pyongyang. However, due to her family background, she was forced to remain and work in the small rural town.

The living conditions in North Korea’s capitol are surprisingly different compared to the local cities.

Kim Soo Mee explained about the corruption surrounding university admissions in North Korea. “Only children who grow up in rich families can be admitted to the universities in Pyongyang, as huge sums of money are needed to bribe institution administrators. For example, if a student wants to attend Kim Il Sung University, often times a family will pay upwards of 1,000 dollars just to afford the child a chance of getting accepted. Pyongyang Medical College and Kim Hyong Jik College of Education usually require approximately 500 dollars in bribes.”

I was curious to ask, “Can a student bribe their way into a school even if he or she does not have good grades?”

She explained that such students are instructed to leave certain indicating marks on their test paper at the college entrance examination as a way for evaluators to discern whether the student offered a bribe or not. The evaluators rank the students by the amount in bribes their families have paid, and then rank them according to their family background.

Her college life was unbearable because she had no financial power or a strong family background to support her.

385 days out of her college years were spent practicing for the 40 seconds of the military parade it would take to pass by Kim Jong Il’s podium. The average student spends almost two and a half years preparing for national events such as military parades and agricultural support activities that take place in the Spring and Fall. These hardships led Soo Mee and many of her fellow students to dream of going abroad.

The most popular jobs after graduation include diplomatic posts and working in foreign currency-making companies. She went on to explain that it is now undesirable to work as a discharged soldier or a member of the Party.

As for the common perception of Kim Jong Il among North Korean youths, she maintained that “through propaganda, the people are made to believe that the General (Kim Jong Il) ‘s meals consist of only a few rice balls and salted radish. However, I was shocked to find out that preparation of the General’s meals costs 1,000 dollars.” This information was told to her by a researcher from Kim Il Sung and Kim Jong Il’s Longevity Institute.

Most of the intellectual students have an unfavorable opinion about Kim Jong Il, but the general public does not see the truth behind his lies.

“In the movie, ‘Geumjin River’ (2004), there is a line that states, ‘We are poor because the heavens took away our Supreme Leader (Kim Il Sung) in wrath because the people did not respectfully take care of him.’ The authorities are currently insisting that our country is now poor because of imperialistic pressures and economic sanctions imposed on us by America.”

I asked, “What do the Pyongyang citizens think about the future of North Korea?”

“Most think that we should open and reform our state, but they can never mention the words ‘open’ and ‘reform’ in public,” she replied. “The authorities often proclaim that we can attain wealth by properly following the Military-First Policy and by establishing a strong economic society. But the problem is they do not tell us how to do so. The only people not doing business in the jangmadang are cadres of the Party, generals of the Army and National Security or Safety Agents; they maintain favorable living conditions by collecting bribes from the citizens.”

Daily NK
Lee Kwang Baek
9/21/2007

The expansion of Jangmadang’s private economy

Several years ago, I met a defector from North Korea and is currently residing in Japan. He frequently meets people coming and going from North Korea.

The change he relayed regarding North Korea was interesting and vivid. Although hundreds of people are not dying from starvation as in the past, transformation brought about by the expansion of the private economy, such as the Jangmadang (markets).

I asked him what the most significant change in North Korea was after the mass starvation of the mid-90s.

It was the reorganization of North Korean society’s class system. According to him, there are currently six levels of classes forming in North Korea.

First is the top privileged class based on Kim Jong Il. It is the class that feeds and lives on Kim Jong Il’s administrative funds, all kinds of support coming in from South Korea, and extractions from civilians.

The second is the power class engaging in the area of foreign currency earning activity. A portion of money gained from the foreign currency earning business is offered to the Kim Jong Il regime and the rest are accumulated as their own wealth.

The third is the “moneybag” class who has earned money from exchanges with the products from Jangmadang and China. They use “violence” and “money,” like the Russian mafia, to secure the commercial rights of each region via the Jangmadang.

The fourth is the class whose sustenance depends on provisions. It can be deduced that people in the middle-class take up approximately 20~30% of the civilian population.

The fifth is the common class who depend on Jangmadang and individual patches. Approximately 60% of the total population falls into this class. They live day to day on their labor power.

The lowest class is the elderly, the handicapped, Kotjebi (begging children), city migrants, and diseased patients.

The most outstanding class is the 5th class. They are a class who has started living independently without depending on the Kim Jong Il regime and counts as 60% of the population.

South Korean administration believes that there is a need to seek a North Korean policy while considering the size and characteristics of the lower class.

That is, direct support or loans to the North Korean government should be reduced and a direct commercial transaction with North Korean citizens should be increased. Gradually, Kim Jong Il regime’s political position should be weakened and the status of self-sufficient lower-class citizens have to be elevated. This can become an important foundation for North Korean society’s move towards a market economy.

The second eye-catching element is the most venerable people in the lower class. Approximately 10% of people who fall under this class are humanitarian aid recipients of our government and international society. The latter two have steadily continued their support to them.

Despite this, according to a recent North Korean source, a significant amount of people are suffering from malnutrition among those who have been admitted to hospitals, long term reeducation camps, and concentration camps for beggar children. Why are such events occurring?

The defector said that when the rice that the South Korean government sends arrives at the North Korean harbor, North Korean authorities or organizations immediately sell them for money.

Similar testimonies have come forth from North Korean civilians. Rice which is sold at the harbor can only be bought with foreign currency. People who can purchase rice by paying foreign currency are “moneybags” for a portion of bureaucrats who have accumulated wealth. Moneybags and corrupt officials hand over this rice to the Jangmadang and collect the enormous balance.

The humanitarian aid provided by the outside, before they are even relayed to the lowest class who should be receiving support, are flowing into the hands of moneybags and corrupt bureaucrats. If such defectors’ testimonies are true, the South Korean government’s humanitarian rice support has lost its original function.

The solution regarding this is two-fold. First is directly relaying medical products and rice to North Korea’s lowest class. Through civilian and organizational efforts, a humanitarian support team jointly based on South Korean civilians and government should be formed and they should initiate humanitarian aid activity by directly going into North Korea.

Further, a large-sized South Korean humanitarian support activity inspection team should observe the activities of the North Korean Red Cross and raise the transparency of distribution. If this is difficult, there is a need to simplify the window through the support of international society whose monitoring is much ahead of our government’s monitoring of formality.

The government should urgently restore the original capacity of humanitarian support in order to avoid falling into a policy of failure geared only towards a dictatorship regime.

For international readers: The Congressional Research Service is an organization that puts together issue briefs and legislative histories for congressional staff.  They are one of the first places US Congressional staff go to learn about a topic.

In April, the Congressional Research Service published a document on the North Korean Economy.  The full report, as well as some past reports, can be downloaded here.

Executive Summary

This report provides an overview of the economy of the Democratic People’s Republic of Korea (DPRK) or North Korea, its external economic relations, attempts at reform, and U.S. policy options. Along with the United States, North Korea’s major trading partners — China, Japan, South Korea, and Russia — form the socalled “six parties,” who are engaged in talks, currently restarted, to resolve issues raised by the DPRK’s development of nuclear weapons.

The economy of North Korea is of interest to Congress because it provides the financial and industrial resources for Pyongyang to develop its military, can be used as leverage in negotiations, constitutes an important “push factor” for potential refugees seeking to flee the country, creates pressures for the country to trade in arms and illegal drugs, is a rationale for humanitarian assistance, is tied to Pyongyang’s nuclear program, and creates instability that affects South Korea and China. The North Korean threat to sell nuclear weapons material could be driven in part by Pyongyang’s need to generate export earnings. The dismal economic conditions also foster forces of discontent that potentially could turn against the Kim regime — especially if knowledge of the luxurious lifestyle of communist party leaders becomes better known or as the poor economic performance hurts even Pyongyang’s elite.

Economic conditions in North Korea currently seem to be improving but have been dismal for those out of the center of power. Mass starvation — eased only by international food aid and other humanitarian assistance — has stalked the countryside. Over the past 15 years, industrial production in North Korea has shrunk considerably. The country has embarked on a program of economic reforms that include raising wages, allowing prices to better reflect market values, reducing dependence on rationing of essential commodities, trimming back centralized control over factory operations, and opening foreign trade zones for international investment.

North Korea has extensive trading relationships with China and South Korea and more limited trade with Japan and Russia. Because of U.S. economic sanctions and lack of normal trade relations status, U.S. imports from North Korea in 2006 were nil, while U.S. exports consisted of $3,000 worth of books and newspapers.  The DPRK has been running an estimated $1.8 billion deficit per year in its international trade accounts that it funds primarily through receipts of foreign assistance and foreign investment as well as through various questionable activities, such as sales of weapons, transporting and producing illegal drugs, and counterfeiting brand name products and currency.

U.S.-led financial sanctions on North Korea have disrupted that country’s trade. In the six-party talks, economic assistance (including fuel oil) is a major bargaining chip. Economic policy options include increasing or easing economic sanctions, preventing shipments of illicit cargo, normalizing relations with Pyongyang, negotiating a trade agreement, allowing the DPRK to join international financial institutions, and removing the country from the terrorism list. This report will be updated as conditions warrant.

KCNA
5/21/2007

The architecture in the DPRK has entered a new phase of its development in the Songun era.

The leader-immortality architecture reflects the unshakable will of the Korean people to attend President Kim Il Sung as the eternal image and to glorify his revolutionary exploits.

The Kumsusan Memorial Palace, the sacred temple of Juche, is a symbol and pattern of architecture for the immortality of the leader.

The Kumsusan Assembly Hall where President Kim Il Sung had conducted indefatigable activities for the Korean revolution and the global cause of independence was named Kumsusan Memorial Palace and built as a sacred temple more than 10 years ago, with the result that a new history of architecture for the immortality of the leader was created.

All structural elements and detailed decorations of the palace from the formation of the elevation to the palace square and stone gates mirror the faith and will of the servicepersons and the people to hold the President in high esteem forever.

Towers of immortality have been erected in different parts of the country. Inscribed in them is the slogan of faith “The great leader Comrade Kim Il Sung will always be with us”.

Typical of them is the tower of immortality built in the entrance of Kumsong Street in Pyongyang.

The tower built across the street has two arch-type openings in the foundation. Inscribed in relief are the immortal slogan on the front and back sides of the tower body flanked by magnolia flowers, the national flower.

The Monument to Party Founding and the Monument to the Victorious Battle of Musan Area, grand monumental edifices in the Songun era, are also associated with the revolutionary exploits of President Kim Il Sung.

The Monument to Party Founding depicts the emblem of the Workers’ Party of Korea in a unique way. A hammer, a sickle and a writing-brush tightly grasped in the hands of a worker, a peasant and an intellectual are vertically erected, surrounded by a girdle. The body of the Monument to the Victorious Battle of Musan Area is a vertically standing rifle, the main theme, unlike other monuments. The monuments depict well in a symbolic method the exploits of the President who founded the WPK and pioneered Songun.

The architectural edifices for the immortality of the leader will be handed down long in accordance with the noble moral obligation of the servicepersons and people to attend President Kim Il Sung as the Sun of Juche and eternal leader.

Korea Times
Andrei Lankov
4/12/2005

Who is the best choice for a spouse in North Korea? Someone with equal or better “songbun,’’ of course! And who can get a good job? Someone with an appropriate songbun! And who will never be allowed to reside in Pyongyang? Someone with bad sogbun!

But what does songbun mean? Essentially, this is a hereditary group to which every North Korean belongs. The first attempts to classify the entire population according to the people’s origin and, thus, perceived political reliability took place in the late 1950s, but the current system was developed between 1964 and 1969, when specially appointed groups undertook painstaking research of every adult North Korean’s family background and origin. With some minor changes, this system has been functioning to the present day.

The whole population of the DPRK is divided into 51 groups, which, in turn, forms three strata or classes: the “main’’ (kibon kyechung), the “wavering’’ (tongyou kyechung), and the “hostile’’ (choktae kyechung).

In order to make the readers feel better about North Korean bureaucracy, I’d rather name some of the groups that are included in these strata.

Let’s start from the top. The main stratum includes 12 groups: 1) workers who come from working families; 2) former farmhands; 3) former poor peasants; 4) the personnel of state organizations; 5) KWP (Party) members; 6) the family members of deceased revolutionaries; 7) the family members of national liberation fighters; revolutionary intelligentsia (that is, those who received their education after liberation); 9) the families of civilians who were killed during the Korean war; 10) the families of soldiers who were killed during the Korean war; 11) the families of servicemen and 12) heroes of the war.

The “uncertain’’ stratum includes nine groups _ whose descriptions I probably omit. But as one might expect, the enemies make the longest list. The bad ones are: 1) workers of complicated origin, that is, people who had formerly been entrepreneurs and officials; 2) former rich peasants; 3) former small or medium merchants; 4) former landlords, that is, people who before the reform of 1946 had more than 5 hectares of land; 5) people who participated in pro-Japanese or pro-American activities; 6) former officials in the Japanese colonial administration; 7) families of people of good social origin who fled to the South during the war; families of people of bad origin who fled to the South during the war; 9) Chinese Koreans who returned from China in the 1950s; 10) Japanese Koreans who returned from Japan in the 1960s.

I’ll stop here _ the complete list of the “recommended suspects’’ is way too long. Among others, it includes practicing Protestants, Catholics and Buddhists, descendants of shamans or courtesans, families of prisoners, and the like.

There is considerable variation in rights and privileges not only between strata, but also between different groups within each stratum. Of course, it is not as bad to be a grandson of a rich peasant than the son of a political criminal. The position of Korean Japanese is even more controversial: the authorities keep them away from some sensitive jobs and watch them closely while courting them in order to extract money and expertise from the friends and relatives they once left behind in Japan.

A person’s fate is determined by his group, by his songbun. It influences his chances of getting a good job and higher education, of being allowed to live in Pyongyang and other major cities, and, hence, his standard of living, punishment in case of a criminal persecution, and many other things. Thus, members of the “hostile stratum’’ normally have no chance to study in prestigious Pyongyang colleges.

It is sometimes possible to improve own station: say, an exemplary military service will vindicate a lad who was unlucky enough to be the grandson of a Protestant minister. These things happen, but the songbun often lasts for generations.

It is impossible to determine the number of people in each group _ even approximately. The existing (and oft-cited) estimations are often patent nonsense. Perhaps we will never learn the truth until the collapse of the DPRK. Nonetheless, it is clear that the economic turbulence of the last decade greatly damaged the system. But that is another story…