Archive for January, 2016

Hydrogen bomb test will give economic boost, North Korean state media says

Friday, January 8th, 2016

By Benjamin Katzeff Silberstein

Today’s Rodong Sinmun carries an article hailing the (claimed) hydrogen bomb test as a step towards turning North Korea into an economic powerhouse, UPI reports:

Pyongyang’s state-controlled newspaper Rodong Sinmun published an article Friday that exalted North Korea’s military-first policy, stating, “The first successful hydrogen bomb test forcefully demonstrated the power of self-reliant [North Korea], [now] we must boldly struggle to build an economic powerhouse and to enhance the people’s livelihoods.”

North Korea stated the regime’s nuclear power has the capacity to strike “any strong enemy” and “seize absolute control.”

“A path has opened, where we can devote all our energies into building an economic powerhouse,” Pyongyang said in statement.

Read the full article:
North Korea hails hydrogen bomb test as path to economic power
Elizabeth Shim
UPI
2016-01-08

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North Korea’s H-Bomb Test: The (Impossible) Economic Context

Thursday, January 7th, 2016

By Benjamin Katzeff Silberstein

Who decides what in Pyongyang? Do fierce political battles rage between hardliners and reformers, where the former group struggles to replace nuclear belligerence with liberal market economics and trade? Whenever a purge or suspicious death occurs in Pyongyang, speculations come alive about potential policy changes by the regime.

It is a fool’s errand to make guesses about how North Korea’s claimed (but unlikely) hydrogen bomb test fits into the speculative dichotomy of modernizers versus conservatives. After all, such simple divisions are rare in the political life of any country. But looking at the test in the context of the past year makes it clear that Pyongyang is pursuing a messy mix of policies that are mutually exclusive.

At the same time as one “hand” of the regime attempts to draw foreign investment, diversify its investor base to include other countries than China, and take its industrial zones from plans to reality, the other “hand” is actively working against economic progress by nuclear tests and diplomatic belligerence. Either the left hand doesn’t know what the right hand is doing, or it does, but just doesn’t want it to succeed.

Perhaps this is the way that Byungjin – Kim Jong-un’s strategy of parallel development of nuclear weapons and the economy – was intended to work. (If so, the regime seems to be dedicating much more resources and energy to the nuclear part, while the economic one still mostly consists of words.) In any case, Pyongyang is trying to achieve two goals at the same time, and it isn’t working.

For example, in 2013, the North Korean regime announced the creation of over ten special economic zones, with more added in both 2014 and 2015. Progress has been uneven. Still, the North Korean regime has continuously indicated that the zones are a priority and will continue to be improved. Just in November last year, new regulations were announced for the special economic zones. Visitors and analysts report that elite businesses have been doing better and better in North Korea, and that the economic environment has become increasingly freer.

Whatever the list of Pyongyang’s priorities may look like, January 6th was not a good day for those North Koreans tasked with planning, building and administering the country’s special economic zones and projects. North Korea is already an unlikely destination for most foreign investors. Many low-wage competitors already sit relatively close by the country, such as Vietnam and Cambodia. North Korea’s comparative advantages are really quite few. Things are already difficult and the claimed H-bomb test certainly won’t help.

The international sanctions are just one part of the problem. Even with knowledge of what the current sanctions regime permits investors to do, the test is a stark reminder that legal hurdles will keep being added as nuclear and missile tests continue. This should deter any investor without special connections, political motives or a financial death wish. Not to mention the terrible PR and public criticism that would follow any (at least western) company deciding to invest in North Korea.

And then, there is of course the China factor. Sure, Beijing doesn’t comply with sanctions the way it is obligated to do. Moreover, as the Choson Exchange blog points out, North Korean and Chinese businesses tend to find a way to get around the sanctions. Last but not least, to a large extent, Chinese investment and cooperation with North Korea is a regional issue, with much of it driven by the northeastern border regions that depend on trade and exchange with the country.

But this doesn’t mean that Beijing won’t ever take concrete action felt by Pyongyang. China’s worries about North Korea’s nuclear tests are arguably more warranted than those of any other country. Residents in Yanji, a Chinese city on the North Korean border, even felt tremors from the bomb test, and teachers and students were reportedly evacuated from schools near the border. A trend is only a trend until it is no more. At the very least, events like the nuclear test don’t exactly make Chinese officials more prone to want to facilitate economic cooperation and infrastructure investments for North Korea.

It’s almost painful to think of all those hours spent in the North Korean administration, drawing up plans for new economic development zones and projects, new laws for investments and other institutional changes to improve the economy, only to see their colleagues in another part of government work in the opposite direction. If (and this is a big “if”) there are indeed policy factions in the government, with modernizers and conservatives, the latter have scored a victory on January 6th, at the expense of the former.

UPDATE 2015-01-07: James Pearson and Ju-Min Park at Reuters have done a very interesting overview (with Michael Madden of NK Leadership Watch) of the people behind North Korea’s nuclear program. It’s an important illustration of the fact that interest groups are not just a thing of business, but also of politics and ideas. Read it here.

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Number of N.K. defectors halves in Kim Jong-un era

Monday, January 4th, 2016

According to Yonhap:

The number of North Korean defectors to South Korea has halved since the launch of the Kim Jong-un regime, apparently attributable to the communist nation’s tougher border control, the Unification Ministry said Monday.

A total of 1,277 North Koreans entered South Korea via China and other countries in 2015, down 52.8 percent from 2,706 recorded in 2011.

Kim took the helm of the North in late 2011 soon after the death of his father Kim Jong-il.

The number of North Korean defectors settling in the South first topped 1,000 in 2001, and it had steadily increased to 2,914 in 2009.

But it has rapidly declined to 1,502 in 2012, 1,514 in 2014, and 1,397 in 2014, according to the ministry amid North Korea’s intensified crackdown on those attempting to flee the country.

The ratio of women has soared. More than 80 percent of the North Korean defectors who came to the South in 2015 were female.

Women, especially those working at markets, seem to be less subject to surveillance than men with regular jobs. It’s also easier for women to get jobs, like housekeeping, in China and to make money needed for coming to the South.

Read the full story here:
Number of N.K. defectors halves after Kim Jong-un assumes power
Yonhap
2016-1-4

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DPRK spends quarter of GDP on military from 2002-2012:

Monday, January 4th, 2016

According to Yonhap (via Korea Herald):

North Korea spent nearly a quarter of its gross domestic product on the military on average between 2002-2012, making the communist nation the world’s No. 1 in terms of military expenditures relative to its GDP, according to U.S. data.

According to the State Department’s World Military Expenditures and Arms Transfers 2015 report, the North’s military expenditures averaged about US$4 billion a year. That accounts for 23.8 percent of the country’s average GDP of $17 billion during the period.

Oman was a distant second on the list, spending 10.9 percent of its GDP on the military, followed by the African nation of Eritrea with 8.6 percent and Saudi Arabia with 8.2 percent. South Korea ranked 48th with 2.5 percent.

In absolute terms, however, the North’s annual military spending during the period ranked only 36th in the world, while South Korea’s ranked 11th, spending an average $26 billion. The U.S. was by far the world’s No. 1 with $656 billion a year on average, way ahead of runner-up China’s $88.5 billion.

In 2012 alone, the U.S. military expenditures amounted to $724, while China’s totaled $12.6. North Korea’s 2012 military spending came to $3.85 billion, while South Korea’s expenditures totaled $31.9 billion, according to the report.

North Korea also ranked first in the number of troops relative to population, with 1.17 million troops. The number also represented the third largest after China’s 2.21 million and the United States’ 1.41 million. South Korea ranked seventh with 679,000 troops.

The U.S. was by far the biggest arms exporter in the world, selling an average $102.4 billion worth of weapons to foreign countries a year during the period. Russia came next but trailed with only $6.8 billion worth of exports.

North Korea ranked 27th on the list, with $100 million of annual arms exports. But Pyongyang’s arms exports accounted for 10.2 percent of its total exports, making the country the No. 1 in terms of the proportion of weapons to total exports. (Yonhap)

Read the full story here:
North Korea spends quarter of GDP on military from 2002-2012: U.S. data
Yonhap (via Korea Herald)
2016-1-4

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Kim Jong Un’s new year message focuses on building an economic powerhouse

Sunday, January 3rd, 2016

Institute for Far Eastern Studies (IFES)

In his 2016 New Year Speech, North Korean leader Kim Jong Un announced plans to build an economic powerhouse.

Kim frequently used expressions such as, ‘priority to self-development,’ ‘concentration of efforts,’ ‘whole Party’, and the ‘whole state’ that placed great emphasis on economic development and improvement of people’s livelihood.

Kim said “The principle of giving priority to self-development should be maintained in building a thriving socialist country [. . .] We should concentrate all our efforts on building an economic giant to bring about a fresh turn in developing the country’s economy and improving the people’s standard of living.”

Kim also stated that “In order to achieve breakthroughs for a turning point in building an economic giant the electric-power, coal-mining and metallurgical industries and the rail transport sector should advance dynamically in the vanguard of the general offensive.” Compared to the 2015 New Year speech, this can be seen as a relative increase in the emphasis placed on the industrial sector.

In particular, he emphasized resolving the power shortages, stating that “The problem of electricity should be resolved as an undertaking involving the whole Party and the whole state.” North Korea suffers from chronic power shortages, especially fuel, as well as decline in the hydroelectric power plant operations. In 2015, interrupted power supply was exacerbated by severe drought. Kim also said that “All sectors and all units should wage a vigorous campaign to economize on electricity and make effective use of it.”

In regards to improving agriculture, livestock, and fisheries sectors, he said that “The crop farming, animal husbandry and fishing sectors should make innovations to effect a radical change in improving the people’s standard of living. The agricultural sector should actively adopt superior strains and scientific farming methods, speed up the comprehensive mechanization of the rural economy and take strict measures for each farming process, so as to carry out the cereals production plan without fail. The animal husbandry and fishing sectors, which are waging an all-out struggle in response to the Party’s call, should ramp up production as soon as possible and see to it that the fish farms, vegetable greenhouses and mushroom production bases built across the country pay off. Thus they can contribute to enriching the people’s diet.”

Kim has made several onsite inspections to facilities in the light industry sector including cosmetics and shoes factories to encourage improvement in quality and domestic made goods. According to Kim, “The light industry sector should put its factories and enterprises on a highly modern footing, provide them with plenty of raw and other materials to keep their production going full steam and increase the number of world-famous products and commodities with a competitive edge.”

He stressed that “All the sectors of the national economy should set ambitious goals and maintain regular production by tapping every possible internal reserve and potentiality. They should also take it as an important policy-oriented requirement to improve product quality, ensure domestic production of equipment and rely on locally available raw and other materials, and make strenuous efforts to this end.”

He also encouraged the launch of the work to establish full-scale the ‘our style of economic management method’: “The Cabinet and other state and economic organs should decisively improve their economic planning and guidance, . . . [and] they should be proactive in organizing and launching the work of establishing on a full scale our style of economic management method which embodies the Juche idea, thus giving full play to its advantages and vitality.”

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