Archive for September, 2009

Reform from Below: Behavioral and Institutional Change in North Korea

Wednesday, September 30th, 2009

Peterson Institute Working Paper (Sept 2009)
Stephan Haggard and Marcus Noland

(Download PDF here)

Abstract: The state is often conceptualized as playing an enabling role in a country’s economic development—providing public goods, such as the legal protection of property rights, while the political economy of reform is conceived in terms of bargaining over policy among elites or special interest groups. We document a case that turns this perspective on its head: efficiency-enhancing institutional and behavioral changes arising not out of a conscious, top-down program of reform, but rather as unintended (and in some respects, unwanted) by-products of state failure. Responses from a survey of North Korean refugees demonstrate that the North Korean economy marketized in response to state failure with the onset of famine in the 1990s, and subsequent reforms and retrenchments appear to have had remarkably little impact on some significant share of the population. There is strong evidence of powerful social changes, including increasing inequality, corruption, and changed attitudes about the most effective pathways to higher social status and income. These assessments appear to be remarkably uniform across demographic groups. While the survey sample marginally overweights demographic groups with less favorable assessments of the regime, even counterfactually recalibrating the sample to match the underlying resident population suggests widespread dissatisfaction with the North Korean regime.

JEL Codes: P2, P3, F22
Keywords: failed states, transition, reform, North Korea, refugees


Russia-ROK gas deal on hold

Tuesday, September 29th, 2009

Last year we reported on an effort to bring Russian natural gas to South Korea via a pipeline that could either go through North Korea or across the East Sea (aka Sea of Japan).  If the pipeline was to cross the DPRK, they stood to gain by leasing the land for the pipeline.

According to news this week, the plan has been indefinitely shelved.   According to the story:

Plans to import Russian natural gas through a North Korean pipeline have been shelved due to strained inter-Korean relations, the head of South Korea’s state-run energy company said Tuesday.

Korea Gas Corp (KOGAS) (KSE:36460) president Choo Kang-soo said unless North Korea specifically asks for the pipeline to be built on its soil, Seoul will not pursue the piped natural gas (PNG) project but opt to import liquefied natural gas (LNG) directly from Russia by ship.

“An understanding has recently been reached with Russian partners on this issue,” the chief executive said, adding that recent developments like the nuclear standoff raised the importance of creating a “controllable schedule” for getting the gas on time.

He pointed out that the inability to control cross-border issues has made the PNG plan less viable.

Under a blueprint announced in 2008, Seoul said it wanted to import 7.5 million tons of Russian gas starting in 2015 to ensure a steady supply of fuel. Seoul had previously relied heavily on imports from Southeast Asian countries, which have since hiked up prices.

The deal, valued at more than US$100 million, called for a pipeline running from Russia’s far east to South Korea through North Korea.

Choo hinted that because Russia is eying both the Japanese and Chinese markets, it also prefers to transform its natural gas into LNG for overseas sales.

KOGAS, meanwhile, said that the total amount of fuel that will be imported from Russia will equal 20 per cent of South Korea’s projected natural gas needs in 2015. In 2007, the country bought 7.8 million tons of gas for home use alone, with more being spent on power generation and various fuel needs.

Russia has an estimated 38 billion tons of natural gas and announced plans to spend US$28 billion to link the Krasnoyarsk, Irkutsk, Yakutsk and Sakhalin gas fields into a unified gas supply system that can facilitate exports.

Statistically speaking, natural resource exports are bad news for good governance and economic development.  This is because resource-dependent governments never need to develop the policies and institutions necessary to promote sustained entrepreneurship in the private economy from which they can extract tax revenue. Since non-democratic countries are supposed to love natural resource exports because they essentially translate into free hard currency, I am surprised the DPRK could not set politics aside and cash in on this deal.

Also, what does this say about Russia’s relationship with the DPRK?

Read the full story here:
S Korean plan to import Russian natural gas via N Korea on hold


Capitalism spreads among DPRK laborers in Vladivostok

Monday, September 28th, 2009

From Voice of America (excerpts):

In Russia’s largest port city on the Pacific Ocean, Vladivostok, several small-framed Asian men are bustling around a half-built apartment building, trying to move large metal beams. They are North Koreans sent out by their government to earn much-needed foreign currency for the country.

Kim Dong Gil came from North Korea’s second largest city of Hamhung. He brags that North Korean workers have the best skills in the Russian construction market, which is also filled with laborers from Central Asia and Vietnam.

The estimated 5,000 North Koreans in Vladivostok come from various backgrounds and even include doctors.

“I didn’t have any construction skills since I used to be with the military,” said Kim Soon Nam, who served in the army back home. “I learned from scratch when I arrived here. I got trained by a really young person who used to curse and swear at me all the time.”

Despite the stress of living and working in a foreign country, the North Koreans have come to appreciate the culture of capitalism.

“Back home I couldn’t make money even if I wanted to. But here if I work hard, I can make a dozen times more,” explained Han Jong Rok.

Choi Jong-kun, an assistant professor of political science at Yonsei University in Seoul, says money is just one reason to leave home. The other is improving one’s status among North Korea’s political elite.

“If they bring in more money, then they would sort of have sort of upward mobility in their social class,” explained Choi Jong-kun.

North Korea does not reveal significant economic data, but exporting workers is considered a key source of hard foreign currency.

A report by the Korea Institute for International Economic Policy in Seoul estimated in 2007 that Pyongyang earns at least $40 million to $60 million a year from labor exports. Outside of Russia, the institute has tracked North Korean workers in Kuwait, the United Arab Emirates, Qatar, Bangladesh, China and Mongolia.

In Vladivostok, every North Korean worker is required to pay the Pyongyang government around $800 each month.

Kim Soon Nam says he works extra hours to make sure he has money for himself.

“If we want to save some money, we have to work Sundays and holidays, too,” he said. “We must earn a lot of money no matter what. North Koreans have to work from 8 am to 10 pm.”

The North Koreans in Vladivostok usually get a five-year visa, but many get extensions to earn more money. They sleep in dormitories and live to work, spending much of their time outside the construction sites doing extra jobs in local Russian homes.

Kim Chul Woong, a welder, says he is willing to sacrifice time from his family back in Pyongyang to give his son opportunities few North Koreans enjoy, like a computer.

“The video footage on the computer can enhance children’s intellectual development, but I don’t have the kind of money,” he said. “When I go back home after working in Russia I’ll have a good amount of money. I can buy expensive stuff for my son. If he wants to do music I can buy him a violin or a guitar.”

He says he is taking advantage of the work while he can get it. Kim Chul Woong says the construction jobs are dwindling in Russia because of the economic crisis. There is also greater competition from newly arriving Central Asians who are as hungry for dollars as he is.

Read the full story here:
N. Korean Workers Earn Dollars for Construction Work in Russia
Voice of America
Young Ran-jeon


North Korea looks to southern China to attract tourists

Sunday, September 27th, 2009

By Michael Rank

North Korea is spreading its net wider in its quest to attract more tourists from China, and now has its eye on the southern province of Guangdong as well as Shanghai.

A Chinese website (link here) reports that a delegation of North Korean travel agents is expected to travel to Guangzhou next month and that local tour operators in Guangzhou and nearby Shenzhen, on the Hong Kong border, are eager to do business.

Tourists will have a choice of two routes to North Korea – they can either fly to Shenyang or Dalian in northeast China and then take the train to Pyongyang via Dandong, or they can fly to Pyongyang via Shenyang. It puts the price at 5,000 yuan ($730) but doesn’t say how many days the tours last or any further details. It says the main attractions will be the usual ones of Pyongyang, the DMZ at Panmunjom, the Myohyang mountains and the annual Arirang pageant.

As NKEW reported in July, North Korea is also targeting Shanghai as a source of tourism revenue, and there is further talk of charter flights from Qingdao in Shandong province to Pyongyang.

Quite apart from the question of how many Chinese are likely to be tempted to visit a Cultural Revolution-type theme park like North Korea, there are also bureaucratic hurdles to overcome. North Korea does not have “approved destination status” for Chinese tourists, which means in theory at least that travel there is restricted to business groups and official delegations. (Incidentally, South Korea doesn’t seem to be an ADS country either).

As the website notes, “An important issue within ADS is to avoid possible illegal immigration through tourism channels. All tourism groups travelling within the ADS framework are supposed to be monitored by both Chinese and foreign authorities to ensure they return to China. Embassies and consulates apply different methods to monitor the return of the Chinese tourists. Whenever a tourism group member does not return to China, the local travel agency is held responsible and sanctions are applied.” Not that there is much likelihood of Chinese tourists defecting to North Korea.

Furthermore, China is encouraging tourists to counter the world recession by spending their money at home, and although this is China-DPRK year marking the 60th anniversary of diplomatic relations, a further obstacle is the fact that Chinese citizens now need a passport to travel there, not just a border pass that was all that was needed previously to cross into the country at Dandong by train.

Nick Bonner of Koryo Tours says: “We have noticed a sharp drop in Chinese tourists visiting DPRK in comparison to this time last year – even though the spectacle of the 100,000 strong performance of the mass games is still going on and has been extended to October 15th.

“I think next year Chinese tourism will be coming back strong – there is a certain ‘busman’s holiday’ attraction for Chinese tourists to visit DPRK.”


Family Reunion update

Sunday, September 27th, 2009

UPDATE: As usual, Lankov hits the nail on the head:

The reunions are emotional, as the relatives are quite elderly and may never see each other again. Observers say many South Koreans feel sympathetic for the divided families and calls for greater cooperation with North Korea tend to increase when reunions are held.

North Korea analyst Andrei Lankov at Seoul’s Kookmin University says that is exactly what Pyongyang wants.

“It is obviously in hope to mobilize some pro-North Korean support to increase pressure over the [South Korean] government on the assumption that the government will be more willing to give more concessions to the North Koreans,” Lankov said.

…Analyst Andrei Lankov says he expects the South to offer some sort of concession.

“Dealing with North Korea is largely about giving them money and concessions,” Lankov said. “We are dealing with a very brutal government, which is ready to create trouble for everybody, so it is important to give something that will at least partially go to the people, not the government.” (Voice of America)

ORIGINAL POST: The DPRK-ROK family reunion footage always makes me sad and angry. Anyhow, Evan Ramstad has some interesting information:

Since their start in 2000, 16 in-person reunions have been held at Mount Kumgang or other places, involving about 1,680 families. There have also been seven videoconference reunion events, involving about 280 families. In all, 19,960 people from the two Koreas have met through the reunions.

In the newest reunions, relatives will be with each other for roughly six to seven hours under conditions largely dictated by North Korea, which tightly controls the movement of its citizens and the information they receive. The relatives will meet for just two hours out of view of North Korean minders, South Korean officials said.

North Korean participants in the reunions receive several days of guidance about what they should and shouldn’t talk about. The South Koreans, for their part, are briefly advised not to talk about the North’s authoritarian government.

North Korea stopped participating after the October 2007 reunion because it was upset at the behavior of new leadership in the South and pressure to give up nuclear weapons.

North Korea agreed last month to restart the reunions after its leader Kim Jong Il in July met Hyun Jeong-eun, the chairwoman of Hyundai Group, whose Hyundai Asan unit manages the resort and has played an important role in establishing commercial relations between the two Koreas.

The BBC has more, including video.

Read the full story below:
In Koreas, Reunions Set to Begin
Wall Street Journal, A16
Evan Ramstad


British pilot burried in DPRK

Sunday, September 27th, 2009

UPDATE:  Michael posts much more, including pictures, here.  Despite locating the ri and seeing pictures of the grave I have been unable to find it on Google Earth.  Let me know if you have better luck.

ORIGINAL POST: Michael Rank uncovered an interesting story about a British pilot shot down during the Korean War who is now buried near Pyongyang’s Sunan Airport. According to the article:

There can be no lonelier grave anywhere on Earth. Amid fields close to the North Korean capital, Pyongyang, lie the remains of Flight Lieutenant Desmond Hinton, a British fighter pilot who flew for the United States Air Force as a member of United Nations forces in the Korean War.

Hinton is officially listed as missing in action (MIA), but his brother David, himself a retired Royal Air Force pilot, traced records of how and where Desmond died and managed to visit his grave in highly secretive North Korea.

David discovered in RAF archives a graphic report of how his brother died on January 2, 1952.

F/Lt [Flight Lieutenant] DFW Hinton had been ordered to undertake an interdiction and reconnaissance mission in the area of Sunan-Pyongyang with three other aircraft from his unit … After making a bomb run on railroad tracks just north of Sunan, he called the other members of his flight saying he was hit and on fire.

The aircraft was then seen to crash into the ground and explode on impact. The remaining three aircraft flew over the wreckage of F/Lt Hinton’s aircraft for 15 minutes, but returned to their home base after seeing no evidence that F/Lt Hinton was alive. Sadly, F/Lt Hinton is still reported as missing.

From this account, David had a good idea of where his brother had gone down in his F84e Thunderjet, over the Sunan area of Pyongyang which is now the location of the city’s airport.

He managed to buy a US military map of North Korea, and contacted the Foreign Office in London in the hope that the recently opened British Embassy in Pyongyang would be willing to ask the North Koreans if they could provide any further evidence concerning his brother’s fate. The British ambassador David Slinn and his colleague Jim Warren were only too happy to help, and found the North Koreans surprisingly cooperative.

It turned out that despite the North Korean government’s reputation of being deeply xenophobic, the remains of Desmond Hinton, who was fighting for the hated “Yankee imperialists”, had been given a decent burial close to where his body fell to ground.

David was therefore determined to pay his respects to his brother at his grave and in 2004 embarked on a remarkable journey to North Korea, taking the train from Beijing to Pyongyang.

The grave consists simply of a mound of earth surrounded by a white picket fence, without any inscription. It lies close to a narrow footpath on a hillside 200 meters from the road, near the village of Kuso-ri and 2.5 kilometers east of Pyongyang airport.

David was told that not long before his visit, his brother’s remains had been moved about 50 meters to a more accessible location.

He was introduced at the grave to two witnesses to Desmond’s crash, a Mr Ri and Mr Han, local villagers who were only 13-years old at the time but appeared to have perfect recollections of the event. “They told how the aircraft passed directly over their houses at very low level and they were at the crashed aircraft within minutes,” David said.

He asked his hosts if they could dig up a piece of Desmond’s clothing, and was deeply moved when he was presented with part of his flying suit.

He would have loved to have been given Desmond’s identity disc too, but was told this had been taken by Chinese troops who were fighting with the North Koreans against the US and other forces.

David gave a short speech at the grave, thanking Colonel Kwak and the ambassador for making his visit possible, while the head of the village promised to tend the grave and paint the fence regularly.

As a former RAF officer, David was also anxious to fix the position of the grave. “I went to the memorial to the Great Leader Kim Il-sung near the village in sight of the grave and took a compass bearing. The grave bears 160 degrees, 500 meters from the obelisk,” he noted in his diary.

Read the full story in the Asia Times:
Finally, laid to rest in Pyongyang
Asia Times
Michael Rank


Friday Fun: DPRK-3D, BBC photos, and Jenkins unplugged

Friday, September 25th, 2009

Several prominent buildings have been modeled in 3D for viewing in Google Earth.  Check them out here:

1. Mansu Hill
2. Moument to Party Founding
3. Monument to 3 Charters for National Reunification
4. Tower of the Juche Idea
5. May Day Stadium
6. You can also access a 3D model of the Ryugyong Hotel through Google Earth.

BBC photos
The BBC published some interesting photos of life in the DPRK.  See them here.

Jenkins Unplugged
An intrepid traveler ventured to Sado to speak with Jenkins. A couple of interesting new data points come out.


Golden Jubilee of FTB Celebrated

Thursday, September 24th, 2009

(KCNA) Pyongyang, September 24 (KCNA) — The 50th anniversary of the founding of the Foreign Trade Bank was significantly celebrated in the DPRK.

Established in Juche 48 (1959), the bank has conducted settlement with other countries and financial transactions in a uniform manner as required by the nation’s developing external economic relations.

The bank has boosted its business relations and satisfactorily ensured settlement with banks of various countries, laying a groundwork for developing the nation’s external economic relations including foreign trade.

The bank has further boosted its business capability and improved international confidence as required by the times when the country’s international prestige and economic potential are rising remarkably and made a brisk way into international financial markets, steadily expanding the business relations with various other banks of the world on the principle of independence, equality and mutual benefit.
A meeting celebrating the golden jubilee of the FTB was held in Pyongyang Thursday.

Present there on invitation were delegations and delegates of various countries participating in the celebrations of the golden jubilee of the bank, staff members of embassies of foreign countries here and foreign guests staying in the DPRK.

O Kwang Chol, president of the bank, delivered a report at the meeting.

Additionally: Previous posts featuring the Foreign Trade Bank here.


New Evidence on Inter-Korean Relations, 1971-1972

Thursday, September 24th, 2009

North Korea International Documentation Project (NKIDP)
September 23, 2009

NKIDP is pleased to announce the publication of NKIDP Document Reader #3, New Evidence on Inter-Korean Relations, 1971-1972.

This latest addition to the NKIDP Document Reader series features newly available South Korean, Romanian, East German, and Bulgarian documents on the North-South dialogue which marked the first significant thaw between the rival regimes on the Korean Peninsula.

New Evidence on Inter-Korean Relations, 1971-1972 , like all NKIDP publications, is available for download free of charge from the NKIDP website.

Yonhap reports on this publication here.


North Korea names new head of public finance

Thursday, September 24th, 2009

Institute for Far Eastern Studies (IFES)
NK Brief No. 09-24-1

North Korea’s Supreme People’s Assembly Standing Committee has removed Kim Whan-su from his position as head of public finance, naming Pak Su-kil as the new financial chief and giving him the title Deputy Prime Minister. This news was carried by (North) Korea Central Broadcasting on September 18.

This brings the number of North Korean deputy prime ministers to five, and the inclusion of the prime minister of public finance is meant to further strengthen public finance capacity. This is but one more indication of the importance North Korean authorities have placed on economic reform policies and the establishment of a Strong and Prosperous Nation by 2012. The other four deputy prime ministers are Kwak Bum-ki, Pak Myung-sun, Rho Du-chul, and Oh Su-yong.

This latest reshuffle was ordered through a Standing Committee ordinance. With the approval of the cabinet prime minister and at times when the SPA is not in session, the Standing Committee has the power to appoint cabinet members, department heads, committee chairs and deputy prime ministers.

The head of public finance is responsible for the national budget, but the national budget is limited to the ‘people’s economy’, and does not include the ‘second economy’ run for and by the military. It is the military budget that actually makes up the majority of the nation’s financial dealings. Therefore, despite the naming of the new vice prime minister, it is expected to be difficult to see any substantial change in the implementation of the national budget.

It is not yet known what led to the removal of former financial chief Kim Whan-su. It is possible that his dismissal resulted from poor returns on the nation-wide ‘150-day Battle’, which was brought to a conclusion on September 17. The naming of the new chief and empowering him as a deputy prime minister may be an attempt to squeeze more production out the ‘100-day Battle’ which is expected to commence soon.

The reports on the appointment made no mention of Pak Su-kil’s personal situation, but it is likely that this is the same Pak that has been repeatedly appointed by the SPA as the committee chairman of the North Hamgyong Province People’s Committee. Chairman Pak is known to have risen to the provincial chair position from his former role as chairman of a county administrative economy committee.