Archive for October, 2015

Types of businesses expanding among North Korean cabinet-directed enterprises

Friday, October 30th, 2015

Institute for Far Eastern Studies (IFES)

Business enterprises under the direct supervision of the DPRK Cabinet appear eager to expand business operations, from mine development to the sale of gochujang (red pepper paste), in order to procure funds necessary for state-level development projects and running the government.

The North Korean cabinet-supervised Korea Taeyang Corporation* revealed on its homepage on October 18, 2015, “We are actively pushing forward joint ventures in the selling and manufacturing of molybdenum products with major companies in China, Switzerland, and Brazil.”

“The molybdenum mine located in Changjin County in South Hamgyong Province produces hundreds of tons of molybdenum concentrate every year, so we are manufacturing molybdenum steel at the molybdenum steel refinery and exporting it,” the company explained.

Their work is not restricted to mining, but extends to transportation and distribution, as well as the restaurant business. The subsidiary Korea Taeyang Transportation Co. owns twenty container wagons, thirty freight cars over 20 tons, fifty 10-ton freight cars, and fifty freight cars under 10 tons.

The Taeyang electrics store, located in Pongnam-dong of Pyongyang’s Pyongchon District, specializes in the selling and repair of electrical appliances and electronics like computers. It was also involved in the vitamin C factory built in 2013 in accordance with Kim Jong Il’s dying injunctions.

In addition, there are ostrich ranches and tourist souvenir shops, as well as restaurants that sell ostrich meat and other North Korean and Chinese cuisines in Pyongyang’s Yonpung Restaurant.

Furthermore, it also operates fertilizer and feed factories, duck ranch, pig factory, instant noodle factory, tobacco factory among others. It also has overseas offices in Beijing, Dalian, Shenyang and Africa.

The corporation expressed, “We are hopeful to make connections with buyers interested in ostrich leather, ostrich crafts, agricultural machineries, teak wood manufactured goods, and red pepper and bean pastes.

The president of Taeyang, Pak Sun Chol, is a delegate to the Supreme People’s Assembly and deputy director of Cabinet affiliated General Bureau of State Development.

On Naenara, the official web portal of the DPRK (targeted toward an international audience), the corporation expressed its intention to “meet the continuous challenges in new areas under the direct guidance of the Republic and develop into a technology-focused company that will strengthen cooperation and exchanges with companies from around the world.”

While some of the profits earned by the company are used by the Cabinet for its operating funds, most of the profits are reportedly used for state construction projects.

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DPRK announces 7th party congress

Friday, October 30th, 2015

 

ORIGINAL POST (2015-10-30): According to Xinhua:

The ruling Workers’ Party of Korea (WPK) of the Democratic People’s Republic of Korea (DPRK) announced Friday that it will hold its seventh congress in early May next year.

The gathering will be the first of its kind in 36 years. The last WPK congress took place in 1980.

In an announcement carried by the KCNA, the Political Bureau of the WPK Central Committee lauded the party’s governance, saying the party has become “the organizer and leader of all victories for the Korean people.”

The conference is to be held to reflect “the demand of the party and the developing revolution that witness epoch-making changes in accomplishing … the cause of building a thriving socialist nation,” said the statement.

The WPK Central Committee can call party conferences between its congresses.

And in a separate story published the same day:

The Seventh Congress of the ruling Workers’ Party of Korea (WPK) of the Democratic People’s Republic of Korea (DPRK) will be held in early May in 2016, the official KCNA news agency reported Friday.

The political bureau of the WPK central committee announced the decision, in which it lauded the party’s governance, saying the party has become “the organizer and leader of all victories for the Korean people,” according to the report.

The conference is to be held to reflect the demand of the party and national development that “witness epoch-making changes in accomplishing …the cause of building a thriving socialist nation,” it said.

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The (Market) Forces of History in North Korea

Friday, October 30th, 2015

By Benjamin Katzeff Silberstein

The market is a common topic for debate in history. How did it impact the rise of the anti-slavery movement in the US and the UK? What impact did economic conditions have in the French Revolution? These questions are, and should be, asked in the current debate about North Korea’s socioeconomic development as well.

But despite the hope of many, the market might not simply be a story of growing individualism and disconnect from the power of the state. While such a trend may well be at work, it could also be the other way around.

This was recently illuminated through an interesting story by Reuters. In a visit to Pyongyang, they took a look at how markets and everyday business transaction function in North Korea at the moment. As they note, it is telling that a reporter from an international news agency can make transactions in the open, with a government minder by his side, at the black market rate. Business that previously had to be done in the shadows now happens in the open:

Shoppers openly slapped down large stacks of U.S. dollars at the cashier’s counter. They received change in dollars, Chinese yuan or North Korean won – at the black market rate. The same was true elsewhere in the capital: taxi drivers offered change for fares at black market rates, as did other shops and street stalls that Reuters visited.

The most obvious conclusion is that the state is adapting itself to the bottom-up development of the market. Indeed, this is the way the story is often told. In this narrative, the government is only reacting to developments and has long lost the economic policy initiative.

But one could also see a government that is confident enough to relax the rules. It just isn’t a certain fact that the state and the market are two opposing entities.

First, connections to the state still seem to be good for those wanting to trade on the market. For example, according to the surveys conducted by Stephan Haggard and Marcus Noland that laid the foundation for Witness to Transformation (2011)party membership is still considered one of the best ways to get ahead in North Korea (or at least it was at the time when the surveys were conducted). A somewhat similar trend can be discerned in survey results presented by Byung-Yeon Kim of Seoul National University at a conference at Johns Hopkins SAIS in late September this year. Kim’s results also indicate that there is a strong positive correlation between party membership and participation in both the formal and informal economy.

Second, the government is making money off of the market. DailyNK recently reported that the fees charged by state authorities for market stalls was raised. They also noted that regulations of the markets seemed to have gotten more detailed over the years. As noted in this report published by the U.S.-Korea Institute at SAIS, the space that the government allocates to markets has consistently increased in the past few years. Not only have official markets grown, many of them have also been renovated and given better building structures.

All in all, this paints a picture of a government that controls markets while allowing them more space to function. It is not clear that formerly black market activity happening in the open means that the market is gaining ground at the expense of the state. They may well be moving together. That is good news for those hoping for stability, but bad news for those banking on a market-induced revolution. Despite the hope of many that the market will cause the demise of the regime, the role of the market force in North Korea’s history is far from clear.

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New trolley-bus route in Pyongyang

Thursday, October 29th, 2015

According to Rodong Sinmun (2015-10-29):

Trolley buses will run between Pyongyang Railway Station and Sci-Tech Complex via newly-built Mirae Scientists Street.

The traffic section covers 11.7 kilometers and its trial operation was successfully made some days ago.

From scores of years ago, trolley buses have been running in various sections of Pyongyang City, which help prevent pollution and fully ensure convenience for the citizens.

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On recent economic developments in the DPRK

Thursday, October 29th, 2015

James Pearson writes in Reuters:

When North Korea’s late “Dear Leader” Kim Jong Il opened the Pothonggang Department Store in December 2010, he called on it to play “a big role” in improving living standards in the capital Pyongyang, official media said.

Five years later, judging by the long lines inside the three-storey store that sells everything from electronic gadgets and cosmetics, to food and household goods, the Pothonggang is meeting Kim’s expectations – at least for privileged Pyongyang residents.

But the department store also starkly illustrates the extent to which the underground market has become the new normal in isolated North Korea. And that poses a dilemma to the Kim family’s hereditary dictatorship, which up until now has kept tight control of a Soviet-style command economy, largely synonymous with rationing and material deprivation. Now that the black market has become the new normal, Kim Jong Un’s government has little choice but to continue its fledgling efforts at economic reforms that reflect market realities on the ground or risk losing its grip on power, experts say.

A Reuters reporter, allowed to roam the store with a government minder for a look at the North Korean consumer in action, noted almost all the price tags were in dollars as well as won. A Sharp TV was priced at 11.26 million won or $1,340; a water pump at 2.52 million won ($300). Beef was 76,000 won ($8.60) a kilogramme. North Korean-made LED light bulbs sold for 42,000 won ($5). The exchange rate used in these prices – 8,400 won to the dollar – is 80 times higher than the official rate of 105 won to the dollar. At the official rate, the TV would cost over $100,000; the light bulb, $400.

Shoppers openly slapped down large stacks of U.S. dollars at the cashier’s counter. They received change in dollars, Chinese yuan or North Korean won – at the black market rate. The same was true elsewhere in the capital: taxi drivers offered change for fares at black market rates, as did other shops and street stalls that Reuters visited.

For the last twenty years, North Korea has been undergoing economic changes, the fruits of which are now more visible than ever in the capital, Pyongyang, where large North Korean companies now produce a diverse range of domestically made goods to cater to this growing market of consumers. People are spending money they once hid in their homes on mobile phones, electric bicycles and baby carriers.

The latest sign that the workers’ paradise is going capitalist: cash cards from commercial banks.

GREW OUT OF FAMINE

Four months before Kim opened the Pothonggang Department Store, the United States imposed sanctions on North Korea, including its imports of luxury goods, for torpedoing a South Korean ship – a conclusion Pyongyang rejected. Since then, the U.N. has imposed more sanctions on North Korea for violating restrictions on its nuclear and missile programmes.

None of that has had much effect on the vast majority of North Koreans living in the countryside, where a rudimentary market has evolved considerably over the past two decades. Agricultural mismanagement, floods and the collapse of the Soviet Union led to famine in the mid-1990s. The state rationing system crumbled, forcing millions of North Koreans to make whatever they could to sell or barter informally for survival.

The regime penalised this new class of entrepreneurs in 2009 when it redenominated the won by lopping off two zeros and setting limits on the quantity of old won that could be exchanged for the new currency. That move ended up destroying much of the private wealth earned on the market.

Demand for hard currency surged after the bungled currency reform as more and more merchants in the underground markets required transactions to be conducted in foreign currency. It triggered two years of hyperinflation.

But the government of Kim Jong Un, who became North Korea’s leader after his father’s death in December 2011, has essentially accepted the ubiquity of the black market rate and a widespread illicit economy, North Korea experts say.

“Under Kim Jong Un, not a single policy has been implemented which would somehow damage the interests and efficiency of private businesses,” said Andrei Lankov, a North Korea expert at Kookmin University in Seoul.

“It’s a good time to be rich in North Korea”.

THE NEW CONSUMER

Many of the goods inside the Pothonggang Department Store, a grey building nestled between willow trees and a river of the same name, are still beyond the reach of many North Koreans.

An air conditioning unit sells for 3.78 million won ($450 dollars) – which if paid in won would require a bag of 756 five thousand won notes, the highest denomination note in won.

A growing middle class called “donju”, meaning “masters of money”, who made cash in the unofficial economy are starting to spend it on these new products, along with the long established elite of Humvee-owning individuals with powerful political connections.

Only recently an elite item, mobile phones are now common in the capital, with nationwide subscriber numbers topping three million, an employee with Koryolink, the cellular carrier controlled by Egypt’s Orascom Telecom told Reuters.

The number has tripled since 2012 and indicates one in eight of North Korea’s 24 million people now have a mobile phone.

Energy-saving products are a fast-growing sector of North Korea’s new consumer market and were one of the hottest items in the department store.

Domestically produced LED bulbs are ubiquitous in North Korea, where satellite images have shown a country almost completely black at night. The 9-watt bulb costs $5 and is a best-seller at the Pothonggang store, said a staff member. The energy-saving bulbs are used inside homes and on street lamps that now bask the formerly darkened streets of the Pyongyang night in a dull, faint glow.

Solar panels with USB-enabled inverters and batteries are available in the store alongside water pumps and small generators – exactly the kind of systems North Koreans now use to take power into their own hands.

CASH CARDS

Baby products are another booming consumer item. A large section of the department store is devoted to strollers and baby carriers produced in China and South Korea.

Many residents of Pyongyang can be seen riding Chinese-made battery powered bicycles, which only began to appear in the capital over the last year, locals said.

Some of these transactions are done with the Narae Card, a cash card run by North Korea’s Foreign Trade Bank – a designated entity under U.S. sanctions since 2013 for the part it reportedly played in nuclear weapons procurement.

Cash cards have been in the hands of the few for the last several years but have recently become a new growth industry. Narae cards are topped up with U.S. dollars and are mainly used for foreign currency purchases. They can also be used to top up mobile phone accounts.

Foreign investors can also set up banks in North Korea and are allowed to lend money and provide credit-based financing schemes to North Korean companies, according to a bilingual book of North Korean law available to foreign investors.

Ryugyong Commercial Bank, for instance, offers shopping discounts as well as gold or silver card options for its customers. As with the Narae card, customers are encouraged to top up their accounts with dollars.

LOSING FACE?

After a $4 dollar taxi ride, the driver reluctantly handed the change from a twenty dollar note to a Reuters correspondent who insisted on getting change in North Korean won.

Foreigners are not officially permitted to use the currency, so the openness of the transaction – in the presence of a government guide – was another sign of the black market turning white in north Korea. The driver’s reluctance to hand over won was because of its inconvenience, not because he was afraid of being caught.

“It’s a lot of notes in our money,” he grumbled, counting out 130,000 won from a large crumpled bundle of discoloured 5000 won notes.

That note, still the highest denomination, once carried a smiling portrait of founding president Kim Il Sung but is being gradually phased out by a version with no portrait – an indication a larger denomination note may one day replace it to accommodate the widespread use of black market pricing.

That would also get around the embarrassing problem that the faces of American and Chinese leaders, not the Kims, adorn much of the cash used in the country now. For a regime that has cultivated a personality cult around the Kim dynasty, it is quite literally losing face on its own money.

MATTER OF TIME

Where there’s commercial enterprise, advertising is sure to follow. Sprinkled in among the roadside signs and billboards, once the exclusive domain for propaganda, are small notices that tout car repair services, electronics and trading companies

One prominent company, Naegohyang [Naekohyang/내고향] (my homeland) advertises at football games and has a women’s football team by the same name. It produces everything from clothes and sanitary pads to 7.27 brand cigarettes, a favourite of Kim Jong Un’s who can be seen smoking them on state TV. They also make ‘Achim’ cigarettes for export to Iran with printed health warnings written in Farsi.

At a speech following a military parade marking the 70th anniversary of the ruling Workers Party, Kim Jong Un promised to introduce “people-first” politics. It remains unclear, however, how committed he and his Workers Party – not to mention the powerful military – are to market-based reforms.

But it’s only a matter of time before the Kim regime formally adopts a market-based economy – as China did 35 years ago under Deng Xiaoping, said Kookmin University’s Lankov, who lived in Pyonyang in the 1980s.

“That’ll be a great day, but it’ll be relatively meaningless in one regard,” he said. “It’ll be a formal recognition of something which has happened anyway”.

Read the full story here:
North Korea’s black market becoming the new normal
James Pearson
Reuters
2015-10-29

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DPRK-China trade through 2014

Thursday, October 29th, 2015

Stephan Haggard posted some charts of DPRK-China trade taken from KOTRA:

North-Korean-China-Trade-from-KOTRA

North-Korean-Trade-including-North-South-Trade

North-Korean-Exports-and-Imports-from-KOTRA

 

 

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DPRK’s domestic sales of wind turbines

Wednesday, October 28th, 2015

According to the Pyongyang Times:

New type of wind turbines go on sale

A new type of small wind turbines made by the Aeguk Magnet Factory attract an increasing number of customers.

The new turbine with its blades spiral and conical in shape proves to be more advantageous than the three-blade propeller turbine.

Its utilization rate of wind is over two times as high as that of the three-bladed turbine, so it can be set up everywhere—both seaside and inland where the wind blows above two metres per second. And it can also be installed on top of public buildings and on the balconies of multi-storey flats.

With its blades relatively short, the turbine requires only one third of the previous area for installation and generates little noise and vibration.

All parts of the turbine are domestically made including the essential permanent magnet, and the cost is at least 75 per cent lesser despite better stability, said Kim Chol Song, manager of the factory.

Just a few months after the turbines went on sale, the products find growing demands in Haeju of South Hwanghae Province, Phyongwon of South Phyongan Province and other plain areas.

The factory has established a technical process for turbines with a capacity of 100-300W, which are widely thought to cost much less than solar panels in production.

Read the full story here:
New type of wind turbines go on sale
Pyongyang Times
2015-10-28

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South Koreans donate to DPRK

Tuesday, October 27th, 2015

According to Yonhap:

A South Korean civilian group crossed the inter-Korean border Tuesday to provide fertilizer and other assistance needed for a greenhouse project in North Korea, relevant company officials said.

Representatives from Ace Gyeongam, the foundation run by bed maker Ace, visited North Korea for the first time in six months earlier in the day to deliver items necessary for running greenhouses in Sariwon, about 70 kilometers southeast of Pyongyang, according to the officials.

“Most of the materials are greenhouse-related ones. The portion of fertilizer is small,” said an official at the Unification Ministry, which approved their visit to the North.

In April, Ace Gyeongam provided materials worth 200 million won (US$177,120), including fertilizer, vinyl and pipes that are needed to build greenhouses.

At that time, the South’s government approved a private group’s bid to send fertilizer to North Korea for the first time since it imposed sanctions on the North over a deadly warship sinking in 2010.

Seoul has vowed to encourage more civilian groups to increase humanitarian aid to the North this year in inter-Korean exchanges in non-political sectors.

South and North Korea reached a deal on Aug. 25 to defuse military tension and spur more exchanges at the non-government level.

In 2009, Ace Gyeongam set up 50 greenhouses on farms in Sariwon with an aim to increase the number to 300 units in the near future.

Read the full story here:
S. Korean civilian group gives fertilizer, other aid to N. Korea
Yonhap
2015-10-27

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NCNK on pending sanctions legislation

Tuesday, October 27th, 2015

The National Committee on North Korea (NCNA) has published a quick summary piece on sanctions legislation under deliberation in the US Congress. According to NCNK’s web page:

There are currently three related North Korea sanctions bills under consideration in Congress. H.R. 757, introduced to the House by Rep. Ed Royce in February 2015, is broadly similar to a bill that passed the House in the last session of Congress, but wasn’t acted upon by the Senate. In the Senate, S. 1747 was introduced by Senators Robert Menendez and Lindsay Graham in July of this year. Additionally, Senators Cory Gardner, Marco Rubio, and James Risch are co-sponsors of the recently-introduced bill S. 2144.

Although the three sanctions bills are generally similar in scope, there are several key differences among them, including their potential impact on humanitarian operations; the level of discretion the Executive Branch would have in applying sanctions; and language on sanctions targeting North Korea’s mineral industry.

NCNK’s new Issue Brief gives a detailed side-by-side summary of these three bills, noting key provisions and differences between the three.

You can download the Issue Brief here (PDF).

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DPRK used as Chinese smuggling route

Friday, October 23rd, 2015

According to the Siberian Times:

SWAT team ambush illegal cargo at night in open seas off coast of the Democratic People’s Republic.

The high-quality jade from the Republic of Buryatia was being exported to China without export documents. Its value was put at 50 million roubles or $800,000. Customs spokeswoman Tatiana Shichanina said: ‘We had a tip off that the smuggling was planned and decided to arrange ambush.’

The operation was led from customs vessel ‘Petr Matveev’. Officers seized ten sacks of jade. The crew were detained and taken to Vladivostok.

In China, this mineral is considered a ‘sacred rock’ and it can command a higher price than gold. The value of the ornamental rock in China encourages criminal gangs to collect and smuggle it.

Read the full story here:
Customs seize 3 tons of Siberian jade being smuggled by sea to North Korea en route to China
Siberian Times
2015-10-23

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