North Korean Economy Watch

The Guardian
Ian Cobain and David Leigh
10/17/2005

Firm with Tories’ Ken Clarke on payroll runs factory in country with grim human rights record

British American Tobacco, the world’s second largest cigarette company, has secretly been operating a factory in North Korea for the past four years, the Guardian has learned. The company opened the plant in a joint venture with a state owned corporation shortly before the regime was denounced by George Bush as a member of the “axis of evil”, and despite widespread concern over the country’s human rights record.

BAT has never mentioned the factory in its annual accounts, and it is thought that many shareholders are unaware of its links with the country.

The discovery of the secret factory comes two years after BAT was forced to pull out of Myanmar, formerly Burma, under pressure from the UK government and human rights campaigners. The human rights record of the communist regime in North Korea is widely regarded as even worse than that of the brutal military dictatorship in Burma.

The disclosure of the existence of the plant comes a day before the first ballot in the Conservative leadership election in which Ken Clarke, BAT’s non-executive deputy chairman, is a candidate.

BAT confirmed that Mr Clarke, who has been on the company’s payroll since 1998, was aware of the decision to invest in North Korea. The firm has also said that as chair of BAT’s corporate social responsibility audit committee, Mr Clarke “would oversee human rights reports on all countries where we operate”.

Mr Clarke declined to comment, although he has previously denied any impropriety in his role with BAT.

The anti-smoking group Ash said: “It seems that there is no regime so awful and no country so repressive that BAT does not want to do business there. It beggars belief that an MP like Ken Clarke could be taken seriously as a candidate to lead a major political party.”

Mr Clarke could face an investigation by the Commons health committee over accusations that he gave false evidence to parliament when he denied BAT was embroiled in international cigarette smuggling. Mr Clarke dismissed the smuggling claims as “nonsense” five days after BAT’s lawyers had confirmed that certain claims were true, in an internal letter which subsequently came to light in the US. Mr Clarke has denied giving false evidence.

BAT launched its business in North Korea in September 2001 after forming a joint venture company with a state-owned enterprise called the Korea Sogyong Trading Corporation, whose main interest had previously been exporting carpets. BAT made an initial investment of $7.1m in the enterprise, and owns 60% of the company they formed, which is known as Taesong-BAT. It has since increased its investment, but declines to say by how much. This company employs 200 people at its factory in Pyongyang, the capital, producing up to two billion cigarettes a year. It initially produced an inexpensive brand called Kumgansan, named after a mountain in the east of the country, and is now producing brands that are known as Craven A and Viceroy. Despite its previous involvement in smuggling, BAT denies that any of its cigarettes produced in North Korea are intended for the Chinese market, and insists that they are all for consumption in North Korea.

The company says that it has worked to improve the working conditions of its employees in Pyongyang, that it provides workers with free meals, and that they are “well paid”. When asked how much the employees were paid, however, the company said it did not know. BAT even said that it had “no idea” how much its cigarettes cost on the North Korean market as the operation was run by the company’s Singapore division.

Questioned about its apparent reluctance to disclose the existence of its North Korean operation, BAT said that it listed only its “principal subsidiaries” in its accounts, and added that it was not obliged to inform investors about an investment of that size.

“It is a very small entity within the BAT group and, therefore, does little to justify a mention,” a spokeswoman said.

The spokeswoman denied the factory was “a secret”, adding: “If we are asked about our investment there, we respond appropriately. The investor community know of it.” Asked about North Korea’s human rights record, a company spokeswoman said: “It is not for us to interfere with the way governments run countries.” She said BAT could “lead by example” and assist the country’s development by meeting internationally accepted standards of businesses practice and corporate social responsibility.

In launching its North Korean enterprise, however, BAT is quietly doing business in a country which is regarded by some as having the worst human rights record in the world. Even one of BAT’s own public relations officers, in Japan, was astonished when questioned about the joint venture company. “Business with North Korea?” he asked. “Where there are no human rights?” The depth of concern about the suffering of people in North Korea is expressed in a series of reports by the United Nations and human rights watchdogs.

Last August, in an excoriating report presented to the UN General Assembly, Vitit Muntabhorn, special rapporteur on North Korea for the UN’s Commission on Human Rights, pointed to the “myriad publications” detailing violence against detainees. He expressed “deep concern” about reported torture, the killing of political prisoners, the large number of prison camps and use of forced labour. Finally, he protested at the “all pervasive and severe restrictions on the freedom of thought, conscience, religion, opinion and expression, peaceful assembly and association and on access of everyone to information”.

In its latest report on the country, Amnesty International highlighted concerns about the torture and execution of detainees, and worries over the lack of basic political freedom. The charity said that millions of North Korean people were suffering hunger and malnutrition. It added that there had been reports of public executions of people convicted of economic crimes, and that Christians, whose churches have been driven underground, were reported to have been executed because of their faith.

According to human rights observers in South Korea, about 200,000 people are held in prison camps in the north.

Human Rights Watch, meanwhile, describes the Pyongyang regime as being “among the world’s most repressive governments”, adding that its leader, Kim Jong Il, “has ruled with an iron fist and a bizarre cult of personality” since the death of his father, Kim Il Sung, in 1994.

BAT carried on its business in Myanmar for four years, running a cigarette factory in a joint venture with that county’s military dictatorship. It pulled out only after the UK government had asked it to withdraw and after Mr Clarke had been forced to admit, at a shareholders’ meeting, that “Burma is not one of the world’s most attractive regimes”.

FAQ: BAT in North Korea

What’s wrong with investing in North Korea?
Britain says it will not officially support investment there because of North Korea’s nuclear ambitions. Others, such as Action on Smoking and Health (Ash), object to investment which props up a notoriously cruel communist regime.

What is BAT’s track record as a company?
BAT has refused to stop selling cigarettes around the world, despite proof that its product is addictive and bad for health. Instead, it has sought to increase profits despite western governments imposing more legal restrictions, by selling to unsophisticated consumers in the developing world.

What is Ken Clarke’s role in BAT?
He collects £170,000 a year in pay and perks, in return for the title of deputy chairman. As a former health secretary and chancellor, he gives BAT credibility and international connections.

Why has his behaviour caused controversy?
When the company was accused of being involved in the lucrative smuggling trade in China and Latin America, Mr Clarke falsely claimed to parliament the accusations were “nonsense”.

Korea Times
Andrei Lankov
10/11/2005

“How much do they earn there, in the North?” “What are North Korean salaries now?” These questions come naturally, even if people are aware that in a socialist economy the formal size of one’s salary is less significant an indicator of wealth than it is in capitalism.
Under socialism, access to goods is at least as important as the amount of money in somebody’s possession. Since retail prices in the socialist economies tend to be subsidized, this means that many goods are not readily available in shops, but are distributed by the state bureaucracy instead. Thus, people who are deemed more deserving get such goods… goods that are not available to the “less valuable” people.

A party bureaucrat and a skilled worker often might have roughly similar salaries in a socialist economy, but their actual consumption levels may be vastly different. Apart from bureaucrats, another group of people who have privileged access to commodities are people employed in the retail system. They always can divert some goods from the public distribution system and use them either for their own consumption, or for barter with those who control other valuable commodities. Thus, the position of a sale clerk is seen as very prestigious occupation in the North.

The 2002 reforms (never called “reforms” in the North Korean press) dramatically changed the structure of wages and prices in the country. For a while it was not clear what the current price and wages levels were, but recent research by the World Food Program seems to answer a few questions. Now we know what was regarded as “normal” wages in 2004.

According to the survey, most types of low-paid workers earn between 1,700 and 2,500 won per month, with an average estimated at 2,100. Low-level professional jobs such as clerks and teachers at nursery and primary schools earn between 1,400 and 2,000 won per month. The average old age pension is just 900 won; women, in particular housewives, sometimes get pensions as low as 300_400 won.

The official exchange rate is 1,700 won per Euro (they to play down the significance of the imperialist dollar, so exchange rates are usually quoted in euros). However, throughout 2004, the actual exchange rate fluctuated between 1,600 and 2,200. This means that the average pension was something like 50 cents a month, with a nursery teacher earning as little as one dollar a month. This is not as bad as it sounds, since prices are also relatively cheap. But this is still pretty bad…

Most of the people who draw salaries live in the cities (some 70% of the North Koreans are inhabitants of urban areas), and rely on the public distribution system for their survival. The system, which almost ceased to function a few years ago, obviously has made a moderate comeback. Since all data in the secretive North is classified, nothing is known for sure, but it seems that in early 2005, the Public Distribution System was “the main source of cereals for the 70 per cent of the population living in urban areas” (such was an estimate by the FAO, a U.N. food agency).

Still, the official rations are hardly generous. According to the WFP, in early 2005 rations were cut to 250 grams per person per day _ 40 per cent of the internationally recommended minimum. People have to purchase food on the markets, and this food is expensive, with rice costing some 500 won a kilo.

According to the FAO report, “the income of cooperative farmers from the annual obligatory crop sales to the Government varies greatly from one farm to another, resulting in monthly incomes per person ranging from 500 won to 4000 won.” But farmers can also substantially increase their income by selling the produce from their kitchen gardens, and by hillside farming which is done on the steep slopes of the mountains. The latter activity has become common in the North over the past decade. It is formally forbidden but done nonetheless, and it seems that a large part of the hillside produce goes outside the public distribution system.

Unemployment is quite high, but it is hidden. Formally, everybody has a job, but a persistent shortage of raw materials, spare parts, machinery, and power supplies means that few factories actually operate at full capacity. In many cases people come to their factories and offices and sit there idly, spending just a couple of hours a day doing some meaningful work. They still have to come, since otherwise they could lose access to food rations, and this would make their situation impossible, probably even threatening their physical survival.

According to interviews with officials, and other information garnered, the WFP estimated that some 30 percent of the North Korean workers are either permanently or temporarily underemployed or unemployed.

As usual, women are more likely to become unemployed. But perhaps they do not mind. Why? Well, is it possible for a family to survive, even on two salaries, if the official income can merely buy eight kilos of rice to augment the distributed 200 grams? Of course, the answer is “no”, and even in the most difficult circumstances people need more than just rice. Hence, the survival strategy of most families depends heavily on the efforts of their women. While formally seen as “unemployed housewives”, women produce most of the income, ensuring the family’s survival. Indeed, the new-born North Korean capitalism has a female face. But that is another story…

London Times
David Sharrock
10/10/2005

Sean Garland, president of the Workers’ Party and alleged leader of the Official IRA, was arrested on Friday evening as he was preparing to deliver the keynote speech at his party’s annual conference in Belfast. The US Government is seeking his extradition, arguing that he and others have “engaged in buying, transporting and either passing as genuine or reselling large quantities of high-quality counterfeit $100 notes”.

It further alleges that Mr Garland “arranged with North Korean agencies for the purchase of quantities of notes and enlisted other people to disseminate” the money in the UK.

The 71-year-old IRA veteran was arrested by Police Service of Northern Ireland officers and appeared in Belfast Magistrate’s Court the next morning.

The so-called “superdollars” have been tracked for decades by FBI officers. Defectors from North Korea involved in their production have revealed that the secretive communist state intended to flood the world with the near-perfect notes in an attempt to destroy the US economy, a project which shared equal importance with the nuclear missiles programme.

Mr Garland, who lives in Navan, Co Meath, in the Irish Republic, was the subject of a briefing to the US’s top intelligence chiefs in the late 1990s, according to a BBC Panorama documentary of last year.

One US investigator conservatively estimates the number of “superdollars in circulation in the US alone at $30 million”.

Mr Garland was released on bail of three sureties of £10,000 each and on condition that he remained at an address in Co Down, Northern Ireland.

A solicitor for Garland told Judge Tom Burgess that his client “strenuously protests his innocence”, but the Crown lawyer argued that if released there was a “substantial risk” that Garland would not come back to face his extradition.

He told the court: “We say in simple terms that the defendant would have a strong incentive to flee back to the Republic of Ireland.”

The warrant for his arrest was issued on May 19, posing questions as to why the US authorities did not simply seek him through the Republic’s courts. It is estimated that around 20 extradition warrants for Irish citizens have been turned down by Irish courts in the past five years.

The US authorities now have more than 60 days in which to seek his extradition.

Mr Garland has previously described the accusations as “gross slanders and lies”, but the allegations first surfaced in a book by Bill Gertz, national security correspondent for the the Washington Times.

In 2002 a former KGB agent and two British criminals were jailed by a Birmingham court for their part in distributing the superdollars. Mr Garland was described in court as “the top jolly” of the Official IRA, the group from which the Provisional IRA split in 1969, and accused of acting as the middleman for the notes.

Mr Garland is a major IRA figure of the past century. He joined the British Army in the 1950s in order to steal weapons and later took part on a botched attack on Brookeborough barracks in Co Fermanagh, in which Sean South and Fergal O’Hanlon were shot dead.

Under fire Mr Garland carried the dying South on his shoulder back across the border, earning a place in a famous Republican ballad commemorating the deed.

Herald Tribune
Choe Sang-Hun
10/10/2005

Here in the North Korean capital, where ubiquitous slogans posted on deserted boulevards and carved into mammoth towers give the city the look of an off-season theme park dedicated to a bygone ideology, one message is conspicuously absent these days.
 
There is no mural showing muscular North Korean soldiers stabbing American troops with bayonets, as there once was. No longer is there a billboard depicting a North Korean missile slamming into Capitol Hill in Washington. And there are no shrill slogans exhorting North Koreans to prepare for “a final battle with American imperialist aggressors,” as they did in the past.
 
“It is true that we have removed anti-American slogans,” said Hong Sung Chul, one of the North Korean officials who recently escorted a group of South Koreans on a tour of the North. “We hope the Americans reciprocate our good will.”
 
Hong said the removal of anti-American slogans was part of North Korea’s effort to cultivate a favorable atmosphere amid six-party talks aimed at ending North Korea’s nuclear weapons program. A new round of negotiations is scheduled for November.
 
But it is still a toss-up as to whether the banished imagery was part of an official campaign to recast the most enduring feature of North Korean psyche, the fear and loathing of Americans, or just a publicity effort for visitors.
 
Either way, the revamping of propaganda in North Korea’s showpiece capital was as much a sign of change here as the busloads of foreign tourists rushing through the once-forbidden city. These modest indicators offer a glimpse into a country that is gradually regaining confidence after years of famine and after tentatively increasing its contacts with the outside world.
 
Pyongyang is not a mirror of the rest of the country. The government stocks the city with politically reliable citizens and keeps its living standard much higher than elsewhere. But in the sales pitches and bargaining of store clerks and the relaxed manner of Communist minders escorting visitors, eager to polish their government’s image, a new measure of optimism was palpable among the country’s elite.
 
The government minders, part tour guides and part public relations officers for the regime, talked about the importance of rebuilding the North Korean economy and attracting foreign investment with the same rehearsed spontaneity that North Koreans once recited anti-American diatribes.
 
As North Korea prepared to celebrate Monday the 60th anniversary of the ruling Workers’ Party, throngs of students and citizens have been mobilized daily to rehearse for a massive outdoor rally. Streets were festooned with red-and-yellow party flags emblazoned with the images of a hammer, sickle and calligrapher’s brush.
 
For almost two months, the authorities have also brought thousands of people into Pyongyang in North Korea’s version of a pilgrimage to Mecca. Here, the faithful were treated with an “Arirang” extravaganza, the closest thing to an Olympic opening ceremony in North Korea, but one with a decidedly totalitarian flavor.
 
In an unusual gesture of openness, the North Koreans this year opened the show to outsiders, accepting hundreds of them daily, mostly from South Korea, in a scheme driven not simply by a desire to educate outsiders on North Korean socialism, but also by commercialism.
 
For these outsiders, the trip was an occasion to witness the country’s cautious and clumsy steps into the outside world even as the North is still burdened with the ideas of an outmoded era. Unwittingly or not, North Korea, by opening itself to well-fed South Koreans wielding digital cameras and bursting with U.S. dollars, was casting itself as one of the world’s weirdest tourist destinations.
 
In between visits to Communist monuments, tourists were ushered into souvenir shops where smiling beauties sold everything from mushrooms to “adder liquor,” a leaky bottle of fiery alcohol with a dead snake in it. The women extolled the concoction’s purported effectiveness as an aphrodisiac and only accepted euros and U.S. dollars.
 
The South Korean tourists spent profusely, buying goods whose main attraction was neither quality nor prices, but rather the flimsy packaging and outdated design: perfect I-have-been-there mementos from the world’s last remaining “socialist paradise.”
 
North Korea demands that all visitors start their trip to Pyongyang by bowing before the 23-meter-tall, or 75-foot-high, brass statue of Kim Il Sung, the first ruler of North Korea.
 
On a recent trip, however, South Korean tourists stood upright before the statue, some with hands in pockets, some clicking digital cameras, as an official solemnly bid them to bow. If North Korean minders were enraged, they did not show it.
 
But questioning revealed the minders’ unique take on their country’s problems with the outside world.
 
“People in South Korea and the rest of the world don’t understand us,” complained Hong. “We know some countries ridicule us for our economic difficulties. We want to rebuild our economy fast. How good will it be if we can use the money spent for our nuclear weapons to buy rice for our people. But we can’t.
 
“We saw what the Americans did to Iraq,” Hong continued. “What option would a small country like us have but to build nuclear weapons when a big bully is determined to strangle us and gang up on us?”
 
Park Man Gil, a North Korean official, stressed his country’s desire for greater contact with its neighbor. “We want more economic cooperation with South Korea,” he said.
 
The North’s desire to make connection to the outside world was confirmed – vigorously, in fact – by a South Korean executive.
 
“You always hear two voices here. On one hand, they lash out at the United States; on the other hand, they are conciliatory,” said Park Sang Kwon, president of Pyeonghwa Motors of South Korea, which runs an auto-assembly factory in North Korea. “As a person who has dealt with the North Koreans more often than any other from the outside, I can say with certainty that the North Koreans really want to be accepted by, and live with, the Americans.”

Daily NK
Han Young Jin
10/18/2005

Kim Jong Il’s politics of gift is a well-known practice. On only on the birthdays of Kim Il Sung and Kim Jong Il, but also on the day of party establishment and other national and traditional holidays.

The reason why Kim Jong Il distributes gifts to the people is to increase level of obedience and make them express gratitude towards “the Commander’s special grace.” Although it may look like a lousy way of convincing people to the South Koreans, to the North Korean people, it had been a long tradition. The reason why they offer gifts to the participants to the Arirang Performance lies along the same line. Although gift offering did exist in other former communist countries, but the level of practice is incomparably higher in North Korea.

Kim Jong Il sends to gifts to about 20,000 people every holiday, and the amount he spends on these gifts is about $20 million US dollars every year.

There was special food distribution on the day of 60th Anniversary of the Party Establishment. Apart from food distribution there is a separate group of people who receive special gifts. The number of them reach to 20,000, who are core members supporting the Kim Jong Il dictatorship.

The receivers include the family members of the liberation movement activists against Japanese colonialism, initial communists (palchisan), the party, high level officials and the military. The members of the initial communists are only about 300 in number. Kim Il Sung ordered, “The party must take care of the sons of the palchisan down to three generations” so they are entitled to special treatment.

The bereaved family department of the Worker’s Party takes care of these families. The sons and grandsons receive free education up to university, offered jobs and free cars as well as housing.

5,000 Entitled to Special Treatment

The people entitled to special treatment reach up to 5,000. The first level cadres such as of the Central Party, the People’s Arm Force, guard commanders and military commanders are entitled as main distribution everyday. The ministers of the cabinet and vise ministers are smaller in number and in a level lower than the military and party cadres.

The people entitled to gifts on the three main holidays (New Year’s Day, birthdays of Kim Il Sung and Kim Jong Il) number to 15,000. They are the cabinet cadres and military cadres above commanding officer level and cadres of different levels such as families of those sent abroad (for espionage and information gathering), foreign business workers and bereaved families.

The representatives of the Supreme People’s Assembly and provincial party secretaries, chiefs of the People’s Committee, Central Procurator’s Office, Central Court, National Security Agency, Security Office and other provincial level cadres also receive gifts from Kim Jong Il the three main national holidays. High level officials whose rank is as high as the central party secretaries in local cities and counties too are on the list of the gift receivers.

Managed by Keumsusan Accounting Department

Sending out of gifts under Kim Jong Il’s name is managed by the Keumsusan Accounting Department. All the cadres of secretarial level and above in the Central Organization and Guidance Department receive electronics, clothes and even food from Japan and South Korea. They always receive enough to eat that they prefer to receive more electronics than food.

The secretaries of the Worker’s Party and the cabinet ministers receive the most luxurious gifts they can possibly get. The gifts include two pairs of suits, two bottles of expensive imported liquor, expensive underwear, clocks with Kim Il Sung and Kim Jong Il’s names engraved, expensive refrigerators and color TV.

The workers of the Keumsusan Accounting Department visit each government agencies and offices with the gifts in refrigerating truck used specifically gift delivery. They call the receivers in secret and distribute the gifts with vouchers.

At the time, the receivers bow to the portrait of Kim Jong Il and say, “We will repay the high political confidence and grace of the Great Leader Commander Kim Jong Il with our loyalty (devotion).”

In case of the cabinet members or military officials where the receivers are only a small number, the truck of the Keumsusan Accounting Department delivers the gifts to the houses. In local places, they gather the receivers in one place and hold a small ceremony for the gift distribution. For the local receiver, the gifts include two bottles of expensive liquor, a box of tangerines, foreign sweets, one pair of suit, and a cartridge of cigarettes, “Pyongyang.”

20 Million USD on Gifts Every Year

The defector who has an expertise in the matter says the amount of money Kim Jong Il spends on gifts every year reaches up to 20 million US dollars. The Keumsusan Accounting Department had been taking 1% of the annual national budget and directly ordered gifts from foreign countries.

He says recently, the responsibility of purchasing gifts transferred to the United Front Department of the Central Party. “As it became responsibility of the United Front Department of the Central Party to purchase the gifts, some of the gifts sent from South Korea have turned into Kim Jong Il’s gifts to the cadres under his name,” he added.

Some gifts come back to Kim Jong Il in peasant, roe, honey and mountain (wild) ginseng from the people.

Cadres do not talk about what they have received. In sometime early 1980s, Kim Jong Il once offered Benz cars to the cadres of the United Front Department and Organization and Guidance Department of the Central Party, and the cadres fought over the color of the cars. After criticisms from Kim Jong Il, cadres are not allowed comment on the gifts they received.

However, the cadres who have received gifts do not hide that they received gifts. Some of them gather the people from the department to their offices or homes and share “the Commander’s gifts.”

The party notifies the worker’s about gift receivers to arouse more fidelity out of the people by letting the party workers know that responsible workers receive special treatment and to show off that Kim Jong Il love and trusts the workers.

Korea Times
Andrei Lankov
10/4/2005

During the 50-odd years that followed the armistice of 1953, both Korean states have been locked in an intense rivalry. It was a local cold war, a minor version of the global Cold War, but much more emotional since it was a war between the same people. During some periods, this cold war became very hot. Indeed, those decades were an era of daring raids, complicated intrigue, botched and successful assassinations and, of course, of covert naval warfare.

The major role in this quiet warfare was played by North Korean infiltration craft, used to land agents on the South Korean coast. There are three major types of vessels used by the North Korean navy for this purpose. Throughout the history of quiet naval warfare, two ships of each type were lost due to enemy action.

The most unusual and imaginative contraptions are the semi-submersible boats. These can be described as a poor navy’s submarines. They are small boats, with a displacement of some 5-10 tons and a top surface speed of 40-50 knots. They have ballast tanks, and when these tanks are filled with water, the craft submerges almost completely with only the small conning-tower visible above the water. In this semi-submerged state, the craft is much slower, but it is also almost invisible both to both human eyes and radar. Perhaps it is not as good as a real midget submarine, but it is much cheaper and easier to maintain, and it can carry up to six people.

The first battle with such a craft took place in December 1983, when one was discovered not far away from Pusan, and after a chase was sunk by the South Korean navy.

Another semi-submersible was lost in action in 1998. The South Korean signal intelligence discovered the semi-submersible near Yosu in the early hours of the morning of Dec. 18. The South Korean Navy mobilized a number of planes and ships, which approached the boat, demanding that the crew surrender. But North Korean special forces are famous for their unwillingness to give themselves up alive, so they opened fire using small arms. There was no possible doubt about the outcome: the boat was hit by artillery shells and it sank, to be salvaged the following year.

A semi-submersible infiltration boat cannot operate at a great distance from its base, and in most cases it is carried close to the target destination aboard a specially designed mother ship. Such ships are disguised as fishing boats, but they have powerful engines and a built-in dock for a semi-submersible or a more conventional speedboat. The dock is equipped with outward-opening double doors on the stern, allowing the boat to be safely hidden inside the hull.

There have been two cases in which such a ship has been discovered and sunk by hostile forces. The first incident of this kind happened in August 1983, when a South Korean patrol boat discovered just such a ship operating near Ullung-do Island. The ship was sunk after a short shootout.

Another incident took place in December 2001, and this time, the ship was found by the Japanese navy near the Japanese coast. This was not the first discovery of this kind, but on previous occasions, the North Koreans ships managed to flee using their superior speed. This time, however, the ship could not move fast enough _ perhaps the disintegration of economy has influenced the navy as well. As to be expected, the ship’s crew refused to surrender and opened fire, injuring two Japanese sailors. They returned fire and in less than four minutes the ship sank with its entire crew.

The North Korean Navy also possesses a number of submarines, including the Yugo class vessels. These are specially designed midget submarines whose major task is infiltration. The Yugo boats are small, with a displacement of merely 70 tons when submerged.

Such a submarine was caught in a fishing net near Sokcho on the east coast on June 24, 1998. Its propeller and periscope had been fouled. The vessel was captured by the South Korean navy but sank while being towed. The submarine was soon salvaged but all crew and commandos (nine of them – more than usual for a submarine of this type) were found dead after committing group suicide.

Larger Sango class submarines are also sometimes used for infiltration. It was this submarine that was involved in the most high-profile case of military confrontation between the two Koreas in the 1990s. In mid-September 1996, a North Korean Sango submarine was on a routine infiltration mission: a group of commandos were to conduct surveillance of the military installations on the east coast. However, in the early hours of Sept. 18, the submarine ran ashore and was discovered by a taxi driver. The crew and commandos attempted to breakthrough to the DMZ. A long spy hunt ensued, with heavy losses of life on both sides (among the victims there were farmers whom the commandos killed as dangerous witnesses) as well as with the usual group suicide of the North Korean soldiers.

Indeed, one of the most remarkable features of this quiet war is the unwillingness of the North Korean soldiers to surrender. Few sailors and commandos have ever been taken alive. Does this reflect the exceptional valor of the North Korean warriors? To some extent it may, but also there are other reasons behind such behavior. But that is another story…

Christian Science Monitor
Donald Kirk
10/4/2005

Its South Korean funders say it offers potential for cultural exchange. But the monk who oversees it readily admits no North Koreans may visit.

As they lead visitors along a trail below craggy rocks inscribed with praise for the late “Great Leader” Kim Il Sung, young North Korean guides offer a carefully crafted narrative.

They criticize President Bush. They take on US policy. And last weekend, they appeared eager to denounce the dismissal of Kim Yoon Kyu, who is currently under investigation for fraud. The South Korean executive worked for more than 10 years to develop this unusual tourist zone on the east coast several miles above the demilitarized zone that separates North and South Korea.

“We are willing to reduce the number of tourists coming here as an expression of our confidence in him,” says Koo Eun Hyun, a smiling 20-year-old, repeating the North’s demand for reinstatement of Mr. Kim as president of Hyundai Asan, part of the Hyundai group, which is investing $1 billion in building the complex.

Mr. Kim led the project, now subsidized by the South Korean government, from the time the first shiploads of visitors sailed from South Korea seven years ago. Tourists now travel by newly paved road, and Hyundai Asan in June announced the millionth visitor – far short of the 5 million it had hoped for.

Indeed, the project loses vast amounts of money, and is likely to lose still more. The standoff over Kim’s dismissal is escalating amid a South Korean investigation into alleged fraud in economic projects in the North – including whether some funds wound up in the hands of North Korean officials – prompting the North to cut the quota of tourists from 1,200 to 600 a day.

Perhaps as a result, Kim Young Hyun, a Hyundai Asan vice president, prefers to talk about a $10 million project, largely funded by South Korea and Hyundai Asan, to rebuild a Buddhist temple complex inside the zone that was largely destroyed in the Korean War. “Buddhism is traditionally the religion for Koreans,” he says. “Cultural exchange can be the foundation of economic exchange.”

The Venerable Jejeong, the scholarly South Korean monk who oversees the complex readily admits that North Koreans are banned from the complex, just as they are from the rest of the zone, except when they come to work. Those few North Koreans on the site, he says, “ask questions about history but do not ask other questions.”

In fact, he says, he’s never talked to North Koreans outside the zone and has no idea how freely – or if – they can practice their religion. Still, he shares the optimism of South Korean authorities about the future.

“We can minimize the differences and find common ground,” says Mr. Jejeong, who has practiced Buddhism in Thailand and San Francisco. “Currently our educational systems are completely different. North Koreans are not interested in religion.”

Jejeong places his hopes for opening the temple to worship “after unification.” He cites an easing of religious restraints in China. “The North Koreans may be influenced by China indirectly,” he muses.

In the meantime, the temple serves as a monument to North Korean propaganda. A plaque in front of the skeletal outlines of new buildings says that Kim Il Sung and his wife, the mother of current leader Kim Jong Il, visited on Sept. 28, 1947. The plaque blames the leveling of the complex on US bombing.

But for now, North Koreans would rather prove their authority over Hyundai Asan than hark back to the war. Tourists who visit traipse along a few familiar trails, attend an acrobatic performance, dip into baths fed by hot springs and dine in modern restaurants, all closed to North Koreans seen toiling with ancient implements in the fields beyond the wire.

They listen as guides extol the beauties of the region, all under the watchful gaze of North Koreans as anxious to parrot policy as to impose fines for littering.

“We regard [Hyundai Asan’s] Kim Yoon Kyu as a pioneer,” says Miss Koo. “We sacrifice profits for the sake of friendship.”

The Guardian
Jonathan Watts
10/3/2005

Of all the bars in all the world, there is probably none as exclusive, surreal or intriguing as the Random Access Club in Pyongyang. There are also few institutions that are quite so necessary to the mental well-being of the customers.

Open for business only on Friday nights, the RAC is a watering hole for North Korea’s tiny expatriate community; the 300 foreign residents allowed to live among the 22 million population of the planet’s most reclusive nation.

At first sight, the club inside the compound of the United Nations World Food Programme could not look more mundane nor the clientele appear less exotic. Apart from the decor – mostly copies of Chinese contemporary artworks – the simple bar, concrete walls and well-worn pool table might as easily belong to a church hall in Croydon as an expat hang-out in Pyongyang. The few dozen customers seem so earnest and engaging that they too could be mistaken for a suburban congregation rather than the disaster and war hardened aid workers and diplomats they really are.

What is bizarre is the context. The RAC is an oasis of modern globalised normality inside a land where time has not only stood still but gone backwards. North Korea exerts more control over its citizens than the Soviet Union in the dark days of Stalinism. It takes the ideology of 1984 to levels that George Orwell could not have dreamed of. It is rusting proof that the engine of industrial development has a reverse gear. And it is a dark and uncomfortable warning of what could happen to the world if we ever run out of oil.
To find a place like the RAC in the midst of this is like seeing a tiny postcard of Brighton beach stuck on Picasso’s Guernica, or having the latest Peter Greenaway film interrupted by a few seconds of Neighbours.

The bar’s short history is the story of the gradual opening of North Korea since the government reluctantly requested outside help to feed a population racked by famine, droughts and floods.

When it started in 1995, the WFP had just two representatives running a small aid project from rooms in the Koryo hotel. By 1997, North Korea had become the biggest humanitarian operation on the planet, with international organisations providing food and medicine to more than a quarter of the population.

In the meantime, the resident aid community – which included other UN agencies and about a dozen NGOs – had swollen to more than a hundred and been moved to the diplomatic district. The RAC emerged in response to the growing need among this group for a communal gathering point and a place to let off steam about the frustrations of working in such a difficult political and humanitarian environment.

Foreigners in Pyongyang arguably face more restrictions than their counterparts in any other country. They cannot make private visits to the homes of North Koreans, they cannot travel outside of Pyongyang without permission and they are not supposed to exchange their dollars and euros for local currency.

The work can be harrowing. Although the worst of the food crisis passed more than five years ago, some areas still suffer from poor nutrition and a lack of basic medicines. In remote outposts, WFP monitors can be extremely isolated. In Hyesan – a four-day drive from Pyongyang – the organisation’s representative lives alone for eight weeks in a basic hotel where the temperature in the lobby can fall as low as minus 17 degrees in the winter. There are no other foreigners, their local guides leave them at the weekends, and they are not allowed to socialise privately with Koreans.

In Pyongyang, the situation is not nearly as bad. Many visitors are surprised at the beauty of this showcase city. Compared to most capitals, it is clean, quiet and safe. There is sufficient food, some fine duck and noodle restaurants and even a little capitalist entertainment in the form of the casino, karaoke bar and golf course at the Yanggakdo hotel.

In addition, years of pure ideology – the utter subjection of the individual to the collective will of the state embodied by the leader Kim Jong-il – have produced some impressive (or scary, depending on your point of view) cultural marvels, such as the circus and the performances by young dancers and musicians at the children’s palace.

Those looking on the positive side of life in North Korea also point out the friendliness, innocence and high levels of education of many of the people they meet, as well as the cleanliness of the air in a country starved of energy and short on traffic. Because of this, and the frequent blackouts, Pyongyang is probably the best capital in the world for stargazing.

But the political problems undermine most of these benefits. Most foreigners accept their phones are bugged. Some suspect that much of what they see during inspections is staged. Even among the old-hands who have been in the country for years, many say they have never made a Korean friend.

This is largely because North Korea is gripped by a siege mentality – and not without justification. The country has been in a state of hot and cold war with the US since 1950. Outsiders are seen as potential spies or sources of ideological impurity.

There is good reason for the government to fear charity. Every smile or hand-out from a foreign aid worker undermines the state’s xenophobic propaganda and philosophy of “juche” self-sufficiency.

The WFP’s mission in North Korea is the only one where aid monitors do not have unrestricted access to the entire country. But the UN organisation has gradually widened its focus, pushing back the boundaries where it operates, expanding its presence to 42 foreign and 70 domestic staff, and meeting regularly with thousands of local officials who might otherwise never come into contact with a foreigner. Its monitoring ambitions remain the same as when the RAC was named: random access to all parts of the country.

This is the aspect of aid work that North Korea fears the most. Although the food and drugs are humanitarian, their side-effect is political. As most of the customers in the RAC will testify, one of the biggest changes since the aid operation began is in attitudes. Ten years ago, most North Koreans would turn their backs on a foreigner. Now they are almost as likely to smile.

That, more than anything, may be why the RAC could soon be losing most of its customers. The government has ordered all humanitarian work to end by the end of the year. Negotiations are still under way regarding what that will mean, but one resident’s estimate is that as many as 80 of the 120 aid officials in Pyongyang will have to pack their bags and leave by December 31.

The mood in the RAC has never been more gloomy. Out will go most of the young blood. Those who remain are likely to be diplomats, a sharply reduced corps of aid workers, five English teachers and a handful of businessmen.

“It’ll be like going back to 1994,” commented one regular at the bar.

“The jokes these days are black ones about all the second-hand fridges and cars that will flood into Pyongyang’s markets at the end of the year,” said another.

It is still possible that as one door closes others will open. North Korea welcomes economic development in the form of investors and technical support for infrastructure projects. The government wants to boost the tourist industry. A new railway is about to open across the demilitarized zone that will increase the flow of visitors from South Korea. The growing influence of Beijing is bringing in more people and goods from China. Progress in six-nation nuclear talks could also mean more atomic energy agency inspectors and diplomats from Japan and the US.

But ready or not, North Korea wants its independence back. It wants its future foreign guests to be visiting town on short-term visas, not moving in for years on end and setting up their own social club. For North Koreans and expats, there will be plenty of other bars, but at the RAC, it is time to drink up. The government may soon be calling last orders.

Los Angeles Times
Barbara Demick
10/3/2005

North Korea Reinstates Controls on Grain Sales Rice and other foods will be distributed by the government and banned at markets.

Rolling back some of its economic reforms, North Korea is banning the sale of rice and other grains at private markets and strengthening its old communist-style public distribution system under which all citizens are supposed to get rations, aid groups and North Korea experts say.

The changes were supposed to be implemented Oct. 10, a holiday in North Korea marking the 60th anniversary of the ruling Workers’ Party. But reports from the World Food Program office in Pyongyang, the capital, indicate that merchants have been told already that they can no longer sell grain.

The United Nations agency said in a statement on its website that “as of Oct. 1, reports are that cereal sales in the markets will cease and public distribution centers will take over countrywide distribution.”

North Korea experts say the moves do not necessarily indicate an abrupt U-turn in the impoverished country’s economic policies, so much as concern that change was taking place too quickly.

“I think it is a transitional necessity. You can’t move too fast into free—market economics without softening the blow for people who have grown up in a planned economy,” Richard Ragan, who heads the World Food Program office in Pyongyang, said in a recent telephone interview. “This is not that different from what you saw happening in China in the 1990s.”

Lee Young Hwa, a Japan—based human rights worker who has close contacts with traders at the Chinese—North Korean border, believes the new restrictions on markets are designed to boost the power of the Workers’ Party and curb the role of the military in the economy.

“The military people control the food sold at the market. Nobody else has the trucks or the access to gasoline to move food around the country. The leadership fears that their economic reforms aren’t working because everything is controlled by the military, and they want to take back control,” Lee said.

For years, there have been accusations that the military was pilfering humanitarian shipments of rice and other aid, keeping the best for its own and selling the rest at markets. Secretly taped video footage obtained last year by human rights workers shows apparently unopened sacks of rice given by the U.S. and other donors being sold illegally at a market in the northern city of Chongjin.

On the open market, a pound of rice costs 15 to 25 cents — an impossible sum for many North Koreans, whose average salary of $1 per month keeps them on the verge of starvation.

Under the new rules, rice, as well as other staples such as corn, is to be sold at public distribution centers at subsidized prices and in rationed quantities. Markets, which have been gradually legalized since 2002, will still be permitted to sell vegetables, produce, clothing and other goods.

Cho Myong Chol, a former North Korean economist who lives in Seoul, said he believed North Korea would continue with market reforms but at a slower pace. “Since the economic reforms in 2002, the gap between the haves and the have—nots has become so extreme that there is an imbalance that is causing social unrest and dissatisfaction. I think they needed to do something about food to keep control.”

It remains to be seen whether the changes will help ordinary North Koreans. The government recently informed U.N. aid officials that it was cutting back their operations and no longer needed large donations of rice and other foodstuffs. Experts believe North Korea is concerned about the U.N. ‘s monitoring requirements and prefers direct aid from countries such as South Korea and China, which place fewer restrictions on donations.

Until the 1990s, the public distribution system introduced by North Korean founder Kim Ii Sung was the hallmark of a nation that claimed to provide its people with everything from rice to shoes. But the system collapsed in the early l990s, exacerbating a famine that killed an estimated 2 million people — about 10% of the population. The public distribution system still operates, but at reduced capacity.

Although North Koreans today buy much of what they need at markets, the government doesn’t like to admit it and insists that the cradle—to—grave system of social welfare remains.

“We are still a communist country. Nothing has changed. I get everything I need through the public distribution system,” said Yoon So Jung, 25, a guide interviewed last week at Mt. Kumgang, one of the few areas of the country open for tourism.

But pressed about her pink windbreaker, Yoon admitted hesitantly, “Well that, I bought at the market.”

Korea Times
Park Song-wu
9/27/2005

The Pyongyang regime has described Chang Song-taek, North Korean leader Kim Jong-il’s former right-hand man, as a “tree’’ that is now cut off, sources well-informed of the North’s power structure in Seoul said on Tuesday.

Chang, Kim’s brother-in-law and a confidant until purged in late 2004 for an alleged bid to enhance his power, was predicted to return to the Workers’ Party because the Dear Leader, 63, reportedly has a limited number of associates to rely on.

But such a possibility looks slim now as Kim has apparently changed his mind, according to sources in Seoul.

“(Chang) was predicted to make a comeback in the past because he was such a close confidant (of Kim Jong-il),’’ the Yonhap news agency quoted a source as saying. “But now almost all the people who, for example, have simply eaten naengmyon (or Korean cold noodles) together in the Yokryukwan restaurant (in Pyongyang) have been expelled to local areas. The likelihood of Chang’s comeback is near zero now.’’

Chang was formerly vice-director of the party’s exceptionally powerful bureau _ the Organization and Guidance Department. High-profile defector Hwang Jang-yop once described him as the “No. 2 man’’ in North Korea.

Now Ri Che-kang (phonetic), new vice-director of the potent department, is known to be in charge of removing Chang and his close allies from the political scene.

The intended purge of Chang, 60, is allegedly a result of his efforts to promote Kim Hyong-nam, an illegitimate son of Kim Il-sung, the founding father of North Korea, as a contender to Kim Jong-il.

Kim Hyong-nam, 33, was adopted at birth by a sibling of Chang, according to a country report on North Korea by the Economist Intelligence Unit.

The expulsion process resembles one that took place in the 1970s when the Pyongyang regime underwent a power struggle during which “side branches’’ of Kim Il-sung were trimmed away.

At that time, the regime purged Kim Il-sung’s uncle Kim Young-ju as well as others, including the leader’s second wife Kim Song-ae (phonetic) and her children. In 1976, Kim Young-ju disappeared from the political scene and did not re-appear until 1993 when he returned to the Party Central Committee.

Chang is reportedly in a bad state of health now. Even if Kim Jong-il reinstates him, he is unlikely to return to the party. Sources in Seoul predicted that the most likely scenario is that Chang will be named an ambassador _ a job which cannot influence domestic politics.

Kim Jong-il has not yet decided who will succeed him, even though his own ascension to power was carefully prepared over more than 20 years.

There are three known rival candidates for the succession _ all Kim Jong-il’s sons, by two mothers, neither of whom he married.

The eldest, Kim Jong-nam, 34, was reportedly the favorite until 2001 when he was caught visiting a theme park in Japan on a false passport, embarrassing the Pyongyang regime.

Kim Jong-nam’s two rivals are his younger half-brothers _ Kim Jong-chol, 24, and Kim Jong-woon, 22. Kim Jong-il is said to favor Kim Jong-woon, as the more manly of the two, the country report said. Their mother, Ko Young-hee, a former dancer who became his consort, died of cancer in 2004.

Her death triggered numerous media reports predicting an imminent power struggle in the Pyongyang regime, which is described by the Western media as a “Communist dynasty.’’