North Korean Economy Watch

Institute for Far Eastern Studies (IFES)

Since the start of the Kim Jong Un era, North Korea has introduced elements of a market economy while at the same time sought ways to mitigate the side effects caused by the rapid spread of market mechanisms.

The Choson Sinbo, mouthpiece of the General Association of Korean Residents in Japan (also known as Chongryon), revealed on February 22, 2015 that on a number of cooperative farms there are now ‘purchasing sites’ where farmers can barter and exchange goods. The newspaper explained that “[On the cooperative farms] there are purchasing sites where cheap goods are displayed and farmers are able to trade distributed agricultural products […] Through these sites it can prevent farmers from liquidating their produce and thus prevent funds from flowing into the market.”

Through the introduction of the ‘field responsibility system,’ North Korea has reportedly been able to meet demand for daily necessities at these purchasing sites. The state controls these sites in order to prevent farmers from taking goods to the jangmadang or the market when the surplus, which returns to the farmers, increases. Since entering the Kim Jong Un era, the field responsibility system has been expanded throughout the country and is credited with having contributed to North Korea’s increase in agricultural production. The system divides the bunjo (the small production teams on the cooperative farm) into family-sized units of 3 to 5 people and entrusts these units with the work of cultivating small-sized fields.

A system similar to the purchasing sites of the cooperative farms can be found in the city as well. The Choson Sinbo revealed that “[North Korean factories] are purchasing items like food and basic commodities produced in the country and are distributing them to workers as a portion of their wages.” In the years following Kim Jong Un’s rise to power, wages increased exponentially due to the introduction of incentives and the increase in the autonomy of factories and businesses. But because the threat of inflation becomes significant if those increased wages are paid entirely in cash, it is reported that businesses pay a part of workers’ wages in goods and commodities.

The Choson Sinbo added that the ‘Hwanggumbol Shop,’ a convenience store that has been appearing here and there in Pyongyang since December of last year, is also an effort by the state to prevent the rapid expansion of the market. The newspaper explained that the state-operated store focuses on supplying “cheaper prices than the market” and that the goal of the store is to guarantee “the circulation of money through state-operated stores.”

State-operated stores are an attempt to prevent the market from taking a central place in the circulation of money. This is accomplished by having state-run stores supply goods at a lower price than the market and thereby attract consumers. Different from the past, the current regime intends to utilize the market rather than restrict it. It is believed that North Korea will try to keep the market in a condition in which it can be suitably managed.

UPDATE 1(2016-2-23): The North Koreans have re-released the original documentary inn Korean. Here are links to parts one, two, and three.

ORIGINAL POST (2015-3-20): Though Yeon-mi Park is arguably one of the most well-known North Korean defectors these days, for numerous reasons I have not devoted much of my time to her work. I was also surprised when Uriminzokkiri released two videos discredit Ms. Park (Video one in three parts is here. Video two is here). Maybe someday the North Koreans will catch onto the fact that these videos actually raise the status/profile of those they are trying to vilify, but in the meantime we can have some fun with them.

Ms. Park is the third North Korean defector (of whom I am aware) about which the DPRK has made these sorts of films. She now joins company with Shin Dong-hyuk and and Ma Yong-hae, though doubtless there are more.

The second video attacking Ms. Park was interesting to me due to the use of geography to try and discredit her story. So I thought I would write about what the video claims and examine whether its assertions hold up to some basic scrutiny. As was the case with the videos attacking Mr. Shin, the North Koreans appear to unintentionally verify some Ms. Park’s claims. So let’s begin.

The video states at the 3:33 mark:

In one of her lies, Park said that about eight kilometers from Hyesan in Ryanggang Province there is a “Juche Rock” in a peak of a mountain called “Kot-dong-ji (?)” in Komsan-ri (검산리). She said if you look down from that mountain peak you can see Pongsu-ri (봉수리) of Pochon County and [the] Amnok River. She said she took that route to escape.

But in fact there is a highway from Hyesan to Pochon County and just on its left side there is a small rock called “Juche Rock.” And if you look down from there the opposite side is Changbai  County of Jilin Province, China.

On the far other side of [the] Amok River, you can see not the Pongsu-ri of Pochon County but Yonpung-dong, Hyesan City.  So how on earth did she manage to find a mountain here in the region which she is said to have crossed at the risk of her life?

The video was indeed filmed in Hyesan, but unfortunately for the North Koreans, when I combine (a) data in the video with (b) administrative data published in North Korea with (c) satellite imagery, I get results that verify claims made by Ms. Park (as described in the video).

Here is a Google Earth satellite image  of the area described in the video (where Ms. Park is alleged to have crossed the Amnok River):

To begin with, “Juche Rock” (41.449298°, 128.247329°) can clearly be seen on top of a mountain in Hyesan, Ryanggang province. I am not sure why the North Koreans wanted to bother disproving the existence of a mountain–especially if they are going to record a video from the top of it.

Secondly, “Juche Rock” is on the outer border of Komsan-ri:

Thirdly, later in the video (6:16), the North Koreans identify a house they claim was Ms. Park’s in Sinhung-dong, Hyesan City. Here is a satellite picture of that house (Marked in yellow: 41.397725°, 128.171969°):

I have no idea if the Park family actually lived here, but this house is exactly 8.48 km from “Juche Rock”. It’s a bit further on foot. So again, the satellite data is confirming what the video asserts Ms. Park claimed.

Finally, the point about the village to the north of “Juche Rock” being Yonpung-dong, Hyesan City, not  Pongsu-ri of Pochon County, was the most difficult to for me to untangle. This confusion stemmed from two causes. The first was because Ms. Park is technically wrong about “Pongsu-ri” being the next village north of Juche Rock. The second source of confusion is because the North Koreans recently changed the border between Hyesan City and Pochon County and have apparently done some renaming in the process.

I have three maps (published in North Korea) that identify ‘Yonpung-dong, Hyesan City’ as ‘Hwajon-ri (화전리), Pochon County.’ You can see the area for yourself on Google Earth at  41.460212°, 128.231495°. Apparently sometime recently (I don’t know when), the North Koreans shifted the border of Hyesan City further north into Pochon County. At this time I suspect that Hwajon-ri was renamed Yonpung-dong. The only evidence that I have of the border change is a blurry map that the North Koreans produced to show the location of Hyesan’s new economic development zone. It shows the Hyesan border has moved north from its original location, however even it retains the name “Hwajon-ri.” The only source I have that the area has been renamed “Yonpung-dong” is this Uriminzokkiri video. But all of this certainly took place after Ms. Park had left the DPRK.

Here are approximate before and after pictures of the Hyesan – Pochon border changes:

To Ms. Park’s credit, however, there is an area just north of Yonpung-dong/Hwajon-ri called ‘Pongsu’ (봉수). It is not a ‘ri’, but it used to have a train station with the same name. The train station has since been torn down, but that may be the reason she remembers the area as “Pongsu.”

So to recap: The North Koreans published a video in which they called Ms. Park a liar (among other things) and used geography to prove that she had mislead people. The geographic points they raise in the video, however, tend to support comments Ms. Park is alleged to have made.

There is a separate question as to whether Ms. Park made the claims referenced in the video, and to that I have no idea. As I mentioned, I have not paid particular attention to her story.

However, I am delighted that digging into this video has taught me that the border between Hyesan and Pochon has changed.

There are other claims in the video that I don’t want to address because, frankly, I am not qualified–and it is Friday.

Two new books are out on North Korea. Together they “book-end” North Korea’s history. One takes place in the beginning. The other takes place in current times. Info and links below.

North Korea Confidential: Private Markets, Fashion Trends, Prison Camps, Dissenters and Defectors
By Daniel Tudor and James Pearson

You can learn more about the book and order it from Amazon.com.

I have read bits of this book and found it very interesting.

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The Great Leader and the Fighter Pilot: The True Story of the Tyrant Who Created North Korea and The Young Lieutenant Who Stole His Way to Freedom
By Blaine Harden

You can learn more about this book and order it at amazon.com.

Media coverage of the book here and here.

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Other books, videos, blogs, etc are here.

Many of us imperialists have not had the chance to purchase goods in a socialist shop or department store. I did in the former Soviet Union, Eastern Europe and in the DPRK. Rather than collecting the items you want and taking them to a single check out line, you are required to stand in three separate lines. I never really saw a published source explaining it all (though I am sure Lankov has written about it in one of his books), but happened upon a declassified (FOUO) document published on May 18, 1979 (the bracketed and italicized sections are my own comments).

[Line 1: Ordering] It is said that at the state-operated North Korean store the customer requests to the sales clerk what he wishes to purchase and have the name of the product and the price written on a small piece of paper. [Line 2: Paying] Then the customer goes to the cashier. After paying for his purchase in cash [and ration coupon if necessary] he gets his paper stamped; then [Line 3: collection] he goes back again to the clerk who [gets] the paper.

The purchased item is then finally handed to the customer.

I am not sure how many official retail establishments in the DPRK still practice these archaic control procedures. This practice is not used in the markets. In one encouraging sign, the recently refurbished Kwangbok Area Supermarket has transitioned to market-style shopping where individuals collect goods and pay for them in a single line.

Here is the citation for the quote:

“Translations on Korean Affiars (FOUO 1/79)”, U.S. Joint Publications Research Service, 18 May 1979. Release 2007/02/09: CIA-RDP82-00850R000100050036-6

This week I read the following report in the Washington Free Beacon (2015-3-13):

North Korea’s communist government has created a dwarf village in a remote part of the country where short people it regards as undesirables are prevented from reproducing and forced to fend for themselves within the harsh Stalinist system.

The abuse of North Koreans who have dwarfism, a genetic condition that produces short bodies and disproportionate limbs, is the latest disclosure of widespread human rights abuses within the country. A U.N. commission report a year ago charged the regime with “crimes against humanity.”

Several North Korean defectors disclosed the existence of the village, called Yeonha-Ri, and said it is located in Kimhyongjik County, a border region in northeastern Ryanggang Province. The province is named after North Korea’s founding dictator Kim Il-Sung’s father, Kim Hyong-Jik.

Dwarfs are persecuted by the regime under a policy that combines Korean superstitions about physical deformities manifesting from personal or ancestral sin, and the hardline communist regime’s demand that all citizens must work, according to North Korean defectors.

As part of the anti-dwarf measures, all people under 120 centimeters in height, or just under four feet, have been forced to relocate to the farming village at Yeonha-Ri.

One defector, who disclosed details of the village on condition of anonymity, said the North Korean government originally planned to exterminate the dwarfs as part of a policy of eliminating those within the population with undesirable physical traits. But concerns about international reaction to the population “cleansing” instead resulted in allowing the dwarfs to set up the farming village.

The goal of the separation is to prevent the dwarfs from marrying and reproducing. To that end, they are forced to undergo sterilization.

Also, North Korean dwarfs face a greater risk of starvation because they are not given the same food rations as other North Koreas.

Travel is also restricted under the dubious claim that as little people the dwarfs could be crushed while riding on crowded train cars.

The Free Beacon article later references this article in the UK’s Daily Mail.

For what it is worth, Yeonha-ri, or Ryonha-ri (련하리) as the North Koreans call it, can be found on Google Earth at 41.418403°, 127.513423°. Here is a satellite image:

At its closest point, the village is just under 4 km from the Chinese border.

Commission of Inquiry on Human Rights in the Democratic People’s Republic of Korea briefly mentioned dwarfism in the detailed findings document:

Another research institute based in the ROK reported that human rights violations against persons with disabilities include the segregation and forced sterilization of persons suffering from dwarfism.

The citation for this quote is: KINU, White Paper on Human Rights in North Korea (2013), pp. 442-444. You can download the report here (as well as the most recent 2014 report, which does not mention “dwarfism” but rather “midget persons”).

The 2013 KINU report is based on defector interviews, so it is subject to the usual caveats.

The KINU 2013 survey respondents identify three locations of a dwarf village in Kim Hyong-jik County.

The first is a village named “Sangchangri” (Sangchang-ri), identified by two defectors. I am unable to locate a village by that name in Kim Hyong-jik County. It does not appear on any of my North or South Korean maps. I am aware of two villages named Sangchang-ri, but they are in North and South Hamgyong respectively.

Three other defectors independently report that they knew of a village for little people near Koup-gu, which is just north of Ryonha-ri (though they specifically identify Jungri-dong which is just 2.5 km south of Ryonha-ri).

A third location was identified as Wolthan Worker’s District (41.408095°, 127.059341°) which is in Kim Hyong-jik county, but on the western side.

The KINU reports also go on to say that the current legal status of little people is much more complicated than the simple narrative of identification, sterilization, and isolation that is reported in the contemporary media–especially following the death of Kim Il-sung.

Previous KINU reports also describe villages for little people in other parts of the country.

The reports of mistreatment of little people, however, date back many years. Hwang Jag-yap, who defected to South Korea in 1997 reported:

Concentration camps [plural] for persons of very short stature were set up in Jungpyung, in South Hamkyung province, after express orders from Kim Il-sung to isolate them to “prevent dwarves from multiplying.”

Additionally, I have a declassified report (FOUO) titled “Translations on Korean Affairs” published on May 18, 1979. It also mentions a dwarf village (p35):

In North Korea, in order to prevent the proliferation of dwarfs (deformed dwarfs), they are all put in a cooperative farm near Kanggye, Chagang Province, which is completely isolated from the outside. Therefore you cannot see dwarfs anywhere else.

This report gives the impression that there was only one village for little people and it was not so close to the Chinese border.

So there is lots of information on this topic that goes back many years and is not very consistent. Maybe somebody with more time than me could do a timeline of all the data and try to standardize all of the geographic names given.

UPDATE 1 (2015-3-18): Although overall trade volume between the DPRK and Russia was down in 2014, North Korea’s exports to Russia were up. According to Yonhap:

North Korea’s exports to Russia soared nearly 32 percent in 2014 from a year earlier, a report showed Wednesday, amid Pyongyang’s efforts to bolster ties with Moscow.

According to the report by the Korea Trade Investment Promotion Agency, North Korea’s outbound shipments to Russia reached US$10.17 million in 2014, up 31.9 percent from a year earlier.

By item, textile exports came to $4.7 million, or 46.2 percent of the total, followed by machinery with $1.6 million, musical instruments with $1.37 million and electrical equipment with $670,000.

Pyongyang also sold $250,000 worth of cars to Russia last year, 2.3 times more than the previous year, with shipments of optical devices soaring more than 60 times to $190,000.

Bilateral trade volume, however, fell 11.4 percent on-year to $92.34 million last year as Pyongyang’s imports from Russia shrank 14.9 percent to $82.17 million.

Crude imports dropped 7.9 percent on-year to $33.98 million last year, taking up the largest 41.7 percent share of the total imports.

“North Korea has been striving to strengthen economic cooperation with Moscow, though it will take time for the North to diversify its trade markets due to its heavy dependence on China in the past,” said Cho Bong-hyun, a senior research fellow at the state-run Industrial Bank of Korea (IBK) in Seoul.

Last year, more than 90 percent of its exports were bound for China. Bilateral trade between North Korea and China, however, fell 2.4 percent from 2013 to $6.39 billion in 2014, marking the first annual decline since 2009, according to Seoul data.

The 2014 figure is seen as signaling that the strained political ties between the two nations, particularly after the North’s third nuclear test in February 2013, have affected their economic relations.

Amid such languid ties with Beijing, North Korea has been ramping up efforts to forge a closer relationship with Russia, with the two nations declaring 2015 as a year of friendship.

ORIGINAL POST (2014-12-4): According to Yonhap, trade between North Korea and Russia (imports and exports)dropped significantly in the first three quarters of 2014:

Trade between North Korea and Russia dropped significantly this year, despite Pyongyang’s efforts to step up economic cooperation with Moscow, data showed Thursday.

Russia’s exports to North Korea reached US$59.01 million in the first nine months of this year, down 10.1 percent from the same period last year, according to the data by the Vladivostok office of the state-run Korea Trade-Investment Promotion Agency (KOTRA).

In particular, Russia’s exports of flour to North Korea plunged 72.2 percent on-year to $770,000.

Russia’s imports from its neighbor also fell 7.9 percent on-year to $6.46 million during the January-September period.

North Korea’s imports of electronics and coal from Russia also tumbled 61 percent and 44.6 percent, respectively, according to the data.

Russia’s imports of North Korean nuclear reactors, boilers and other machinery, meanwhile, shrank 57.1 percent on-year to reach $451,000,

Bucking the overall decline, Russia’s imports of North Korea-made clothes soared 35.5 percent on-year to $3.61 million, maintaining an uptrend of recent years.

North Korea has been intensifying efforts to expand economic cooperation with Russia, recently deciding to use the Russian ruble as a trade currency as well as launching a fledgling logistics project to link Russia’s border city of Khasan to the North’s port of Rajin.

Read the full story here:
N. Korea-Russia trade shrinks this year
Yonhap
2014-12-4

UPDATE 1 (2015-3-26): The DPRK has denied the hacking allegation. According to Yonhap:

North Korea again denied its involvement in a series of data leaks at South Korea’s nuclear power operator and rebutted Seoul’s interim probe results that accused the communist regime of conducting the hacking attacks.

The North’s Central Internet Research Institute said that the investigation that linked Internet protocol addresses used in the attack to North Korea is groundless and was fabricated by Seoul, according to Pyongyang’s state media Korean Central News Agency.

The denial follows a March 17 announcement by a special investigation team that found the data leaks at the Korea Hydro and Nuclear Power Co. “believed to have been caused by an (unidentified) group of North Koreans hackers.”

In December, an unidentified hacker, claiming to be an activist against nuclear power, had posted data about nuclear power plants, including their blueprints, five times and threatened to destroy the facilities while demanding they be shut down.

Earlier this month, the hacker renewed its threats by posting more files on Twitter that included documents concerning the country’s indigenous advanced power reactor 1400, while demanding money in exchange for not handing over sensitive information to third countries.

The state-run KHNP operates 23 nuclear reactors in South Korea that provide nearly one-third of the country’s energy demand.

ORIGINAL POST (2015-3-17): According to the Wall Street Journal:

South Korea on Tuesday blamed North Korea for a December cyberattack on nuclear power-plant operator Korea Hydro & Nuclear Power Co., marking the first online incursion publicly attributed to Pyongyang since the hacking of Sony Pictures Entertainment.

South Korean investigators said state-owned Korea Hydro, which operates the country’s 23 nuclear reactors, and its business partners were targeted in multiple cyberattacks aimed at stealing internal data that included plant blueprints and employees’ personal information.

South Korea’s nuclear-plant management wasn’t compromised in the attacks and no critical data was disclosed, the investigators said. A series of “spear-phishing” emails aimed at stealing passwords and obtaining remote control access of computers were largely unsuccessful, they added.

A Korea Hydro spokeswoman declined to comment, saying the firm wasn’t participating in the investigation.

A Twitter account holder in December posted Internet links to Korea Hydro’s internal-data archives and issued various demands to prevent further leaks, the investigators said.

Investigators said they traced the intrusions back to Internet addresses registered by North Korea. The spear-phishing virus that investigators said was used in the attack, named “kimsuky,” was previously identified by cybersecurity experts as created in North Korea. The related tweets were posted through servers in Shenyang, in China’s northeast, and Vladivostok, Russia, they said.

Pyongyang’s state newspaper in late December denied involvement in the cyberattacks, calling such accusations a ploy to escalate inter-Korean tension.

Tuesday’s statement was the first time South Korea had publicly attributed the cyberattacks to North Korea.

Here is coverage in Yonhap.

Read the full stories here:
North Korea Blamed for Nuclear-Power Plant Hack
Wall Street Journal
Jeyup S. Kwaak
2015-3-17

According to Yonhap:

South Korea, together with the U.N. Food and Agriculture Organization (FAO), plans to help develop fish farms in North Korea as an aid to the impoverished state, the government said on March 17.

According to the Ministry of Oceans and Fisheries, the Korea Maritime Institute will soon sign an agreement with the FAO to launch a joint study on the fish-raising industry in the North.

The two parties will study climate conditions in North Korea and find the best species for farming, and based on the outcome of the study, South Korea and the FAO will raise a 30 billion won (US$26.5 million) fund to help build new fish farms in the North, the ministry said.

The aid, however, will likely be delivered by the FAO as Pyongyang continues to be at odds with Seoul over its nuclear program.

Inter-Korean dialogue has nearly come to a halt after the North’s third nuclear test in early 2013. The communist state continues to blast daily threats and slander against the South’s Park Geun-hye government.

South Korea’s National Red Cross had offered to send 25 tons of powdered milk for the malnourished children of North Korea last month, but Pyongyang quickly rejected the offer.

North Korea is believed to have suffered a chronic shortage of food since the late 1990s. The country continues to depend heavily on international handouts to feed a large portion of its population of 24 million, accepting nearly $20 million worth of international aid in the first half of 2014 alone.

You can read the whole story here:
S. Korea to help develop fish farms in N. Korea
Yonhap
2015-3-17

Pictured Above (Google Earth): The Sunchon Thermal Power Plant Health complex

According to the Daily NK:

The donju —North Korea’s nouveau riche — have recently been expanding their business inroads. Whereas this contingent previously forayed in wholesale/retail businesses, the burgeoning real estate market, and transportation, they are now yielding profits by increasingly partaking in state construction projects, Daily NK has learned.

“The South Pyongan Sunchon Thermal Power Plant recently built swimming pools and bathhouses by utilizing waste heat recovery, a project in which several of the donju invested,” a source in South Pyongan Province informed Daily NK on the 16th. “The authorities merely granted permission—the entire project was undertaken with the money invested by the donju.”

The recently constructed swimming pool can hold up to 200 people, creating potential for significant financial profits to be split 50/50 between the state-run power plant and the donju investors, according to the source. She noted that since last year, the Sunchon Thermal Power Plant has already reaped in significant construction funds through residual revenue from the swimming pool.

“The swimming pools, bathhouses, and steam room facilities boast modern amenities, such as restaurants and snack bars, attracting scores of patrons,” she explained. “All the waste heat from the power plant turbines was squandered until the launch of this construction project, which was based on a proposal by the donju to redirect the secondary heat in order to establish swimming pools and steam bathhouses.”

Those members of the donju with more expendable wealth have impressive business acumen, utilizing connections with executives of state-run enterprises in order to partake in various profitable ventures. “The donju are doing what the state cannot ,” the source pointed out.

She expounded on this by saying that donju business domains are rapidly expanding to encompass state construction endeavors. Beset by financial difficulties, North Korean officials are heavily reliant on the donju to implement state-run construction projects, creating a de facto “public-private partnership.” Party cadres forge a symbiotic relationship with the donju: the former receive immense kickbacks from the latter, who are more than willing to pay for the opportunity to expand their business terrains.

“The city of Sinuiju has been carrying out a large-scale national project of building apartments recently,” a different source based in the city told Daily NK. As previously reported by Daily NK, a multitude of the donju have invested in this large-scale venture.

“The donju are investing in the apartment construction under the condition of attaining a certain degree of leasing rights; in other words, they will effectively own the place and charge rent to individuals to reap in profits,” she concluded.

Read the full story here:
‘Donju’ Step In on State Construction
Daily NK
Seol Song Ah
2015-3-16

Anna Fifield, in this interesting Washington Post story, actually gets a current data point:

Kim is part of the economic lifeline that is keeping North Korea afloat. He manages a factory in a small town outside Dandong, China’s commercial gateway to North Korea, where North Korean women work making clothes for a Chinese company. The women are allowed to keep one-third of the $300 a month they earn, while the rest goes back to Kim Jong Un’s regime in Pyongyang.

In a second article, she provides a little more information:

In the clothing factory, the women work 13 hours a day, 28 or 29 days a month, and are paid $300 each a month — one-third of which they keep. The rest goes back to the government in Pyongyang.

“Even though I want to pay them more, I have to send a certain amount home to my country, so this is all I can give them,” Kim said in his office at the factory. On his desk, an open laptop revealed that visitors had interrupted his game of solitaire.

…

North Korea is thought to have at least 50,000 workers outside the country earning money for the regime, and 13,000 of them work in Dandong.

Assuming that there are 50,000 workers earning $200 each / month for Pyongyang (a low-ball figure in my opinion), this would imply a cash transfer of $120 million per year. Not a lot of money on a national scale, but remember this is a lower-bound estimate.

At the same time in Geneva, special rapporteur Marzuki Darusman said he was launching an inquiry into the “bonded labourers” working for the DPRK. Read more about this in The Guardian.

The full articles are worth reading here:
“Talking kimchi and capitalism with a North Korean businessman”
Washington Post
Anna Fifield
2014-3-16

North Korea’s growing economy — and America’s misconceptions about it
Washington Post
Anna Fifield
2014-3-13