North Korean Economy Watch

Summary by James Person, North Korea International Documentation Project:

This Document (full journal article including documents here) consists of a memorandum of a conversation between DPRK Ambassador Li Sangjo to Moscow and Soviet Deputy Minister of Foreign Affairs N.T. Fedorenko, as well as a letter addressed to N.S. Khrushchev. Li sought a meeting with either Khrushchev or A.I. Mikoyan to press upon the Soviet leadership the gravity of the situation inside the DPRK and KWP CC following the historic 1956 August Plenum.
 
In the letter, Li described in detail the actions of the party leadership after being criticized both before and during the August Plenum by opponents to Kim Il Sung’s development strategies. Although the existing historiography, as well as North Korean propaganda characterizes the events of August 1956 as an attempted coup, Li suggested that the challenge was a democratic one aimed at eliminating the serious consequences of the personality cult and ensuring intra-party democracy and collective leadership, completely in accordance with the statutes of the KWP accepted at the Third Party Congress in April 1956. However, sycophantic and hostile elements in the party leadership “took revenge” on those who “courageously” criticized them. Li, who had long been a proponent of outside intervention, encouraged fraternal assistance. Despite the failure of earlier attempts to press upon Kim Il Sung the need to reform through comradely criticism by fraternal leaders, Li asked that a senior Soviet official be sent to Pyongyang to call a new plenum with all present, including the purged members of what became known as the “consumer goods group.” Li also indicated that he had sent a similar request to Mao Zedong.

Read the documents from the Soviet archives, including historical context here.

Last August I posted an excerpt from Andrei Lankov’s book, North of the DMZ, on the preservation of Kim il Sung’s body in Kamsusan Memorial Palace.  This year, the Daily NK (here and here) provides some new information on Kim il Sung’s imposing presence on the North Korean landscape.

First some statistics:

1.  There are approximately 70 Kim il Sung statues in North Korea (large statues a la Mansu Hill in Pyongyang).

2.  There are approximately 30,000 plaster busts.

3.  There are approximately 140,000 monuments and memorials

4.  There is allegedly one Kim Jong il statue in Pyongyang (although the Daily NK is the only source I have ever heard make this claim). 

5.  The first Kim il Sung statue was at the Mangyongdae Revolutionary School on 10/24/1948.  The second was in front of the Changjeon School in 1949. The most recent is at Kim il Sung University in 1996. 

Apparently all of the statues are made of bronze, but are coated in a gold paint every two years to prevent them from corroding.  The gold paint is allegedly imported from Germany (Can any German readers/speakers find out which German company supplies the paint?  How much? And at what cost? ).   

All of the likenesses of the Great Leader are exclusively constructed by the Mansudae Art Studio’s “Number One Works Department”  in Pyongyang.  The workers in this group are tested annually by a deliberation committee so they can be certified to work on Kim statues, etc.  These individuals are the only ones legally allowed to reproduce the leader’s image in North Korea.

Once a Kim statue is completed, it is transported by numerous agencies (security, party, and artists) to its destination where it is erected.  Lamps are supposed to shine on the statues from 10:00pm until 4:00am.  Local citizens are charged with keeping the area around the statue tidy (which can be verified on Google Earth).  In the event of an emergency (such as a war), many statues allegedly have dedicated bunkers in which they can be stored.

The Daily NK is running a couple of interesting pieces on Kim il Sung monuments and statues in the DPRK.  Both articles are worth reading (here and here), and I will comment on them more extensively in the near future, but the first article made a startling claim that I had to put to NKeconWatch readers: That there is a Kim Jong il statue in Pyongyang.

In contrast to the many Kim Il Sung’s statues, there stands only one Kim Jong Il statue. This is located in on the lawn of National Security Agency office building at the foot of Mt. Amee in Daesung district, Pyongyang. It was erected on Kim Jong Il’s 46th birthday in 1988 and is constructed not of bronze, but of gold.

In addition to the one standing statue of Kim Jong Il, all Colleague Kim Il Sung Revolutionary History Institutes, which are located in each major local office or agency, showcase plaster busts of the Kim son, and at the International Friendship Museum in Mt. Myohang, a large sitting statue was constructed.

I have spent about 20 days in the DPRK.  I know many people who have spent many many more, and I have never heard of any Kim Jong il statues.  Can anyone confirm this?  Any photos out there?

If you want to make money, you have to spend money. 

Excerpts from Yonhap:

North Korea regards [Chongryun] the pro-Pyongyang residents’ group in Japan as its major overseas support base. The pro-communist group operates a number of primary and junior and high schools in Japan where students of Korean ancestry learn the Korean history and language.

Kim Jong-il “sent 205 million yen as educational aid fund and stipends to the General Association of Korean Residents in Japan for the democratic national education of the children of Koreans in Japan,” the Korean Central News Agency said in a report, monitored in Seoul.

The latest North Korean financial donation comes amid warnings by international aid groups that the isolated communist country faces its worst food shortage in years.

Read the full sotry here:
N. Korea donates US$2 million to pro-Pyongyang group in Japan: report
Yonhap
4/12/2008

From the Donga Ilbo:

A black Benz with the red license plate of “087” passed by quickly. 087 is a number used exclusively for the sedans of North Korean diplomats. It was easy to tell that the North Korean embassy located on this street recently purchased the luxurious sedan.

“The North Korean embassy has been full of life since the latter half of 2006 because of the increased number of North Korean workers sent to Russia, diversified businesses and growing efforts to secure energy supplies,“ said North Korean defectors that the Dong-A Ilbo report team met in Moscow.

North Korean workers will construct the next APEC forum venue:

In order to prepare for the APEC, the Primorsky regional government (on the North Korean border) plans to issue work permits to 12,000 North Korean workers in 2008, four times higher than the number of those last year. A foreign national, who has hired North Korean workers, said, “North Korean senior officials are lobbying fiercely in order to increase the quota for laborers. They even arrange free tours of North Korea for Russian government officials.”

North Korea companies revived:

Recently, North Korean companies, such as Daedong River, Neungra, Baekdu and Goonpyo, have established their offices in many parts of Russia.

A 39-year-old North Korean defector who has stayed in Russia for 12 years said, “I believe, out of the 49 Russian provinces, North Korean firms have established their offices in about 30 provinces. Some 90 percent of them are responsible for overseeing North Korean workers.”

Joint ventures between Russia and North Korea, which went into hibernation after the United States froze North Korea’s account at Macau’s Banco Delta Asia in 2005, have recently resumed their activities. “Joint companies, which were active in the early 1990s, such as Dongbang Seafood and Far East Marine Transportation, have resumed their businesses,” said one Korean-Russian residing in Nakhodka.

Wages and Taxes:

“North Korean companies, which are spread across Russia, have been collecting about $400 to 500 from each North Korean worker every month. It is then used as high ranking officials’ business expenses,” said a 46-year-old North Korean defector.

“The discontent of workers is growing because high ranking officials dine out at fancy restaurants and their wives purchase expensive clothes with money earned by them,” added the defector.

(Uncle Sam is the only other government I know of that also taxes the income its citizens earn outside of its territory)

The story also makes a big deal out of the fact that the North Koreans pay huge bribes to do business in Russia, but who doesn’t?

Big players, who deliver a large sum of bribes to Russians, have also recently emerged. A captain of a North Korea freight ship was caught March 12 on site while shipping 100 tons of crude oil without reporting to customs at the Slavyanka shipyard, southern Vladivostok. It was found that the captain gave $45,000 to the president of the crude oil storage company as a kickback.

Read the full sotry here:
N.Korea’s Businesses Thriving in Russia
Donga Ilbo
4/4/2008

The DPRK is sending a barrage of signals that it is not happy with the policy changes that are on the new South Korean government’s agenda (denuclearize and account for all nuclear activities, reform, repatriate missing South Korean citizens, etc):

1. February 25, 2008: the DPRK increases fighter jet maneuvers near the DMZ. (Source: N.K. flight maneuvers rise near border, Korea Herald, Jin Dae-woong
4/1/2008

2. March 27, 2008: the DPRK expels eleven South Korean officials from industrial zone. (Source: South Koreans kicked out of North Korea’s Kaesong industrial centre, The Times of London, Leo Lewis, (3/27/2008)

3. March 28, 2008: the DPRK test fires missles off its coast. (Source: North Korea sends a missile warning, Asia Times, Donald Kirk, 3/29/2008)

4. March 30, 2008: the DPRK issues blunt statements about deteriorating relations and suggesting complete destruction of the South if it is attacked. (Source: Pro-North Korea newspaper says relations with South at lowest since after nuclear test, Associated Press, 3/31/2008)

5. April 1, 2008: The DPRK breaks its silence on direclty challenging South Korea’s new president, labeling Lee Myung Bak a “traitor” and a “sycophant toward the U.S.” (Source: North Korea Calls South Korean President a `Traitor’, Bloomberg, 4/1/2008)

6. April 3, 2008: North Korea accuses the South Korean Navy of violating its territorial waters, “The South Korean military’s warmongers have sent three battleships deep into our territorial waters in the West Sea (Yellow Sea) at around 11:45 am (0245 GMT) on April 3,” and “South Korea’s military should clearly bear in mind that an unexpected countermeasure will follow if they continue to push battleships into (our waters) and raise tensions.” (Note here they are trying to pin the military escalation on South Korea) (Source: North Korea accuses South of entering its waters, Reuters, 4/3/2008)

7. April 3, 2008: North Korea announces it is suspending all dialogue with South Korea and closing the border to Seoul officials, its toughest action in a week of growing cross-border tensions. (North Korea cuts contacts with South, The Austrailan, Park, Chan Kyong, 4/3/2008)

8. DPRK violates NLL three times (Yonhap) 5/22/2008

Reasons not to panic:

1.  Although eleven South Korean officials have been expelled from the Kaesong Zone, Some 48 South Koreans and five North Koreans still work at a separate inter-Korean management committee overseeing the industrial zone, where about 800 South Koreans work along with more than 25,600 North Korean laborers for 69 South Korean companies.  In other words, it is still business as usual for the most part. (Source: Pro-North Korea newspaper says relations with South at lowest since after nuclear test, Associated Press, 3/31/2008)

2.  DPRK statements about about attacking the South are a response to statements aired in public by General Kim Tae-young at a National Assembly hearing on his nomination as chairman of the joint chiefs of staff where he claimed his people had plans for use any time it was deemed necessary to take out the North’s nuclear facilities. (Source: North Korea sends a missile warning, Asia Times, Donald Kirk, 3/29/2008)

3. While all of this was going on, 159 CEO’s of small- to medium-sized South Korean enterprises toured North Korea in search of investment opportunities. (Source: 159 CEOs Begin Trip to North Korea, Korea Times, Kim Sue-young, 3/19/2008)

4. Tourism to the DPRK continues unhampered.

5.  The Pyongyang International Trade fair in May is on and business delegations are still welcome.

6. April 3, 2008: The South’s unification ministry said it did not believe civilian exchanges would be affected. Two Seoul-funded projects in the North - the Kumgang resort and the Kaesong industrial complex - are major hard currency earners for the impoverished nation. (North Korea cuts contacts with South, The Austrailan, Park, Chan Kyong, 4/3/2008)

7. Inter korean trade this year is up! (Yonhap)

Dr. Lankov publishes some great information on the relationship between the early DPRK state and the Soviet Union…

[F]rom the very start the land reform program in North Korea was planned by the Soviet military authorities, and Kim Il-sung simply signed the documents, which had been prepared for him by the Russian officers.

This fact is well-known, since Russian papers on the land reform issue were declassified and published in South Korea almost a decade ago.

and… 

[E]ven a cursory look through the available documents clearly indicates: in 1945-1950, the North Korean regime operated under the complete control of the Soviet supervisors. Who drafted the above-mentioned land reform law? The Soviet advisers. Who edited and, after some deliberation, confirmed the North Korean Constitution? Stalin himself. Who arrested all the major opponents of the emerging Communist regime? The Soviet military police. Where were they sent to do their time? To prison camps in Siberia, of course!

The available papers leave no doubt that even the relatively mundane actions of the North Korean government needed approval from Moscow. The Soviet Politburo, the supreme council of the state, approved the agenda of the North Korean rubber-stamping parliament and even “gave permission” to stage a parade in 1948. The much-trumpeted conference of the politicians from the North and South in the spring of 1948 was another Soviet idea, even if the leftist historians now love to depict it as yet another expression of Pyongyang’s will to negotiate based on its alleged national feelings. The most important speeches to be delivered by the North Korean leaders had to be pre-read and approved in the Soviet Embassy.

My favorite story in this regard happened in December 1946, when the first elections for the North were being prepared. On Dec. 16, the Soviet Colonel-General Terentii Shtykov discussed the composition of the North Korean proto-parliament with two other Soviet generals. The generals (no Koreans were present) decided that the Assembly would consist of 231 members. They did not forget to distribute the places among the various parties, decided how many women would become members, and the social composition of the legislature. If we have a look at the actual composition of the Assembly, we can see that these instructions were followed with only minor deviations.

Read the full story here:
Southern Biases About North Korea
Korea Times
Andrei Lankov
3/9/2008

The Daily NK reports that preparations for Kim Jong il’s successor government are ushering in an end to Songun:

North Korea has embarked on a rehabilitation of the Chosun (North Korea) Workers’ Party’s authority, meaning a return to party-centered politics from military-oriented politics, various inside sources suggest. The move could be related Kim Jong Il’s choice of successor.

In late February, a number of sources told the Daily NK through telephone interviews that instructions came down from the Party to each province on February 1st to “pay more respect to the local party apparatus than to the armed forces.”

Various sources said, “The rumours say that the instructions are intended for everyone (resident of Hoeryong)”, “Foreign currency-earning workers were given a mass lecture on this subject in mid-February (resident of Chongjin)”, and “People welcomed the command, hoping for less harassment from the army (resident of Hyesan)”.

Wat is happening in the government?

Last October, Kim Jong Il reappointed his brother-in-law and closest advisor, Jang Sung Taek, to the Director of the Administration Department, which has the responsibility for the National Security Agency, the People’s Safety Agency, and the Prosecutors’ Office. More recently, the Guidance Department undertook a large-scale inspection of the United Front Department, which signals an attempt to strengthen the Party.

The Guidance Department of the Party is the department tasked with leading and inspecting the Party apparatus. It also resides at the core of the North Korean power structure and is under Kim Jong Il’s direct control, so its involvement demonstrates the gravity of this investigation.

Sohn Kwang Ju, the chief editor of Daily NK and an expert on Kim Jong Il, suggested that, “Kim Jong Il, thinking that North Korea has already achieved military strength through the possession of nuclear weapons, is now starting to reconstruct the Party-centered order and revive the Party’s authority.”

Will it work?

Hwang Jang Yop, President of the Committee for the Democratization of North Korea and the former North Korean Foreign Secretary, gave a similar analysis. According to him, “Kim Jong Il, sooner or later, will strengthen the Party’s authority, especially that of the Guidance Department because the Vice-Director position of the Guidance Department should eventually be taken by one of Kim’s sons.”

Nevertheless, many experts expect difficulty for Kim Jong Il in his effort to strengthen the authority of the Party.

Han Ki Hong, the president of the Network for North Korean Democracy and Human Rights, said that “Kim Jong Il has been running his country under the abnormal system of the Military-First policy for over a decade. Throughout that time, the Party’s authority totally collapsed and the armed forces’ power and authority has increased beyond control, and this is irrevocable.”

The full article can be read here:
Possible Shift from the Army to the Party in 10 years
Daily NK
Choi Choel Hee & Lee Sung Jin
3/5/2008

Institute for Far Eastern Studies (IFES)
NK Brief No. 08-3-3-1
3/3/2008

In the latest issue (February 3rd) of the DPRK Cabinet bulletin, “Democratic Chosun”, it was reported that the first extended cabinet meeting of the year opened in the beginning of February, with Premier Kim Young-il presiding. The bulletin stated that the issue of accomplishing this year’s economic plans was discussed.

At the meeting, Vice Premier Kwak Bum-ki stressed that accomplishing this year’s economic goals was “essential for opening the doors to a breakthrough for building an economically strong nation,” and that it was the “fundamental task laid out before the Cabinet.” He went on to reveal the tasks and directives needed to revitalize all realms of socialist construction, which he stated was necessary to create a powerful and prosperous nation by 2012, the centennial anniversary of the birth of the late Kim Il Sung.

In particular, he called for the production of the “lifeline of socialist construction”, and specifically, electricity, coal, metal, and railways, which he referred to as the “four lines for the advance of the people’s economy.”

Accordingly, the goal of carrying out overwhelming repairs to power generation facilities, and at the same time constructing new power plants in order to increase electrical production capabilities by several hundred thousand kilowatts, was proposed.

The meeting also stressed the need for concentrating efforts on geological exploration and exploitation industries in order to reasonably development and use natural resources, for a change in production of goods necessary for daily life, and for a resolution to the people’s ‘eating problem’ alluded to in the recent New Year’s Joint Editorial.

The bulletin also reported that there was discussion on creating a new five-year plan for the development of science and technology, going as far as to say, ”the role of science and technology in the building of an economically powerful nation is decidedly large, and in order to answer the very real calls for development, [the issue of] strengthening international economic projects” was brought up.

Premier Kim Young-il, Vice-Premier Kwak Bum-ki, Chairman Kim Kwang-rin, of the Committee on National Planning, Park Nam-jil, of the Power Supply Industry Bureau, and Kim Yong-sam, from the Railways Bureau, were among cabinet ministers present.

The international press (and just about every blogger on the planet-including myself) has written something about the NY Philharmonic’s visit to North Korea last week.  Whether one believes that this event is a significant breakthrough in cultural relations or not, what has evaded direct discussion in the media is the purpose of cultural relations in the North Korean system (and indeed its predecessor - the Soviet system).

At the end of World War II, the DPRK imported many Soviet party, state, and military organizations.  One of these was the USSR All Union Society for Cultural Relations with Foreign Countries (known as ‘VOKS’).  Publicly, the mission of VOKS was to promote peace and understanding between the Soviet people and other peoples of the world.  However, the actual mission of VOKS was to promote Soviet ideology, policy, and influence overseas. 

VOKS began its mission in the 1920s.  It undertook activities such as: Attempting to influence French intellectual circles; bringing sympathetic individuals and groups to tour the Soviet Union to see how the construction of the worker’s paradise was proceeding; bringing students from the developing world to be educated in the Soviet Union; sending Soviet scholars and technicians to undertake development projects overseas, etc.  VOKS was even influential in the USA, where it supported a number of pro-Soviet civil society organizations. 

VOKS also played an important role in establishing the legitimacy of Soviet hegemony in North Korea following World War II.  Cultural delegations of North Koreans were taken to the Soviet Union to bear witness to the great accomplishments of the worker’s revolution.  Their impressions were then distributed to the North Korean population at large, along with many other cultural goods produced by the Soviet Union. 

Although VOKS’ success at swaying public opinion in the west is an unresolved question (as far as I know), the details of their activities are well known to western scholars since Soviet archive materials are readily accessible. Effective or not, the take away from this history lesson is that socialist countries have historically treated cultural relations activities, like everything else, as regime-enhancing activities.  In other words, they promote the political incumbents. 

The North Koreans copied VOKS wholesale from the Soviets, and this organization is still functioning in the DPRK today.  It is the Korean Committee for Cultural Relations with Foreign Countries (CCRFC).  Although this body has been around since the founding of the DPRK, it is perhaps most known in contemporary times for supporting the Korean Friendship Association, numerous pro-Pyongyang “Friendship Societies,” and to a lesser degree, several leftist organizations such as the National Lawyers Guild.  These organizations tend to toe the party line and echo Pyongyang’s perspective in international debates.  At a minimum, they promote a marginal distrust of western media and historiography.

Based on the comments I have made so far, many might be led to believe that I am pessimistic on the positive impact that cultural relations broadly, and the the NY Philharmonic visit specifically, might have in changing the North Korean system.  But this would be a mistake.  Since the Arduous March and Kim Jong Il’s rise to power, North Korean institutions have undergone such a transformation that comparison with their Soviet predecessors might not be useful for understanding their purposes today.

Since 1997, the North Korean CCRFC has been chaired by Mun Jae Chol, a North Korean policy elite.  I just finished watching the NY Phil performance-here-and Mun Jae Chol is indeed in the audience, as are several people who work for him who I have met.  Mun Jae Chol took over the committee in 1997 (as best I can put together from KCNA reports–his promotion was not formally announced in the news), and since then the mission of the organization seems to have changed significantly.  To start with, the cold war is over.  North Korean cultural relations activities are not going to convince the world’s people that the North Korean government is the legitimate governing authority for the whole Korean peninsula.  No one will ever believe that now.

Since the propaganda war is over, and resources are scarce, the CCRFC seems to be  focused on generating foreign exchange revenue from tourism, cultural exchanges, and brokering foreign direct investment (all under the guise of their previous mission, however).  Under established laws and customs, the staff of the CCRFC are permitted to interact with foreigners and make regular trips overseas.  They are the very people who have an incentive to promote interaction with the west because they will directly benefit financially from it.  True these people are not paragons of liberalism, but they all own western clothes, use digital cameras, listen to iPods, broker deals between private North Koreans and foreigners (smuggle goods), and travel to China on a regular basis.  There are procedures in place to control their entrepreneurial tendencies, such as never allowing one guide to be alone with a foreigner, however, these rules can be evaded at minimal cost.  They might repeat what they are told to say, but they certainly know better.

Staff of the CCRFC include influential party members and security personnel.  Raising the frequency and profile of cultural relations activities with North Korea will increase the income of these individuals who can buy support directly through cash transfers, or indirectly through business deals, ultimately greasing the cogs of change in the North Korean bureaucracy towards a greater acceptance of openness.  Maybe.

Comment from Dr. Petrov:
CCRFC (known in North Korea as Taewe Munhwa Ryeollak Wiwonhoe or simply TaeMun) is indeed struggling to survive in the changing economic environment. Although most of the projects they try to lure foreigners into are devoid of economic sense, they are still pretty powerful and even allowed to invite journalists to visit N.Korea. Cooperation with CCRFC is a game of unpredictability but in some cases can lead to success. See a success story here.