North Korean Economy Watch

Daily NK
Moon Sung Hwee
12/10/2008

The North Korean authorities recently announced the intention to sell all industrial products in state-operated stores, soon after announcing the revised “10th-day farmers markets,” which open only on the 1st, 11th and 21st of every month, starting from next year.

According to an inside source in North Hamkyung Province, a new instruction on the sale of industrial products in state-operated stores was introduced during the latest cadres’ lectures. As rumors of the large-scale entry of Chinese goods onto the market due to Chinese loans circulate among people, there has been in a flutter in the market.

The source stated that the idea of industrial product sales was introduced during a cadres’ lecture on the 29th of November under the title, “measures to improve the current situation and people’s lives,” which also explained the transformation of the current market system into the “10th-day farmers market” system.

In the source’s opinion, “It signifies the government’s attempt to monopolize the industrial-product market, which was actively and spontaneously established by the people after the ‘march of tribulation’ in the late 1990s. Industrial goods to be sold in the state-operated stores would include both Chinese and North Korean products.

During the lecture, it was stated that “All industrial goods that have been passing through the jangmadang (markets) must now be sold in the state-operated stores and only vegetables or certain agricultural products can be sold within the farmers markets,” which suggests the prohibition of individuals selling food-related products and industrial goods.

With regard to the backdrop of this policy, the authorities explained that, “The current market was a temporary measure taken by the state considering the difficult situations caused by the march of tribulation. However, the markets after some time deviated from the state’s intention and socialist economic principles and have become a hotbed of crimes generating capitalist and anti-socialist trends. Therefore, we are ridding ourselves of all markets and reviving the farmers market.”

The source explained that this measure does not seem to “simply control the markets. But if they begin selling industrial products in the state-operated stores, they would be able to circulate money within the regime that has been circulating within private markets and among individuals by tying purchase profits to national banks.

He said, “Due to the jangmadang, the gap between the rich and the poor has widened. And, because money is not flowing within the regime, the authorities are getting rid of private sales to revive the banks so as to recover the regime economy… It seems the state-controlled economy will become better next year” he added.

However, the source also relayed that “Although they announced the selling of industrial goods only in the state-operated stores from next year, nothing, regarding exactly when and how, was mentioned during the lecture.”

“There is also another rumor that even ‘procurement stores’ would have to sell products on the same price level with the state-operated stores, or they would have to close down. It basically signifies that the regime will not permit any form of private sales, by selling all products that had been sold by individuals” he added.

The source reported that there have been heated debates on this decision among North Koreans.

“Famers gladly took this decision that industrial goods will sell in state-operated stores because they have been complaining that they sold agricultural products at next to nothing while buying industrial goods at such a high price. They are expecting that industrial goods will cost less than now” the source reported.

“However, workers in urban areas are extremely concerned that they cannot sell anything in the jangmadang. An average workers’ salary is 1,500 North Korean Won and if individuals are not permitted to sell, workers’ families will be harshly affected” he forecasted.

The source continued on and said, “Even though they say workers get paid well, how are they expected to live when a pair of military boots costs 9,000 North Korean won. One month’s salary is not even half a kilo of rice.”

The source in the end expressed concern because workers began “explicitly complaining about cadres who only fill themselves up. I personally think that there will begin a massive war within the markets starting from New Year’s Day”.

Institute for Far Eastern Studies (IFES)
NK Brief No. 08-12-8-1
12/8/2008

The North Korean online magazine ‘Our Nation (uri minjokkiri)’ emphasized on January 1 that development of national defense industries would be prioritized, stating that it was “the best way to move forward and harden a strong national defense while at the same time developing the entire economy.”

In an article titled, “The Path to Economic Construction of the Military-first Era,” the website reminded the reader of the goal of building a strong and prosperous nation by 2012, and stated that Kim Jong Il had said that building up the economy was the “main line of construction for the building of a Strong and Prosperous Nation.” It went on, “Today’s era is the era in which the national economic strength is determined by the amount of development of the national defense industries,” and, “National defense industries are in a leading position, while the independent establishment of the core economic structure is necessary, and a strong economic base can be constructed.”

The magazine emphasized, “The might of heavy industry can be further strengthened following the completion of the basis of the national defense industries, also ceaselessly developing light industry and agriculture.” The article also stressed that as North Korea’s national defense industries are at a comparatively high level internationally, matching that of the United States, and that he national economy overwhelming potential is easy to see.

The article noted that today’s military competition between nations is practically scientific and technological competition, and, “strengthening of national defense in every way based on science and technology, and establishing a framework of science and technology and deciding to quickly develop a strong and prosperous nation by focusing on science is really the path for building the economy in the Military-first Era.”

The magazine emphasized that this military-first era economic building plan was “truly for the people, and was the most civic path to prepare national economic strength for public services.” “In accordance with changes in the political atmosphere and actual conditions, the amount of energy applied to building of national defense and economic construction, citizens’ livelihoods, or other realms could vary, but the true requirement of the building of the socialist economy is to ceaselessly raise the level of the livelihoods of the people, and ultimately, this goal can never waver.”

Daily NK
Park Hyun Min
12/5/2008

The North Korean authorities have been expanding the construction of facilities that laud and idolize Kim Il Sung and Kim Jong Il throughout North Korea, in order to unite the people in spite of the severe economic crisis.

Up until the end of the 1990s, North Korea had been focusing on creating “revolutionary memorial halls” or ‘historic sites,’ or erecting statues in order to idolize the Kim family.

The main structure of idolatry, above all, is the Kim Il Sung statue. Among all the statues, the one in front of the Museum of Korean Revolution on the top of Mansudae hill in Pyongyang, erected in April 1972 to celebrate Kim Il Sung’s 60th birthday, is best-known. It is 23 meters (75.5 feet) high, including a 3 meter pedestal. The statue was once covered with gold, but it was removed.

Similar, less grandiose statues are located in all 70 major cities of North Korea. In total, there are 140,000 structures designed to idolize the Kim regime.

Especially after the death of Kim Il Sung, and the succession of Kim Jong Il three years later, in 1997, many mosaic murals were created throughout North Korea with the father and the son as the theme, and many of the revolutionary monuments were erected.

Mosaic murals mainly feature Kim Il Sung, the father with Kim Jong Il and Kim Jong Il’s mother, Kim Jung Sook, made with glass or tiles of natural rocks baked at 1,200.

According to reports from the North Korean state-run media since 2000, one mural was made in 2000, four in 2002, then the number increased to 19 in 2003, 49 in 2004, and a sharp increase to 70 in 2005. Then in 2006, 55 murals were made while 67 were made last year. 88 murals have been made this year alone.

Furthermore, the size of the mosaic murals is growing. On average, the length and height of a mural is 5–10 meters. However, bigger murals with dimensions of 30 meters by 20 meters have been under construction.

The most well-known murals are located on Tongil (Unification) Street in Raknang district and on Kwangbok Street in Mankyungdae district in Pyongyang. The one on Kwangbok Street was made to celebrate Kim Sung Il’s 95th birthday in April, 2008, and goes by the name of “My great country, my nation, live forever.” The height and length of the murals are respectively 42 meters and 25 meters.

The other mural that was completed on Tongil Street the day before that was 33.7 meters long and 22 meters high.

Chosun Sinbo reported with great fanfare, “These murals are the biggest mosaic murals in the nation.”

Revolutionary monuments or historic memorials at places where Kim Il Sung or Kim Jong Il are known to have been, are being made constantly.

North Korea put up 31 revolutionary memorial slabs last year in places such as Pyongyang Music School or Pyongyang Shoe Factory, and 37 so far this year, in places like Suncheon First Middle School and Kangkye Pig Factory. Last year, revolutionary monuments were erected in five places, including the public building of the People’s Safety Agency in North Hamkyung Province and so far four monuments have been erected in places like Pyongyang 3.26 cable factory.

Jane Portal, the author of “Art under Control in North Korea” visited North Korea twice and assessed this idolatry as the world’s most intense, saying that Stalin and Mao Zedong’s idolatry cannot be compared with Kim Il Sung’s hunger for praise.

Additionally, North Korea is focusing on boosting people’s loyalty and revolutionary consciousness through collective visits to these historic sites, and by excavating or renovating them.

Chosun (North Korea) Central Broadcasting (the state-controlled radio station) last month hinted at the strengthened idolization process, saying that “Plans to revive historic sites in North Hamkyung province and the efforts of party members and laborers working on these projects are processing well.”

The Singaporean government is insuring investment in the DPRK…

Quoting from the article:

Singapore firms keen to expand into the largely untapped market of North Korea now have a foot in the door, thanks to two new agreements inked on Tuesday.

The Ministry of Trade and Industry (MTI) said that Singapore signed an Investment Guarantee Agreement (IGA) with the country on Tuesday.

Trade and Industry Minister Lim Hng Kiang and his North Korean counterpart, Mr Ri Ryong Nam, signed the IGA during the North Korean Foreign Trade Minister’s official visit to Singapore.

MTI said the IGA will help promote bilateral investment flows by protecting investors and their investments.

Under the agreement, investors will be accorded non-discriminatory treatment, compensation in the event of expropriation or nationalisation of their investments, and free transfer of capital and returns from investment – perennial ‘banana peels’ for businesses entering a less-developed and unexplored market.

Separately, the Singapore Business Federation (SBF) also signed a Memorandum of Understanding with the North Korean Chamber of Commerce.

According to the SBF, North Korea remains an unexplored market for many Singapore firms but there exists many opportunities for local businesses to tap into such as its high-quality yet affordable workforce and the abundance of natural resources.

Read the full article below:
S’pore, N.Korea ink trade deals
The Straights Times
Francis Chan
12/2/2008

Institute for Far Eastern Studies (IFES)
NK Brief No. 08-12-2-2
12/2/2008

North Korean authorities appear to have taken some action on their recent decision to strengthen market restriction policies.

According to information weaned from statements made by contacts within North Korea, the DPRK cabinet passed a measure to turn the North’s markets into ’10-day Markets’, allowing them to open only on the 1st, 11th, and 21st day of each month beginning in 2009.

This information came from a lecture meeting for North Korean authorities, but it appears that workers in the Market Management Office have also been telling average citizens about similar measures since November. Some North Korean residents believe this is an effort to close general markets and convert them into farmers’ markets from next year.

There are some that expect strong opposition from North Korean residents that will make the likelihood of effective enforcement slim. There was much talk at the beginning of this year, as well, of transforming general markets into 10-day markets or farmers’ markets, but ultimately, such measures could not be enforced. Some believe that if current general markets are transformed into farmers’ markets, rioting could ensue.

As most goods circulating in general markets are in some way tied to the authorities, there is some doubt as to whether these authorities would abandon their personal profits in order to crack down on market trading. It has been reported that as of yet, there have been no significant shifts in the North’s major regional markets, and they are open daily and running smoothly.

Since November 10, there have also been rumors that all personal trade would be banned, but it appears that there has been no actual enforcement of this measure, either.

Institute for Far Eastern Studies (IFES)
NK Brief No. 08-12-2-1
12/2/2008

On November 24, North Korea announced measures to the Kaesong Industrial Complex management committee and other organizations involved in the KIC that would suspend tours to the city of Kaesong and cut the number of South Korean personnel in the complex by half, but stated that businesses operations within the complex would be guaranteed.

Kim Il-kun, current director of the North Korean Central Special Zone Development Bureau who had served as chairman of the North Hwanghae Province People’s Committee until October of this year, led the DPRK delegation, and from the South, KIC Management Committee Chairman Moon Moo-hong, KIC Business Council Chairman Moon Chang-sung, and representatives from companies operating in the complex were included in the 103 people in attendance.

First, the North delivered the notice to the public relations officer of the management committee from 11:00 to 11:07 in the morning.

The North’s KIC management committee announced in the notice, “50 percent of the management committee staff, including the committee chairman or vice-chairman, will evacuated by the end of November,” “Total workers, including those for construction and support activities, will be reduced by half,” “transit across the military demarcation line for those working on cooperative projects and exchanges within a one million-pyong area around the border will be strictly limited,” and stated, “The future of the industrial zone and inter-Korean relations depends on the stance taken by the South.”

From 11:10 to 11:20, the North announced the measures to the company representatives in the management committee assembly hall.

The North announced, “It was decided to guarantee as an exception activities of the businesses in the KIC, and so the resident workers of the South’s production companies are exempt from the measures restricting land crossings of the military demarcation line.”

The announcement proclaimed, “The responsibility for this kind of severe situation lies entirely with the Southern authorities who stubbornly pursue confrontational relations between North and South and fail to recognize the June 15 Joint Declaration and the October 4 Declaration…we do not wish for the South’s small and medium-sized enterprises to suffer from the imprudent confrontational policy of the South’s officials.”

In a separate notice, the North announced, “With the exception of those workers necessary to the KIC business operations, all South Koreans crossing the military demarcation line as visitors, tourists, for economic cooperation, etc. will be strictly limited or blocked,” “All unnecessary South Korean workers in the KIC, including the KIC management committee, will be evacuated, and land entry across the military demarcation line will be blocked, “The Inter-Korean Cooperation Council Office will be disbanded and all South Koreans related to it will be deported,” “Kaesong tours operated by Hyundai-Asan are halted,” “All Southern civic organization and entrepreneur coming in our region overland across the military demarcation line in the east and west seas for the purpose of cooperative exchange and economic transaction will be blocked from crossing overland, and if it is unavoidable that goods and their deliverers must cross by land strict inspections will be carried out,” and, “Train operations between our Bongdong Station and the Southern Munsan Stations are suspended.”

With the North’s new measures, because of the inability to repair inter-Korean relations, it appears likely that the number of new overseas companies looking to operate in the KIC will fall, orders from buyers will drop off, public opinion will sour, production will face difficulties, and the gradual withdrawal of businesses operating in the KIC coupled with the lack of new business interest could lead to the closure of the Kaesong Industrial Complex

Unless something truly amazing happens between now and December 15th, I will be taking a break for exams.  After that I will play catch up and post the latest version of North Korea Google Earth—which has been significantly expanded.

The end of sunshine?
According to Yonhap (here and here), Friday, November 28, was the last day of the Kaesong day tours (210 tourists made the trip) and the last day the “train to nowhere” made its inter-Korean trip.

As for the Kaesong Industrial Zone (KIZ)…According to (Bloomberg), on December 1 the DPRK cut the number of “windows” available each day for South Korean vehicles to enter and leave the KIZ from 19 to 6 (though the Donga Ilbo claims just 3), and limited the number of South Koreans allowed in the complex to 880—about 20% of the 4,200 previously permitted to enter the complex.

According to the  Donga Ilbo, Pyongyang delivered notice at 11:55pm Sunday saying those allowed to stay in Kaesong are 27 staff of the management committee; four from the (South) Korea Land Corp.; 40 from Hyundai Asan Corp.; five at restaurants and living quarters; two at shops and hospitals; and 800 from South Korean companies. Border crossings are also limited to 250 staff members and 150 vehicles each time.

Jeopardizing more than Kaesong
As previously discussed (here and here), South Korea and Russia are interested in building oil and natural gas pipelines which would cross the DPRK. If these projects went through, the DPRK government would benefit from construction and “rental” fees—in effect taking a cut of all the energy resources that cross their borders.  North Korea, is now telling the Russians that the project is not too palatable at the moment.

Still more red than green it seems.

What now?
So while the DPRK chases away investment from the South, they solicit more from Kuwait and Singapore (where Chris Hill is due to stop by):

North Korean Foreign Trade Minister Ri Ryong Nam, now in Singapore, has urged Singapore companies to invest in the isolated country, the Singapore government said Monday.

The North Korean minister “briefed…on economic developments in North Korea and possible investment opportunities for Singapore companies,” in a meeting with Singapore’s former Prime Minister Goh Chok Tong, now a senior minister in the Cabinet, a government statement said.

Goh said, “Singapore would be glad to explore ways to strengthen bilateral cooperation, including in the areas of trade and investment, once international concerns were assuaged and the environment improved.”

Singapore Foreign Minister George Yeo made a trip to North Korea in May, accompanied by a business delegation, in what was the first official visit to North Korea by a Singapore Cabinet minister.

On that trip, Yeo met North Korea’s No. 2 political leader Kim Yong Nam and Ri.

Yeo said at the end of his visit North Korea might be keen to learn from some aspects of the Singapore development model and that Singapore is ready to offer help and ideas. (Kyodo-Japan Economic Newswire)

Chewing gum manufacturers beware!

In a recent Korea Times article, Andrei Lankov (citing Brian Myers) highlights how the DPRK has changed the narrative of its raison d’être in response to the growing realization among its people that South Korea is not the poor, exploited US colony the propaganda portrays it to be. 

Quoting from the article:

Until some time a decade ago, the North Korean populace was expected and required to believe in a very simple world picture.

The North, led by the glorious dynasty of omniscient and benevolent rulers, was the best society on the face of the Earth, much envied and glorified by the less fortunate peoples of other countries.

The rest of the world was inferior, though people in the socialist countries admittedly fared better than the helpless inhabitants of the capitalist hell.

But worst of all was South Korea, the colony of the U.S. imperialists who exploited it with unparalleled brutality.

However, around 2000 the North Korean watchers (well, actually a handful of them with the time and ability to read the official press systematically) began to notice a new image of the South emerge.

Brian Myers, the ever observant reader of North Korean press and fiction first noticed the signs of this quiet transformation when it was only beginning.

Soon it became clear that he was right. A new propaganda line was being born. Interestingly, this time the new line was introduced not through newspapers, but in a more subtle way, through works of fiction, which also have to be approved by the supreme ideological authorities.

The new South Korea which emerged in these writings wasn’t so poor. Actually, it was not poor at all. The characters in recent North Korean novels, which deal with the imaginary life of the South, enjoy a lifestyle far superior to that of the average North Korean. They drive cars, dine out easily and live in expensive houses.

As Myers pointed out, the North Korean authors have poor ideas of how expensive Seoul real estate has become, so they sometimes overestimate South Korean’s income levels. In one novel, a young South Korean journalist buys a house in a very expensive neighborhood after merely a few years of work.

Does this mean that the new image of the South is positive? Of course not! South Korean society might be rich, the propaganda operators say, but it is still inferior to the North.

The South Koreans had to pay a terrible price for their success: they were deprived of their precious national identity.

The cultural uniqueness and racial purity of the great Korean nation has become endangered. Mixed marriages are mentioned frequently and in a way that makes readers believe they are between the same lusty Americans and young Korean women.

However, the propaganda insists, the South Koreans themselves are not happy about this situation. They dream about liberation and purification, and their hopes are pinned on Pyongyang and, above all, the Dear Leader himself. In recent years, North Korean propaganda has insisted that Kim Jong -il is worshipped in the South. Similar statements were made earlier as well.

According to this new logic, the North is a torchbearer, a proud protector of nationhood and racial purity. South Korean prosperity is tainted and hence should not be envied.

The North must fight for the ultimate salvation of the South, and such salvation can be achieved only through unification under the North Korean auspices, so all South Koreans will be able to enjoy the loving care of the Dear Leader. Only American troops and a handful of national traitors prevent this dream from coming true.

Lankov (and Myers) speculate that the North Korean government changed the narrative in response to unauthorized information permeating the country.  In a related note, the overt propaganda in many North Korean films has also been reduced in recent decades.

Most importantly, Lankov reminds us that nationalism is not a viable long-term political strategy—even in North Korea.  North Korean Juche was supposed to liberate the Korean people and deliver on material progress, but it has not succeeded.  From top to bottom, many North Koreans already know this.

UPDATE: According to the Pyongyang Times:

The Kuwait Fund for Arab Economic Development has decided to loan on the updating of sewage treatment facilities in Pyongyang.

The ceremony for signing a loan-giving agreement took place on November 19 at the People’s Palace of Culture, which was attended by a delegation from the Ministry of City Management led by Deputy Minister Ri Kang Hui and a delegation from the Kuwait Fund for Arab Economic Development headed by Deputy General Director Hesham Ebraheem Alwaqayan.

The fund will provide long-term low-interest loan for the technological renovation of sewage facilities in Pyongyang.

The loan will be spent on upgrading dozens of pumping stations.

The agreement was inked by Ri Kang Hui and Hesham Ebraheem Alwaqayan.

The Kuwait fund had loaned on the Pyongyang drinking water service reconstruction in 2003.

The DPRK ministry spent the loan on upgrading water purification plants, increasing water production capacity, updating and expanding drinking water service networks and establishing information system on drinking water service and completed the project in February last year.

ORIGINAL POST (2008-11-26): Although the DPRK is doing its best to chase away South Korean investment, the Kuwaiti government is providing Pyongyang with a USD$21.7 million loan to construct water and sanitation facilities.

The Kuwait Fund for Economic Development (KFAED) stated here on Sunday that it will sign a loan agreement with North Korea in a few days which is valued at KD 6.2 million (USD 21.7 million) to help in financiaing a sanitation system project.

In a statement to the media FKAED added the suggested project contributes in improving a the environment and public health by raising the performance of city sewage systems.

With this second loan, KFAED financing to North Korea is to come to KD 12.4 million (USD 43.4 million), going into development projects in water and sanitation sectors.  This is in addition to technical assistance of KD 153.5 thousand (USD 537,000).

I am unsure what exactly Kuwait’s play is here.  Altruism is well and good, but an unconvincing motive for such a hefty sum of money.  The only other narrative that I can imagine is awfully cynical:  If these sanitation projects are constructed by Kuwaiti contractors and engineers using Kuwaiti parts and supplies, then international development officials should be aware that the DPRK offers many opportunities to channel development funds into the coffers of supporters back home—you just have to make sure Pyongyang gets its cut.

Does anyone else have a theory?

Read the full story here:
Kuwait News Agency
11/16/2008