North Korean Economy Watch

North Korean market footage
Kim Song Min  (김성민), founder of Free North Korea Radio, has posted some video footage of a North Korean market.

You might be able to see it here, but I make no promises. It definitely won’t work from China.

Nothing remarkable, but interesting.  Of course the market is dominated by female vendors.  Bread and dried squid were for sale.  Also, shoe shines seemed to be popular.

I wish I knew what people were saying in the background.

North Korean Legos
The Russian  blogger that brought us the DPRK’s Linux OS, the DPRK’s PDA device, and the DPRK’s film camera, now brings us the DPRK version of Legos:

Interestingly, the toys come with instructions in both English and Korean.  Maybe the producers are hoping for an opportunity to export in the future?  Finally some actual socialist building blocks behind which the children of the world can unite!  You can read more in Russian here.  You can read more in English here (via Google Translate)

Pyongyang Metro Photos
Most visitors to the DPRK visit the Puhung and Yongwang Metro Stations.  Satellite images here and here. Google has also cataloged lots of pictures pictures of these stations: Puhung, Yongwang.

The Ponghwa Metro Station is located at  39.012100°, 125.744452°–next to the Party Founding Museum.  This station is not visited by foreigners as often, but here are some photos: One, two, three, four.

The Kaeson Metro Station is next door to the Arch of Triumh (39.043059°, 125.754027°).  A friend sent some North Korean postcards that seem to come from this station, though the pictures look like they were taken in the 1970s: one, two, three, four, five, six, seven, eight, nine, ten, eleven.

Pyongyang goes pop: sex scandal on the socialist music scene
According to a story in The Guardian:

There was mild controversy last year when a secret video featuring Wangjaesan’s female dance troupe entered the public domain. The video was being privately circulated among the elite, but reached the North Korean public before making it over the border to China – and therefore the world. Normally seen in traditional, body-cloaking hangbok dresses as they perform polite folk numbers, this little clip revealed unprecedented levels of sexiness in Pyongyang, as the girls popped up in sparkly hot pants and did the splits. Western displays of decadence like this are illegal but, given Kim Jong-il’s alleged love of pornography, perhaps he turned a blind eye to this one.

The video of the dancers can be found here (though it is a VERY slow download) or you can watch it on YouTube here and here.  I could not find a better version this time around.  Here is the original story in Yonhap (2009-11) when the story broke (with picture).

UPDATED: This video is allegedly of the same group.

The 4 of 31 fishermen
I have not spent much time blogging about the 4 of 31 North Korean fishermen who drifted to the South and do not wish to return to the DPRK.  I did track down the six videos the North Koreans filmed with the family members.  They were posted to YouTube by Uriminzokkiri.  See them here: One, two, three, four, five, six. If anyone can translate these, or give us a rough idea, I would apprecaite it.

KFA sets up branch in Israel!
Alejandro Cao de Benos seeks to build sympathy for the DPRK among the Israelis.

UPDATE: Lankov has ammended his Asia Times (in full below) article with this information published in the Korea Times:

North Korea remains a poor country, to be sure, and malnourishment is still widespread there. Nonetheless, North Koreans do not starve to death any more, and their access to consumer durables has improved considerably. TV sets are common, DVD players have ceased to be a rarity, and the number of mobile service subscribers grows in leaps and bounds. Even computers have begun to appear in more affluent North Korean houses.

However, there is an interesting paradox: this improvement does not necessarily mean that North Korea is becoming more stable.

A few weeks ago I discussed the economic situation in North Korea with a European colleague, one of a small number of people who do research on the North Korean economy. We both agreed that the economic situation in North Korea has improved over the last decade, and that this upward trend is likely to continue. But then my colleague said: “But this is not going to save the Kims’ regime. Actually, the recent economic improvements are bad news for them.” I could not agree more. My interlocutor spent his childhood and youth in the Soviet Union and East Germany, and he knew what he was talking about.

It has often been assumed that the extreme deprivation is what might trigger the regime collapse in North Korea. This indeed might be the case, but world history shows that people seldom rebel when their lives are really desperate. In a time of mass starvation people are too busy looking for food.

Most revolutions happen in times of relative prosperity. A typical revolution is initiated (or at least prepared) by the people who have the time and energy to discuss larger issues. Another condition for a revolutionary outbreak is a widespread belief that an attractive alternative to the current existence is available.

ORIGINAL POST: Lankov writes in the Asia Times:

Spring arrived, and the international media once again began to report that another famine was looming in North Korea. Such reports appear every year, and so far every such alarm has been eventually proven to be false.

When reading the alarmist reports, the present author, a native of the Soviet Union, cannot help but think about the Soviet media’s habit of reporting that a crisis in the capitalist West was becoming ever-more profound. This “crisis” kept deepening, irrespective of the actual state of affairs in the developed West.

Messages about the “threat of hunger” apparently hanging over North Korea largely come from two groups. On the one hand, they are disseminated by political activists who oppose the Kim family regime and want to underline the economic inefficiency of the North Korean government. On the other hand, similar messages are regularly sent by groups that are involved in providing humanitarian assistance to the Democratic People’s Republic of Korea (DPRK) – in the current uneasy international situation alarmism helps to get more aid.

However, the actual situation is different. North Korea is a destitute place, to be sure, and in the past two to three months the food situation deteriorated, no doubt. Nonetheless, in recent years, the economic situation of the population has improved markedly.

Almost no economic statistics are available when it comes to North Korea: the authorities discontinued the publication of statistical data almost half a century ago, in the early 1960s. Almost everything one reads about the current state of the economy should be seen as a guesstimate, and hence should be approached with considerable caution. Nevertheless, experts agree that recent years have been a time of economic growth, albeit this growth has been slow and uneven.

The most oft-cited estimates of the economic situation in the DPRK are produced by the Bank of Korea. According to its analysts, the average annual gross domestic product (GDP) growth in the DPRK for the years 2000-2009 was 1.3% (though there were years when GDP declined).

This author frequently talks to North Korean refugees and their stories confirm this picture. The lives of North Koreans are tangibly better than 10 years ago – and keep improving slowly.

North Korea remains a poor country, though. Even rice, the staple food of East Asia, remains beyond the reach of the majority. The basic daily food of most North Koreans is boiled corn accompanied by pickled vegetables. Meat and fish appear on the table only occasionally, being a rare delicacy.

However, one thing is important: throughout the past seven or eight years, there has been little hunger in North Korea, even though malnourishment remains common. A meal of boiled corn is now regularly available to all but a very small minority of North Koreans. This is a far cry from the late 1990s, when between half million and one million people perished in a famine.

People have become much better dressed, largely due to the availability of cheap Chinese garments. Some durables, not so long ago inaccessible to the majority of the population, began to appear in North Korean houses after 2000. It seems that in the prosperous border towns of the northern provinces, which are the major target of the present author’s research interest, about 80% of all households have television sets, and about 25% have DVD players.

Merely a few years ago, a fridge was a sign of luxury. It still remains a rare symbol of worldly success and is present only in the wealthiest houses, being the North Korean equivalent of a Porsche, but nonetheless, even fridges are becoming less uncommon.

The same can be said about computers – the penetration rate in the border towns seems to be 1-3%. A home computer is seen as a luxury, but it is nonetheless an affordable one for a small but growing number of families. The mobile phone market is booming: some 300,000 handsets are in use, largely in the capital, Pyongyang. Even private cars have begun to appear – something that was almost unthinkable until recently (admittedly, a private car in North Korea is roughly as rare as a private jet in the United States – and it carries a comparable weight as a status symbol).

All this is accompanied by an increase in income differentiation. There is no way to gauge the Gini coefficient (measure of the inequality in wealth) in North Korea, but it is obvious that income inequality is large and growing, not least because the major role in the new economy is played by the informal market sector.

North Korea’s nouveau riche are entrepreneurs or corrupt officials who often do business by proxies, as well as people who have profitable connections with China (usually through family ties). It is in their houses which one finds refrigerators and computers, and it is them and their children who frequent expensive – by North Korean standards – restaurants in Pyongyang.

On the other hand, one should not describe the situation by applying the oft-repeated but primitive and often misleading cliche about “the poor are getting poorer, the rich are getting richer”. Incomes of ordinary North Koreans, however modest, are growing as well and perhaps have approached the level at which they were around 1990, the time when the crisis struck. For the majority of our readers, this would appear to be a level of abject poverty, but as long as North Koreans remain ignorant about the outside world (as they are), they are likely to perceive it as acceptable.

One can only speculate the reasons behind this improvement. Different factors might be in play. First, in the past 10-15 years a new, essentially capitalist economy, grew in what once was a perfect example of a Stalinist state. Now it seems that a majority of families make a living in the private sector, and its growth might account for the general economic improvement. Second, it seems that the state-run sector (or what remains of it) also adapted and learned to work in new conditions. Third, the large role played by foreign (in recent years – only the Chinese) aid, which North Korean diplomats know how to squeeze.

However, these changes do not necessarily bode well for the regime’s future. People who talk about the alleged deterioration of the economic situation in North Korea often are those who hope to see the regime collapse and assume that a food crisis might become the proverbial last straw to bring it about.

This is not really the case. People seldom rebel when their lives are desperate: they are too busy looking for food and basic necessities. Most revolutions happen in times of relative prosperity and are initiated by people who have time and energy to discuss social issues and to organize resistance. Another condition for a successful revolution is a widespread belief in some alternative that is allegedly better than present-day life.

There is little doubt that the North Korean elite welcome signs of economic growth, but paradoxically, this growth makes their situation less, not more, stable. North Koreans are now less stressed and have some time to think and talk – more so since the once formidable surveillance and indoctrination system was damaged during the crisis of the 1990s, perhaps beyond repair.

Since the economy is increasingly under the influence of China, the elite has become more aware about the outside world – in other words, they are beginning to realize how poor they actually are compared to their neighbors. They are learning that there is an alternative, and they have some time to discuss this.

Last but not least, the spread of new technologies is dangerous for the regime in the long run. In a sense, the North Korean power elite is unlucky: they run an anachronistic dictatorship whose survival depends on isolation, but they do it in an era in which new technology is largely about processing information, not materiel.

More or less every DVD player is used to watch foreign – even South Korean – movies that give more than a glimpse of overseas lifestyles, and this makes many old propaganda lies unsustainable. Computers, which come with USB ports, are even more potentially dangerous. Mobile phones enable people to communicate. They are afraid of eavesdropping, and with good reason, but it is doubtful whether the North Korean security police can handle an explosive growth in communications.

One might point at the recent Chinese experience as a testimony to an autocratic regime’s ability to withstand such challenges and even benefit from new technology. After all, the Internet is a good environment for spreading and enhancing nationalism that is now the de-facto mainstream ideology of China. However, North Korea is no China, the existence of a rich and free South makes its situation dramatically different and inherently unstable.

So, the improvement of the economic situation in North Korea might actually shorten the life expectancy of the Kim family regime. At any rate, this is too early to see. But one thing is certain: the annual outbursts of alarmist reporting about the looming food crisis should be taken with a pinch of salt.

Read the full story here:
Why the Kim regime will falter
Asia Times
Andrei Lankov
3/11/2011

Quite unlikely yet, but …
Korea Times
Andrei Lankov
3/13/2011

According to the Daily NK:

This year, the North Korean authorities have been cracking down on the sale and distribution of products, tools and materials coming out of the Kaesong Industrial Complex. As a result, such Korean goods, formerly an expensive but popular choice in Hwanghae and South Pyongan Provinces, are now hard to find in markets.

A source from South Pyongan Province who spoke with The Daily NK in China explained, “Right up until last year, literally anything being made in the Kaesong Complex was available in the market, including clocks, metal, screws, clothes, underwear, toys and parts of electronics. However, the amounts have fallen dramatically since regulations were strengthened.”

The reason behind the regulations is unclear, however; the source suggested it could only be because of deteriorating inter-Korean relations.

Regardless, the source went on, “Nowadays, revealing the fact you sell those Kaesong Complex goods results in high fines and puts you in a bind” Therefore, he went on, “Only bread (Choco Pies), stainless steel or ceramic bowls and underwear are being sold.”

One consequence of the crackdown is that it makes the sale of other South Korean products smuggled in from China equally difficult. Albeit with some provincial differences, clothes and electronics cannot now be displayed on stalls, and must be sold in alley markets in secret.

A source from Shinuiju explained, “Market watch guards go around markets every day inspecting stalls with no notice; their investigation into South Korean products is really severe.” He explained, “If they find goods with Korean writing on, they confiscate them and give them back after two or three days later, after fines have been paid.”

“I hear there was a decree from above reinforcing crackdowns, but won’t this only lead to bribes?” the source pointed out.

Even when readily available, South Korean products are at the top of the price range, so most average families cannot afford them; one Choco Pie, a circular, individually wrapped chocolate cake made famous by the movie “JSA”, is between 180 and 200 won, a set of women’s underwear is 90,000 won, and a set of roughly ten plates, five or six small bowls and some coffee cups is around 250,000 won.

The source reported, “Due to the severe regulations, some traders sell them at home or in secret, hiding the goods behind the curtain.”

Interestingly, one South Korean official with the Kaesong Industrial Complex told the Daily NK that product leakage is not a problem at Kaesong, saying, “There have been almost no cases of complete products leaking out, but it is possible for stock, tools or things provided to workers like Choco Pies. However, the leaks are not enough to affect factory management.

And yet, one defector who used to be a worker in a shoe factory in charge of testing product quality explained that the siphoning off of materials, complete products, tools and other things is common among North Korean workers.

“The way they hide things and bring them out of the factory is really expert. I sometimes put up to 20 pairs of shoes on my body and came out of the factory. If you wear a long, thick winter coat then it is not so remarkable. Sometimes we did it in collusion with the factory manager.”

Read the full story here:
South Korean Products Disappear from Markets
Daily NK
Park Jun Hyeong and Mok Yong Jae
2010-3-10

According to the Daily NK:

A spate of car thefts over the last few months in Chongjin, North Hamkyung Province is said to have been done by military drivers trying to cling onto their posts, according to a source.

The source said some of the thieves were apprehended in an intensive crackdown on car theft carried out from late January to early February by the People’s Safety Ministry (PSM), and subsequently revealed the details.

According to the source, the drivers, in collusion with civilians, stole “servi-cha”, or service cars, and sold the parts, apparently in order to purchase gas and other things they needed to keep their own vehicles running.

Service cars are vans, trucks or buses used to transport people and cargo in lieu of an adequate public transport system.

Even though the PSM in the province apparently launched an investigation into the case, it was apparently unsuccessful because base Party cadres protected the drivers, so now the issue has developed into a tug of war between the military and the provincial PSM.

Speaking on the 7th, the source explained, “The drivers, who are part of a platoon which manages private cars for cadres under the 45th Division of the 9th Corps, which is stationed in Chongjin, hid the stolen cars in a parking lot on-base and sold the parts.”

He explained, “Agents from the Criminal Investigations Section of the PSM tried to access the corps, but 9th Corps cadres including the political commissar and the base National Security Agency head instructed soldiers not to allow them to get onto the base under any circumstances.”

One of the arrested men apparently admitted, “We utilized the fact that the security forces cannot search military bases.”

According to the source, their dire situation drove the drivers to car theft. He said, “An official’s cars projects his pride, so if a driver cannot run his car properly even on condition of having no gas or parts, it is difficult to hold on to that position.”

“The authorities used to turn a blind eye to the military earning money for fuel by supporting foreign currency earning companies or individuals by helping them carry their cargo. However, the military police’s crackdown even on military vehicles has recently been reinforced, so drivers found themselves in that difficult situation,” he concluded.

Following the Arduous March, drivers have played a role of growing importance in the North Korean economy.  Here are some previous posts on the DPRKS transporters and transportation market: Story 1, Story 2, Story 3, Story 4, Story 5.

Read more here:
Military Drivers Involved in Car Theft
Daily NK
Im Jeong Jin
3-8-2011

UPDATE: The Daily NK (2011-3-7) reports that the DPRK’s recently minted commemorative coins have been been appearing in the markets:

Chosun Workers’ Party cadres who attended the Delegates’ Conference in Pyongyang on September 28th were each presented with a commemorative gold coin. Now, however, some of the same coins have begun to appear on the open market, according to a source from North Pyongan Province who spoke with The Daily NK on Sunday.

The commemorative coins were minted from gold, silver and nickel by the Chosun Central Bank, and form part of a tradition of coin presentation for state events or to commemorate notable national achievements which began with the 75th birthday of Kim Il Sung in 1987 and continued with the joint 50th anniversary of the Party founding and 50th anniversary of the liberation of the country from Japanese rule in 1995.

The money needed to obtain the raw materials for the 2010 coins was apparently gathered by Bukang Trading Company, which operates under the Workers’ Party.

“The Delegates’ Conference commemorative coins which have appeared on the market are mostly being sold by people who trade with China,” the source explained. “They are not pure gold, but there is a good amount of gold in them, so the price is reasonably high.”

Kim, who defected to South Korea in the second half of the 1990s, said that such coins used to be treated with the greatest of respect, explaining, “When I was in North Korea, I saw a number of commemorative coins. Even until the end of the 1990s, people looked after them at home as a precious thing and a source of great pride. The coin itself was evidence of a person’s status.”

However, recently people’s values have changed a great deal. The source from North Pyongan said, “In those days, even a starving man wouldn’t sell a ‘gift’ from the Suryeong or the General. But now, no matter how precious the gift may be, people will sell it in the market without a second thought.”

“Watches with Kim Il Sung’s name on and various commemorative coins do appear in the market sometimes,” he went on, adding, “Things which were beyond our wildest dreams in the olden days are becoming normal. Sellers point out, ‘What am I supposed to do with possession of this kind of thing?’ Having something to eat is better.”

More than being a simple indication of difficult economic times, the act of selling something which was intended to be thought of as a personal gift from a benevolent leader appears to present compelling evidence of the deteriorating authority of the regime and its control of social discipline. This seems to be particularly so given that the commemorative coins must be being sold by cadres, in theory the most loyal group of North Korean citizens and certainly one which needs to remain loyal if the regime is to maintain its grip on power in the long term.

ORIGINAL POST (2010-10-4): The DPRK is issuing gold and silver coins to commemorate the 65th anniversary of the founding of the Worker’s Party.

Images courtesy of Daylife.com.

Institute for Far Eastern Studies (IFES)
NK Brief No. 11-03-07
3/7/2011

The number of male workers in Kaesong Industrial Complex (KIC) increased according to the Ministry of Unification (MOU). Since the establishment of the complex, women made up 84-85 percent of the total work staff. But from last May, the number fell below 80 percent and currently is around 74 percent.

In contrast, the number of male workers steadily increased from 15 percent from last year to 26 percent, an increase of over 10 percent.

Out of the new hires of all of last year, 56 percent were male. Even sewing factories generally dominated by female employees began to accept male workers.

Many of the South Korean companies in Kaesong preferred young female workers over male for higher work efficiency; but with declining manpower, more male workers are being hired than previously.

An official from the MOU stated, “We are facing difficulties with labor supply lately,” and added, “Many are even coming from Pyongyang in addition to the nearby areas of Kaesong.”

The total production output of Kaesong Complex reached 323.32 million USD last year, an increase of 26 percent against the previous year.

Kaesong is a popular employment spot for the North Koreans due to its higher wages and extra perks including coupons exchangeable for daily necessities and free coffee and snacks.

The MOU official also noted that even in times of troubled inter-Korean relations, North Korean officials and workers on several occasions have expressed their hopes for the KIC to continue. “KIC is a space we acquired from the North for the purpose of fulfilling our national strategy. We need to be more proactive in utilizing this opportunity to its full potential.”

On the other hand, North Korea sent a letter proposing working-level talks on the industrial complex to the South earlier last month. In the letter the North expressed, “We hope for your active support to resume the working-level talks of the Kaesong Industrial Complex at the earliest possible date to revitalize the currently stagnant business. We look forward to your positive response.”

On January 8, the DPRK officially proposed for the resumption of KIC working-level talks at the earliest possible date through a statement made by the spokesperson of the Committee for the Peaceful Reunification of Korea. Specifically, late January or early February was suggested.

On January 18, the Central Special Zone Development Guidance of North Korea also proposed through its representative for working-level talks related to the KIC to be held in Kaesong on February 9.

The request from the DPRK is analyzed to be an attempt to relax restrictions prohibiting new businesses and investments in the KIC from the “May 24 Sanctions” that the South Korean government put into effect in 2010 following the sinking of the South Korean naval corvette Cheonan in March of last year.

From the Choson Exchange web page:

We are looking to build our knowledge pool in the areas of contract negotiations, microfinance and bond markets as there have been requests for knowledge assistance in these areas from Pyongyang. We are told that North Korean firms need to negotiate more effectively with their Chinese counterparts, and require legal training to do so. The fundamentals of micro-finance and bond markets are also of interest to some financial organizations.  We expect initial programs for these areas to take place in April to May this year.

The executive director of Choson Exchange, Geoffrey See, also wrote the following article in the East Asia Forum:

Choson Exchange recently prepared a program for North Korean students to learn business, finance and economics overseas through university courses and internships.

They consulted a range of North Koreans on how it should structure such a program and ‘the Australia National University’ often came back as the model to follow. Up until 2006, ANU hosted North Korean trainees studying economics under programs supported by international and Australian aid agencies. The Australian exchange program was clearly well-regarded by outward-looking North Koreans.

But what would Australia gain from such programs?

A resolution to the constant series of crises on the Korean peninsula is obviously in Australia’s interest. Conflict on the Korean peninsula can destabilize the region and in a worst-case scenario draw China and the United States into a military conflict involving Australian troops. This would cause incalculable harm to the Asia-Pacific economy because of its impact on all the major Northeast Asian economies, not to mention the human cost of conflict. Australia also has long and particular historical interests in commerce with North Korea.

There are some things that Australia can facilitate for North Korea which is in their mutual interest, but which neither the United States nor South Korea can provide anytime soon. The opportunity for North Korean students to study economics, business or law in Australia in long-term university programs is one such crucial shared interest. Yet such programs are currently impossible because of autonomous sanctions in place since 2006 that deny visas to visiting North Koreans. This policy is counter-productive. It trades off the ability to shape longer-term outcomes on the Korean peninsula for short-term public displays of opprobrium. The only countries whose sanctions can hurt North Korea are the countries that actually trade with it. This policy is also unusually harsh of Australia. The United States takes a more nuanced stance by allowing visits by North Koreans for some purposes while publicly preventing political delegations to express its political support for US allies, chiefly South Korea. Similarly, Australia can publicly express its disapproval of current North Korean activities alongside efforts to develop exchanges that shape a future that goes beyond the present stalemate.

These educational exchanges provide Australia with an effective way to shape longer-term dynamics on the Korean peninsula. One way the Korean crisis will end peacefully is when North Korean elites calculate that benefits of economic integration with the rest of the world are great enough to make the costs of confrontation unsustainable. Overseas education can shift this cost-benefit calculus because it equips a new generation of North Korean leaders with the knowledge and the networks to benefit from international trade and integration.

Choson Exchange recently placed a North Korean student in an internship with an international consulting firm. Without such networks, the opportunity would not have materialized. The student also needed coaching on how to explain why his prospective-employer might find value in taking him on. He assumed that a good score on an international English test was the qualification he needed even though most selective employers see fluency as a minimum threshold, rather than a core selling point. This experience helped us see things from the North Korean perspective: there are hardly any commercial benefits to speak of when one lacks knowledge and networks to realize those benefits.

Now is the time to help build this knowledge and network base. North Korea has been active over the past year setting up institutions to promote economic development. This includes the State General Bureau of Economic Development, the Daepung Group, and the State Development Bank. Choson Exchange has led finance workshops with the State Development Bank, and Bank managers agree that training is needed and appreciated. By helping to educate the next generation of North Korean businessmen, economists, financiers or lawyers who will eventually fill these institutions, Australia can play a role in shaping these emerging institutions in North Korea, institutions that could have important ramifications for how North Korea interacts with the rest of the world in the future.

Australia has the opportunity to redefine how such exchanges are conducted. To maximize impact in developing institutions in Pyongyang, we need to think in terms of a “talent pipeline.” We need interlinked programs targeted at different age-groups: training workshops targeting senior or middle management at these institutions, overseas scholarships targeted at university students or recent graduates, and a way to bring both groups together to help maximize opportunities for scholarship recipients to move into the emerging institutions.

Australia has the base from which to take initiatives with North Korea. The North Korean institutions that are looking outwards explicitly seek to build on what has been done with Australia, and specifically through the Australian National University program for training in economics. A comprehensive settlement of the Korean problem is much more likely if we begin again to put this infrastructure in place and help with institutional development in North Korea.

UPDATE: For the second time in as many weeks, the DPRK’s central bank makes the news.  According to KCNA:

A national meeting of commercial officials took place at the People’s Palace of Culture on Monday.

The meeting reviewed the gains and experience made in the past commercial service and discussed tasks and ways for improving this work.

Present there were Premier Choe Yong Rim, Minister of Light Industry An Jong Su, Minister of Foodstuff and Daily Necessities Industry Jo Yong Chol, Chairman of the State Price Commission Ryang Ui Gyong, President of the Central Bank Paek Ryong Chon and other officials.

According to Yonhap, Paek Ryong Chon is the third son of the late foreign minister Paek nam-sun.

ORIGINAL POST: A big hat tip to Chris Green who translated an interesting article on recent changes to DPRK banking regulations.  The original article in Korean is here.

According to Chris’ translation of the article:

The Chosun Central Bank is said to have raised interest rates by 1.8 times. Customers are also now able to get instant access to their money. As a result, the bank’s total deposits are also said to be growing.

These measures appear to be the bank coming forward to guarantee deposits given that people have been unwilling to put their money there since the 2009 currency redenomination.

North Korea watchers are observing the situation, saying that there is a chance that measures like these could be an indicator of financial sector reform.

Speaking on the 1st, one such source said, “I hear that the number of people putting their money in the bank is growing. The total reserves of the Chosun Central Bank are also growing. The causes of this are that access to withdrawals has recently been freed up and the interest rate has risen steeply.” According to the source, the interest rate offered by the bank was previously 3%, but has recently risen to 5.4%.

The Chosun Central Bank is a government entity under the Cabinet, doing the job of both a central and commercial bank at the same time. It offers savings, loans and insurance services.

North Korean people can deposit money there and earn interest on it; in this, it is much the same as the Post Office, which also takes deposits and gives interest.

In terms of allocation in North Korea, the state does it by force, and there are also cases of deposits being coerced. Indeed, until now it has been hard for North Korean people to recover capital deposited with the bank.

The source explained, “At times when the economic situation has been bad, it has not just been hard to get interest, it has even been common to illegally have to give 20% of the value of the capital to Central Bank management and then take the rest,” but added, “Recently, North Korean people have been able to get hold of their deposits surprisingly easily, and the rumor ‘We can get our money! And the interest has gone up!’ is going around.”

Cho Byung Hyun of the Industrial Bank of Korea’s research institute explained more, saying, “Following the failure of the 2009 currency redenomination, people disliked putting their money in the bank so, for the circulation of money, the bank instituted a policy of allowing instant access to deposits and raising interest rates.”

North Korea suffered serious fallout from the currency redenomination, including rapidly rising prices and the execution of its architect, former Workers’ Party financial planning head Pak Nam Gi.

However, it is also possible in part to interpret the failed redenomination as an opportunity to activate capitalist banking practices.

Cho went on, “We know North Korea has recently been preparing financial reforms. At the moment, banks under existing trade banks etc are controlled by the Central Bank, but this can be seen as propelling reform in the direction of giving independence to each bank.”

Meanwhile, Professor Lee Sang Min of Joongang University economics department pointed out, “This can be seen as helping with the introduction of a capitalist system in North Korea in the long term. It is an opportunity for the North Korean people to learn about a capitalist banking system.”

However, it is as yet too early to see this sort of phenomenon as meaning that the financial system of North Korea is settled. As one defector pointed out, “For this to develop into a system, the North Korean authorities shall have to spend a long time building trust.”

Another North Korea source added, “The dollar tended to be thought of by the North Korean people as the standard currency, but the Yuan is gradually moving to center stage.” This is analyzed by experts as being down to recent economic exchanges between the North and China and the rising value of the Yuan.

Fascinating stuff.  Thanks for posting, Chris.

I am actually looking for information on the DPRK’s monetary system, so if you have any good papers, please send them my way.

According to Yonhap:

Hundreds of South Korean companies doing business with North Korea are teetering on the edge of bankruptcy due to a prolonged cross-border trade ban, the head of the first inter-Korean joint venture said Sunday.

Inter-Korean trade flourished following a summit between the divided countries in 2000, but has been banned by South Korea since last May in response to the sinking of the Cheonan corvette two months prior, which Seoul says a North Korean submarine torpedoed.

According to the South’s unification ministry, about 860 South Korean companies are operating in North Korea.

“South Korean companies, which invested about 200 billion won (US$179 million) in Pyongyang and Nampo, North Korea, are on the brink of bankruptcy because of the suspension of the inter-Korean trade,” Kim Jung-tae, head of Pyongyang Andong Hemp Textiles, said in an interview with Yonhap News Agency.

Pyongyang Andong Hemp Textiles is the first inter-Korean 50-50 joint venture between the South’s Andong Hemp Textiles and the North’s Saebyol General Trading Co., which was established in October 2008.

Kim said the companies posted a combined $150 million in operating loss due to Seoul’s ban on inter-Korean trade.

In June, Kim formed a body consisting of about 200 South Korean businessmen to seek solutions to the prolonged inter-Korean trade suspension. In its opening ceremony, the body called for the government to implement measures to resume inter-Korean trade.

However, the unification ministry holds firm to its position that the trade ban will remain intact until the North takes responsible measures for the sinking of the Cheonan.

Read the full story here:
S. Korean firms reeling from inter-Korean trade ban
Yonhap
3/6/2011

A new paper by David von Hippel, Scott Bruce, Peter Hayes is up at 38 North.  Here is the conclusion:

North Korea has demanded the inclusion of energy aid and development assistance in every agreement covering its nuclear weapons program because it cannot develop into a “strong and prosperous nation” without such help from the international community. The country’s energy infrastructure is decrepit, and until it is redeveloped, the country will remain stuck in survival mode. Energy imports from China keep the North afl oat while it sells its minerals assets for hard currency. Until the DPRK earns enough foreign exchange to diversify imports and to refurbish its refi neries, it has no alternative but to rely on China. This situation means that the United States and its partners must prepare to engage the North on energy issues to prevent confl ict, avoid the collapse of the North Korean regime, build transparency and gather real data on the DPRK economy, and develop communication channels with North Korea. Without convincing the DPRK that it can overcome its energy insecurity and achieve a sustainable energy economy, it is unlikely that Pyongyang will shift away from an economy that emphasizes exports of military hardware and illicit goods, cease its provocative behaviors, and take steps to assume productive relationships with the global community.

The DPRK’s small LWR and uranium enrichment programs present an additional challenge, but if managed correctly, are an opportunity for engagement on energy issues. Moreover, the immediate demonstration of good faith on both sides will be necessary to proceed with denuclearization. Since big ticket energy infrastructure projects will take some time to deliver, non-nuclear fast fuels and technical assistance will be more useful in the short-term. There are a number of options for energy sector engagement available, ranging from capacity-building in science, technology, law, and economics to assistance with implementation of energy effi ciency and renewable energy measures and refurbishing/replacing major energy infrastructure to connecting the DPRK with big regional energy grids. Though engagement should start small, it should also start soon in order to open doors, establish relationships, and create a foundation for the peaceful economic growth in the North necessary to sustain a thaw in the DPRK’s relations with the United States, its allies, and the international community.

You can read the full piece at 38 North here (PDF).