Archive for January, 2009

North Korea’s real estate black market

Sunday, January 25th, 2009

Some great qualitative information on the DPRK’s underground real estate market from Radio Free Asia:

Central authorities are investigating the practice in all of North Korea’s major cities and have confiscated the homes of “dozens” of local officials in the city of Chongjin, one well-informed source who asked not to be named said.

Private ownership or sale of homes is forbidden by the North Korean state, which assigns dwellings to its citizens based on its own determination of need.

“Most government officials build their residences in the North Korean equivalent of suburbs, in areas that are close to the city but still have a rural flavor,” the source, a Chinese merchant who does business in North Korea, said.

“They sell them when they retire.”

“If someone sells a 50-pyong (1,800-square foot) house in such an upscale neighborhood, he can then buy a house that is three or four times bigger in a different area,” the merchant said.

Party and state officials receive permits and order state-run construction companies to build homes in suburban areas near the sea, the merchant said.

He added that the value of real estate privately sold in North Korean port cities is now appreciating at twice the rate of real estate sold elsewhere in the country.

High-quality materials, including expensive appliances and wallpaper, are often used in the building of officials’ homes, according to a North Korean defector originally from Chongjin but now living in South Korea.

“Small but elegant” patios are sometimes also included, he said.

To justify the construction and occupancy of a larger space, local officials build multi-unit structures and fill them with relatives or people of more modest means, the defector said. 

When the officials retire, they pay the other occupants to move and then sell the entire structure.

North Korean authorities have now sent “task forces” to each of North Korea’s major cities to investigate real estate deals by local officials, the border merchant said, adding that a 40-member group was recently sent to Chongjin, where the homes of dozens of officials were seized.

An official in the city’s Songpyong Ward has reportedly been demoted and reassigned to a more backward part of the country, and fines equal to the actual value of transactions have been imposed on citizens who bought or sold homes.

Some thoughts:
1. IFES reported that private real estate transactions were quite common last september.

2. This report, combined with previous accounts, indicates that, although illegal, the DPRK’s real estate market is quite rational.  Construction quality and location influence housing prices.  According to the Daily NK, the qality of the chairman of the neighborhood people’s committee also influences the price.

3. Could the effort to crack down on these transactions be part of the plans to achieve a “Strong and prosperous nation” by 2012?

Read more here:
North Korean Economy Watch: real estate posts

North Korea’s Black-Market Housing
Radio Free Asia
Jung Young

Private sector real estate activity booming in the DPRK
Institute for Far Eastern Studies (IFES)
NK Brief No. 08-9-4-1

Who Is the Chairperson of the People’s Unit?
Daily NK
Moon Sung Hwee


DPRK responds to US intelligence report on public health

Sunday, January 25th, 2009

In December 2008, the office of the US Director of National Intelligence issued a report titled, “Strategic Implications of Global Health (ICA 2008-10D).”  In this report, the DNI made the following comments about the state of public health in the DPRK and its effects on economic growth and military preparedness:

North Korea (p.46)
WHO Ranking of Health Systems (out of 190 countries rated): 167
NCMI Ranking of Health Care Capabilities: 5 (Unsuitable)

1. Economic crisis and famine of 1990s fueled breakdown of once-efficient health-care system.
2. Lack of medicine, equipment, sanitation, and reliable energy supplies make quality healthcare virtually unobtainable outside of Pyongyang.
3. Persistent refusal of international health expertise and assistance makes significant short-term improvements unlikely.

Most Urgent Health Problems:
1. TB, scarlet fever, and measles particularly prevalent, although Pyongyang’s secretiveness makes outbreaks extremely difficult to verify and track.
2. Chronic diseases account for an estimated 40 percent of deaths.
3. Even after the widespread famine of the 1990s, prolonged and severe malnutrition persisted; more than half of North Korean children are stunted or underweight, while two-thirds of young adults are malnourished or anemic. The World Food Program currently warns that a new food crisis is in the making as the result of floods and North Korea’s refusal to accept food aid from a new South Korean government that is highly critical of Pyongyang.

1. North Korean-manufactured illicit drugs—an effort to earn hard currency—increasingly used by citizens of that country as substitutes for scarce medicines or to relieve hunger or boredom.
2. HIV/AIDS prevalence is negligible.

Strategic Considerations:
1. Widespread malnutrition and accompanying physical and cognitive disabilities among DPRK children and young people likely inhibitors of economic growth—with or without opening to the outside world or reunification with the South.
2. If reunification occurs, South Korea will face costs not only of incorporating an economic void, but also those of a huge health-care burden. Seoul could look to other countries or to multilateral organizations to help defray expenses.
3.  Poor health is weakening military readiness because capable new recruits are in short supply. Loyalty may also erode over time, according to Eurasia Group; even when soldiers are well fed, they may be concerned about their malnourished family members.
4. The famine of the 1990s destroyed absolute state control of food rationing, internal movement of citizens, and information as North Koreans were compelled to defy state restrictions in their struggle for survival—and as those who had escaped to China in search of food and work returned with news of the outside world, according to Human Rights Watch.

Potential Opportunities:
1.  Health cooperation (amelioration of North Korea’s heavy health burden) could serve as a means of “diplomacy through the back door.”

Other Comments:

Widespread ill health in the youth cohort may reduce a country’s pool of healthy and capable military recruits, a phenomenon that is currently playing out in Russia and North Korea. Deployed military forces will continue to be vulnerable to the ravages of infectious diseases, and the capability of a government to provide adequate health protection for its troops will significantly impact its ability to project force abroad. (p.5)

Malnutrition-related cognitive disabilities among North Korean children and young people likely will impact future economic growth in that country regardless of when Pyongyang opens to the outside world or reunifies with the South. Nationwide malnutrition has compelled Pyongyang to lower minimum height and weight requirements for military service, and an estimated 17 to 29 percent of potential North Korean military conscripts between 2009 and 2013 will have cognitive deficiencies disqualifying them for service. (p.6)

Along these lines, it is likely that malnutrition-related cognitive disabilities among North Korean children and young people—resulting from the 1990s famine, as well as the widespread hunger that persists to this day—will inhibit future DPRK economic growth, with or without opening to the outside world or reunification with the South. (p.24)

As a consequence of early childhood malnutrition, an estimated 17 to 29 percent of potential North Korean military conscripts will have cognitive deficiencies severe enough to disqualify them for service by US standards (This figure does not include individuals who are mentally capable but have physical conditions disqualifying them from service). The National Center for Medical Intelligence estimates that mental fitness of North Koreans subject to military conscription will be at its weakest during the period 2009-2013 as children born during the severe food shortages and famine of the 1990s reach military age. (p.28)

For the record, the UN WHO ceased publishing the Ranking of Health Systems in 2000 due to the “complexity of the task.” My suspicion is that it was actually ended because member governments did not appreciate being ranked in this field.  However the DPRK’s score of 167 dates from the final publication eight+ years ago. I am unable to investigate the DPRK’s score from the NCMI because this report is not publicly available (as best I can tell).

Although this report offers a decent summary projection of the effects of poor health on the DPRK’s strategic options, there is not much new, or newsworthy, about the report (at least as it pertains to the DPRK).  Most of this information has been floating around the public domain for some time. In fact, I probably never would have heard of this study if the North Korean’s had not publicly complained about it in KCNA. (Click here to read KCNA story

Quoting from Yonhap:

“They floated the cock-and-bull story,” the KCNA said, “It is an open secret that the ill-famed intelligence and plot-breeding institutions of the U.S. including the CIA are hell-bent on releasing false reports about its hostile countries.”

“It is the unpopular healthcare system in the U.S. which should be overhauled or replaced by a new one,” the report said.

“However, they released the false report, finding fault with the advantageous healthcare system in the DPRK in a bid to hurt the prestige and dignity of the DPRK in the international arena and stir up ‘ill feelings’ in society,” it said.

This report is 55 pages long and the portions on North Korea (listed above in full) barely fill two pages.  I am not sure why the North Korean’s chose to draw attention to it by complaining in KCNA.  

You can read the Yonhap story here:
N. Korea condemns U.S. intelligence report on its combat ability


DPRK outlines region-specific economic growth plans

Saturday, January 24th, 2009

Institute for Far Eastern Studies (IFES)
Nk Brief No. 09-1-23-1

Following the recent North Korean New Year’s Joint Editorial and its calls for economic measures, on January 5, more than 100,000 people attended a rally in Pyongyang at which customized economic tasks were presented for each of the North’s provinces, taking into account each region’s particular industrial concentration or specialty.

According to North Korean media reports on January 20, Pyongyang stressed reforms in steel, power, coal, railway, and other sectors it considers ‘Priority Sectors of the People’s Economy.” It also presented tasks for the promotion of housing construction, refurbishment of pig farms, and the increase in production of farms and light industries providing daily necessities to the people of the North.

South Pyongan Province was tasked with increasing the production of ‘Juche’ steel’ at the Chollima Steel Complex, which kicked off the “new revolutionary upsurge” late last year during an on-site inspection by Kim Jong Il, as well as full operation of the newly built ‘superpower electric furnace’, and called on all the people of the province to increase production of organic fertilizer in order to boost food production.

For North Pyongan Province, “mass reforms” for the metalworks sector and concentrated efforts to increase electrical production at the Supung and Taechon power plants were called for. In addition, increased production at the Kujang Earth Colliery Complex, Rakwon Machinery Complex, and the Sinuiju Cosmetics Factory were ordered, as was the institution of advanced agricultural management methods.

Efforts in South Hwanghae Province are to be focused on increasing iron ore mining and scrap iron collection at sites such as the Eunryool and Jaeryung mines, and agricultural production goals are to be met through the introduction of high-yield crops and double-cropping.

North Hwanghae Province was ordered to focus on increasing production at the Hwanghae Iron Complex, the Yesong River Youth Power Plant No. 1, the 2.8 Madong Cement Factory, the Sariwon Poultry Farm, and the Sariwon Pig Farm. In addition, high-yield crops are to be introduced and construction of irrigation systems is to begin, as land management efforts are to be implemented in order to expand agricultural land in Mirubol. North Hwanghae Province is also to build a new library, a new arts theater, and a new housing.

In South Hamgyung Province, efforts are focused on construction of the Keumya River and Keumjin River Guchang power plants, as well as improving mining capacity at the mines in the Danchun area while renovating production facilities at the Sudong Mines. Aggressive promotion of construction on the second stage of the 2.8 Vinylon Complex was also emphasized. Provincial authorities were also ordered to complete the initial stage of refurbishment in the Heungnam Pharmaceutical Plant, improve production at the Kwangpo Duck Farm and the Hamju Pig Farm, and accelerate home construction in Hamheung City.

North Hamgyung Province was tasked with perfecting ‘North Korean-style steel production methodology’ at the Kim Chaek Iron Complex and Sungjin Steel Complex, and modernizing exploration, mining and processing equipment at the Musan Mining Complex in order to boost output, along with bringing the Seodusu Power Plant and Chungjin Thermoelectric Power Plant fully on-line. Another important task prioritized was the completion of the second stage of the Urangchun Power Plant.

In Kangwon Province, construction of the Wonsan Army-People Power Plant, increased production at the Munchon River Ironworks, modernization of the Wonsan Shoe Factory and the Wonsan Textiles Factory, and the refurbishment of the Munchon Poultry Processing Plant were emphasized, along with the diversification of management in farming communities in order to resolve food shortage problems.

Ryanggan Province, in the northern Gosan region, was tasked with improving management of the Samsu Power Plant, which entered service in May 2007, and construction of the Baekdu Mountain Military-first Centennial Power Plant and other electrical facilities, and the establishment of a ‘hometown of potatoes’ for the quick increase in potato cropping.

The Jagang Province was tasked with modernizing its metalworks sector and increasing electrical production at the Gangye Youth Power Plant and Janga River Power Plant, construction of small and medium-sized power plants, and increasing its logging production. Jagang Province was also tasked with normalizing production in its pig, duck, and chicken factories, and software development for local organizations was emphasized as a priority task for the Electronic Business Research Institute in Ganggye City, which was visited by Kim Jong Il after its grand opening last year.


Economic rationality in the DPRK

Saturday, January 24th, 2009

Writing in the Daily NK, guest author “Benji” and an astute reader offer us this little glimpse of economic rationality in North Korean culture.


Commenting on the photo above, “Benji” notes:

“A North Korean soldier in front of an amazing view from [Mt. Pektu].  Minutes later, he was to offer me one of his cigarettes.”  

An astute reader made the following comment:

“The cigarette from the Soldier probably wasn’t the kind offer it seemed to be. North Koreans use cigarettes as currency. When they see a western tourist they offer their substandard north korean cigarettes in the hope of receiving western thus more valuable ones in exchange, or if they are especially lucky chinese Double Hapiness

The pictures and story are worth reading here:
Sacred and Stunning Mountain, Baekdu
Daily NK


Sinuiju SAR: Take 4

Friday, January 23rd, 2009

sinuiju2.JPGOn September 20, 2002, the DPRK’s Supreme People’s Assembly announced the creation of the Sinuiju Special Administrative Region (SAR) (KCNA announcement here).

The project was to be headed by a Chinese-born, naturalized Dutch citizen, Yang Bin…who was arrested by Chinese authorities shortly after the Sinuiju SAR was announced.  Western analysts interpreted this move as a signal that China was not supportive of either the project or the selection of Mr. Bin as its chief executive.  Needless to say the future of the project lay in doubt.

However, according to a Yonhap report (here), as of March 2007 the North Koreans still seemed interested in launching some kind of SAR/SEZ in Sinuiju, though the location had been moved from the city proper to two islands in the Yalu River, Bidan and Wihwa.

In August 2007, IFES and the Choson Ilbo reported that preparations were already underway in Sinuiju to convert the city center into a SAR/SEZ.  However, after this initial media hit, most of the news coming out of Sinuiju was related to Jang Song Taek’s 2008 anti-corruption campaign which brought most of the trading companies along the Chinese border back under the control of the Ministry of Finance.

This week, Japan’s Yomuri reports from Shenyang, China, that the Sinuiju SAR is still on and will be located on Wihwa Island:

“The zone will only cover Wi Hwa Island, which will be much easier to control, and only Chinese will be allowed to freely visit,” one of the sources said. “The plan solely aims at expanding trade with China. North Korea isn’t planning any measures that would involve a dramatic opening up.”

According to Chinese statistics, the total value of trade between China and North Korea from January to October last year was 2.12 billion dollars, up 31.7 percent from a year earlier.

Meanwhile, a diplomatic source said, “The move to beef up border trade with China is also aimed at putting pressure on South Korea.”

(FYI: Use of the phrase “beef up” is a pretty good sign that the diplomatic source was an American.)

I know the story of “The Boy Who Cried Wolf.”  I will remain skeptical about the new SEZ until I see evidence of construction myself.

You can read the full Yomuri article here:
N. Korea plans free trade zone on island
Daily Yomuri
Toru Makinoda


DPRK bans South Korean, overseas goods from Markets

Thursday, January 22nd, 2009

Institute for Far Eastern Studies (IFES)
NK Brief No. 09-1-20-1

It was revealed by Open Radio for North Korea on January 19 that DPRK authorities had handed down a decree to begin enforcing a ban the sale of imported goods in markets across the country on January 20. On January 3, North Korean authorities announced a measure to the Sinuiju Citizen Association and in the Chaeha Market banning the sale of imported goods, telling traders in the market to get rid of imported goods they had with them.

According to the report, the market management office in Sinuiju (operated under the control of the City People’s Committee) posted the decree at the entrance to the Chaeha Market, emphasizing that goods manufactured overseas were banned, while goods made domestically with imported materials were allowed to be sold. The report added that among goods banned from sale, those made in South Korea would be cracked down on especially hard.

Authorities are clamping down not only on markets in the city, but are also strengthening crackdowns on homeless vagrants, known as kotjebi, or literally, ‘flower swallows’. The report stated, “The Party, security office, trade association, youth association, and other organizations in Sinuiju are at the forefront of a coordinated crackdown on Kotjebi,” and, “As the crackdown is currently underway, between 20 and 30 vagrants, on average, are caught each day…those captured vagrants at the jail are sentenced to around 6 hours of forced labor in quarries or farms outside of the city, and must work hard before being given food.”

This same source reported that due to the Beijing Olympics last August, security on the border between North Korea and China had been tightened, and as winter rolled around and the river froze, this security was further strengthened, and, “recently, due to strengthened blockade of the border, the price of bribes to cross the river have more than doubled.”

In October 2008, the number of guards along the border near Hyesan was increased, and the distance between guardposts was halved from 200 to 100 meters. In addition, not only were military border patrols dispatched to the area, civilian patrols were also set up, increasing surveillance. This led to the cost (bribe) of a river crossing to jump from 1,000-2,000 Yuan (150-300 USD) in 2008 to as much as 4000-5000 Yuan (approx. 600-800 USD) this winter.

Some immediate thoughts:

1. This is the kind of information that should be posted on the leaflets South Koreans are sending across the DMZ.

2. The Daily NK recently posted the “Top Nine” most popular goods list in the North Korean markets.  Many of these are imported.

3. Lets hope that these restrictions are as difficult to enforce as the previous directives.  As we all know, banning a product does not make it go away—even in North Korea.  It raises the price to the final consumer and enriches smugglers at the expense of the state and party organs (though individual party members and security personnel benefit as smugglers).

4. These trade restrictions, if enforceable, effectively amount to an import substitution policy….a policy that has pretty much been thoroughly discredited.

5. According to this IFES article, markets are controlled by a local “Market Management Office” which is in turn subordinate to each “City People’s Committee.”  According to the Worker’s Party organizational chart (view here), Each City People’s Committee is subordinate to a Provincial People’s Committee (PPC).  All PPCs are subordinate to the Central Committee of the Workers Party.  I am skeptical, however, that this is the only channel of authority.  Are the DPRK’s markets part of any ministry’s portfolio?


More on Pyongyang’s facelift

Wednesday, January 21st, 2009

As mentioned earlier (here, here, here, and here) the DPRK is pursuing the goal of achieving a “strong and prosperous country (Kangsong Taeguk)” by 2012 (Kim il Sung’s 100th birthday).

Today the Choson Sinbun (via Yonhap) fills us in on some new policy details:

Choson Sinbun, a pro-Pyongyang paper published by Korean residents in Japan, said the People’s Committee of Pyongyang plans to plant 300,000 trees and build several “modern” parks across the capital under its 2009 urban management plan.

“The plan is characterized by the construction and modernization of parks and recreational gardens, and coincides with North Korea’s key aim of enhancing the cultural life and morale of its workers,” it said.

A greenspace will be built along the residential Mansudae area, where many apartment buildings are under construction, according to the report. A “folk park” and a “modern park” are also being planned for other areas in the city.

Antiquated facilities at a pond park at the edge of Pyongyang will be replaced by statues, recreation facilities and a beverage store, it said.

The urban remodeling project is being spearheaded by Jang Song-thaek, brother-in-law of leader Kim Jong-il, who reportedly wields nearly unrivaled power.

Read the full article here:
Pyongyang beefs up remodeling drive with more parks


DPRK looks to sell (un)spent fuel rods

Wednesday, January 21st, 2009

UPDATE:  A reader points out in the comments that the DPRK is in fact looking to sell its remaining UNUSED fuel rods…so I made a fairly substantial mistake here.  My confusion on the subject seems to have come from my reading of the Joong Ang Ilbo‘s coverage, but I take full responsibility for not paying close enough attention to the other stories.

Here is the specific quote: “The North asked us to focus on discussing how to handle the spent fuel rods as much as possible” (Joong Ang Ilbo)

The revised facts:

1. The DPRK has 14,800 fresh fuel rods—equivalent to just over 100 tons of uranium (RIA Novosti)
2. The materials are reportedly worth over US$10 million (Yonhap). 

Hwang Joon-gook, a South Korean diplomat in charge of the denuclearization talks with Pyongyang, led a team of South Korean officials and civilian nuclear experts on a fact-finding mission to the DPRK  to decide whether to buy Pyongyang’s spent fuel rods.

The facts:
1. The DPRK has 14,800 spent fuel rods (Joong Ang Ilbo)
2. This is equivalent to just over 100 tons of uranium (RIA Novosti)
3. The materials are reportedly worth over US$10 million (Yonhap). 
4. The rods are apparently up to 15 years old (Yonhap).
5. The US alleges that the DPRK is enriching uranium as well.  Richardson has more information here.

Just last week, Selig Harrson reported that the DPRK told him “it has already weaponized the 30.8 kilograms (67.8 pounds) of plutonium listed in its formal declaration and that the weapons cannot be inspected.” This amount of plutonium could fuel four or five warheads.

According to NTI:

“Even if the D.P.R.K.-U.S. diplomatic relations become normalized, our status as a nuclear-armed state will never change as long as the U.S. nuclear threat to us remains, even to the slightest degree,” said the [DPRK’s] Foreign Ministry, which issued a similar message several days earlier.

For its own reasons, Russia does not consider the DPRK a nuclear power despite the fact that they have detonated a nuclear device—a fact that would raise eyebrows across the DPRK if reported by the local media. In fact, it was the Russians who supplied the DPRK with the Yongbyon reactors in the first place!

In support of Russia’s position, however, Yonhap offers the following:

North Korea detonated its first atomic device in 2006. The relatively small underground test had less than a kiloton in yield, below what is considered a successful nuclear test.


Jeju to offer pig farm to DPRK

Monday, January 19th, 2009

The people of Jeju Island have shipped tangerines to the DPRK for about 10 years.  Now they are offering a pig farm:

According to Yonhap:

South Korea’s Jeju Island will send equipment to build a pig farm in Pyongyang on Friday to raise the island’s local specialty, black pigs, officials said.

Black pigs, or “heuk-doe-ji” in Korean, are native to the semi-tropical island. They are covered in black hair, and the meat is popular for being chewy and rich in nutrients.

Jeju will send farm equipment worth 220 million won (US$159,190), such as pens, feeders, heat lamps and ventilators, later on Friday aboard a ship also carrying tangerines and carrots as part of the island’s annual aid to the North. When the farm is completed, possibly by May, the island will ship 100 black pigs that can farrow.

“We expect this will help provide nutrition for children and the elderly in the North and pass down our breeding expertise. Jeju Island is a clean area free from animal infectious diseases,” Kang Won-myoung, a provincial official handling the pig project, said over the telephone.

The Jeju provincial government set up the “South-North Black Pig Breeding Cooperation Project” with North Korea when a group of Jeju citizens and officials visited Pyongyang in late 2007. The project was suspended for about a year amid frozen inter-Korean relations until North Korea formally requested to start the farming last September, the island officials said.

The “Jeju Black Pig Farm” will be built inside Pyongyang Pig Farm, North Korea’s largest such facility, established in 1972.

A Norwegian company recently tried to invest in a pig farm in the DPRK.  Unfortunately it did not work out.  Read their story here starting on page 86.  

The DPRK is working to increase meat production as part of its 2012 “Kangsong Taeguk” campaign

Read the full story here:
S. Korea’s Jeju Island to build ‘black pig’ farm in Pyongyang


More from Taiwan

Monday, January 19th, 2009

Although the P.R. of China and the DPRK are supposed to be as close together as “lips and teeth,” we have seen a couple of interesting stories emerging from Taiwan in the last few days.

Case 1: On Jan 8, the Straits Times reported that former Taiwanese president Chen Shui-bian embezzled money intended for the DPRK.

Case 2: Last Friday, the AFP reported that the US Treasury Depratment was moving on a Taiwanese couple who were allegedly facilitating shipping to the DPRK:

The US Treasury moved Friday to freeze the assets of a Taiwanese couple and their companies, linking them to North Korean weapons proliferation.

Alex HT Tsai and his wife Lu-chi Su were accused of providing support to the Korea Mining Development Trading Corporation (KOMID), identified by Washington as a proliferator four years ago, the Treasury said in a statement.

Tsai was last year indicted by Taiwanese authorities for forging shipping invoices and illegally shipping restricted materials to nuclear-armed North Korea, it said.

“He has been involved in shipping items to North Korea that could be used to support North Korea’s advanced weapons program,” the statement said.

The companies controlled by the couple Global Interface Co and its subsidiary Trans Merits Co. were sanctioned by the Treasury action.

“Proliferators depend on access to the international financial and commercial systems to support their dangerous trade,” said Stuart Levey, Treasury under secretary for terrorism and financial intelligence.

“Our action today exposes a North Korean procurement channel, and we urge governments and companies worldwide to cut this channel off entirely,” he said.

Rad the full story here:
US freezes assets of Taiwanese couple and their companies