North Korean Economy Watch

In the article below, Dr. Lankov makes a compelling argument that the North Korean government is now attempting to to re-stalinize the economy because the system cannot survive liberal economic reforms.

Altough the trend seems depressing, optimists should take note that Pyongyang’s efforts to reassert control over the economy parallel a decline in belief in the official ideology.  With a deterioration of this ideology, people’s acquiescence to the DPRK’s political leaders declines, and power dynamics are all that hold the system together.  Efforts to control the general population are increasingly seen by the people as self-interested behavior on the part of their leaders, calling their legitimacy into question.

Additionally, efforts to reassert control over the economy are bound to fail because the system has already collapsed, their capital has been stripped, and there are insufficient funds to rescue the system.

In other words, efforts to re-stalinize the economy are bound to fail from both an economic and ideological perspective.

North Korea dragged back to the past
Asia Times
Andrei Lankov
1/24/2008

When people talk about North Korea these days, they tend to focus on the never-ending saga of the six-party talks and the country’s supposed de-nuclearization. Domestic changes in the North, often ignored or overlooked, should attract more attention.

These changes are considerable and should not encourage those optimists who spent years predicting that given favorable circumstances the North Korean regime would mend its ways and follow the beneficial development line of China and Vietnam. Alas, the recent trend is clear: the North Korean regime is maintaining its counter-offensive against market forces.

Merely five years ago things looked differently. The decade that followed Kim Il-sung’s death in 1994 was the time of unprecedented social disruption and economic disaster culminating in the Great Famine of 1996-99, with its 1 million dead. The old Stalinist economy of steel mills and coal mines collapsed once the Soviets discontinued the aid that alone kept it afloat in earlier decades.

All meaningful economic activity moved to the booming private markets. The food rationing system, once unique in its thoroughness and ubiquity, collapsed, and populace survived through market activities as well as the “second”, or non-official, economy. The explosive growth of official corruption meant that many old restrictions, including a ban on unauthorized domestic travel, were not enforced any more. Border control collapsed and a few hundred thousand refugees fled to China. In other words, the old Stalinist system imploded, and a new grassroots capitalism took over.

The regime, however, did not approve the changes – obviously on assumption that these trends would eventually undermine the government’s control. Authorities staged occasional crackdowns on market activities, though those crackdowns seldom had any lasting impact: people had to survive somehow, and officials were only too willing to ignore the deviations if they were paid sufficient bribes.

By 2002 it seemed as if the government itself decided to bow to the pressure. In July that year, the Industrial Management Improvement Measures (never called “reforms”, since the word has always been a term of abuse in Pyongyang’s official vocabulary) decriminalized much market activity and introduced some changes in the industrial management system – very moderate and somewhat akin to the half-hearted Soviet “reforms” of the 1960s and 1970s.

The 2002 measures were widely hailed overseas as a sign of welcome changes: many Pyongyang sympathizers, especially from among the South Korean Left, still believe that only pressure from the “US imperialists” prevents Kim Jong-il and his entourage from embracing Chinese-style reforms. In fact, the 2002 measures were not that revolutionary: with few exceptions, the government simply gave belated approval to activities that had been going on for years and which the regime could not eradicate (even though it had tried a number of times). Nonetheless, this was clearly a sign of government’s willingness to accept what it could not redo.

However, around 2004 observers began to notice signs of policy reversal: the regime began to crack down on the new, dangerously liberal, activities of its subjects. By 2005, it became clear: the government wanted to turn the clock back, restoring the system that existed before the collapse of the 1990s. In other words, Kim Jong-il’s government spent the recent three of four years attempting to re-Stalinize the country.

This policy might be ruinous economically, but politically it makes perfect sense. It seems that North Korean leaders believe that their system cannot survive major liberalization. They might be correct in their pessimism. The country faces a choice that is unknown to China or Vietnam, two model nations of the post-Communist reform. It is the existence of South Korea that creates the major difference.

Unlike China or Vietnam, North Korea borders a rich and free country that speaks the same language and shares the same culture. The people of China and Vietnam, though well aware of the West’s affluence, do not see it as directly relevant to their problems: the United States and Japan surely are rich, but they are also foreign so their experiences are not directly relevant. But for the North Koreans, the comparison with South Korea hurts. Even according conservative estimates, per capita gross national income in the South is 17 times the level it is in the North; to put things in comparison, just before the Germany’s unification, per capita GNI in West Germany was roughly double that in East Germany.

Were North Korea to reform, the disparities with South Korea would become only starker to its population. This might produce a grave political crisis, so the North Korean government seemingly believes that in order to stay in control it should avoid any tampering with the system. Maintaining the information blockade is of special importance, since access to the overseas information might easily show the North Koreans both the backwardness of their country and the ineptitude of their government.

At the same time, from around 2002 the amount of foreign aid began to increase. The South Korean government, following the so-called Sunshine policy, began to provide generous and essentially unmonitored aid to Pyongyang. China did this as well. Both countries cited humanitarian concerns, even though it seems that the major driving force was the desire to avoid a dramatic and perhaps violent collapse of the North Korean state.

Whatever the reasons, North Korea’s leaders came to assume that their neighbors’ aid would save the country from the worst of famine. They also assumed that this aid, being delivered more or less unconditionally, could be quietly diverted for distribution among the politically valuable parts of the population – such as the military or the police, and this would further increase regime’s internal security.

So, backward movement began. In October 2005, Pyongyang stated that the Public Distribution System would be fully re-started, and it outlawed the sale of grain on the market (the ban has not been thoroughly enforced, thanks to endemic police corruption). Soon afterwards, came regulations prohibited males from trading at markets: the activities should be left only to the women or handicapped. The message was clear: able-bodied people should now go back to where they belong, to the factories of the old-style Stalinist economy.

There have been crackdowns on mobiles phones, and the border control was stepped up. There have been efforts to re-enforce the old prohibition of unauthorized travel. In short, using newly available resources, North Korea’s leaders do not rush to reform themselves, but rather try to turn clock back, restoring the social structure of the 1980s.

The recent changes indicate that this policy continues. From December only sufficiently old ladies are allowed to trade: in order to sell goods at the market a woman has to be at least 50 years old. This means that young and middle-aged women are pushed back to the government factories. Unlike earlier ban on commercial activity on men, this might have grave social consequences: since the revival of the markets in the mid-1990s, women constituted the vast number of vendors, and in most cases it was their earnings that made a family’s survival possible while men still chose to attend the idle factories and other official workplaces.

Other measures aim at reducing opportunities for market trade. In December, the amount of grain that can be moved by an individual was limited to ten kilograms. To facilitate control, some markets were ordered to close all but one gate and make sure that fences are high enough to prevent scaling.

Vendors do what they can to counter these measures. One trick is to use a sufficiently old woman as a figurehead for a family business. The real work is done by a younger woman, usually daughter or daughter-in-law of the nominal vendor, but in case of a police check the actual vendor can always argue that she is merely helping her old mother. Another trick is to trade outside the marketplace, on the streets. This uncontrolled trade often attracts police crackdowns, so vendors avoid times when they can be seen by officials going to their offices.

This autumn in Pyongyang there was an attempt, the first of this kind in years, to prescribe maximum prices of items sold in markets. Large price tables were displayed, and vendors were forbidden to sell goods (largely fish) at an “excessive price”. It was also reported that new regulations limit to 15 the number of items to be sold at one stall.

The government does not forget about other kinds of commercial activities. In recent years, private inns, eateries, and even bus companies began to appear in large numbers. In many cases these companies are thinly disguised as “government enterprises” or, more frequently, as “joint ventures” (many North Korean entrepreneurs have relatives in China and can easily persuade them to pose as investors and sign necessary papers).

Recently a number of such businesses were closed down by police. People were told that the roots of evil capitalism had to be destroyed, so every North Korean can enjoy a happy life working at a proper factory for the common good.

Yet even as the government pushes people back to the state sector of the economy, These new restrictions have little to do with attempts to revive production. A majority of North Korean factories have effectively died and in many cases cannot be re-started without massive investment – which is unlikely to arrive; investors are not much interested in factories where technology and equipment has sometimes remained unchanged since the 1930s.

However, in North Korea the surveillance and indoctrination system has always been centered around work units. Society used to operate on the assumption that every adult Korean male (and most females as well) had a “proper” job with some state-run facility. So, people are now sent back not so much to the production lines than to indoctrination sessions and the watchful eyes of police informers, and away from subversive rumors and dangerous temptations of the marketplace.

At the same time, border security has been stepped up. This has led to a dramatic decline in numbers of North Korean refugees crossing to China (from some 200,000 in 2000 to merely 30,000-40,000 at present). The authorities have said they will treat the border-crossers with greater severity, reviving the harsh approach that was quietly abandoned around 1996. In the 1970s and 1980s under Kim Il-sung, any North Korean trying to cross to China or who was extradited by the Chinese police would be sent to prison for few years.

More recently, the majority of caught border-crossers spent only few weeks in detention. The government says such leniency will soon end. Obviously, this combination of threats, improved surveillance and tighter border control has been effective.

The government is also trying to restore its control of information. Police recently raided and closed a number of video shops and karaoke clubs. Authorities are worried that these outlets can be used to propagate foreign (especially South Korean) pop culture. Selling, copying and watching South Korean video tapes or DVDs remain a serious crime, even though such “subversive materials” still can be obtained easily.

It is clear that North Korean leaders, seeking to resume control that slipped from them in the 1990s and early 2000s, are not concerned if the new measures damage the economy or people’s living standards when set against the threat to their own political domination and perhaps even their own physical survival.

Manifold obstacles nevertheless stand in the way of a revival of North Korean Stalinism.

First, large investment is needed to restart the economy and also – an important if underestimated factor – a sufficient number of true believers ready to make a sacrifice for the ideal. When the North Korean regime was developed in the 1940s and 1950s it had Soviet grants, an economic base left from the days of Japanese investment and a number of devoted zealots. The regime now has none of these. Foreign aid is barely enough to feed the population, and the country’s bureaucrats are extremely cynical about the official ideology.

Second, North Korea society is much changed. Common people have learned that they can survive without relying on rations and giveaways from the government. It will be a gross oversimplification to believe that all North Koreans prefer the relative freedoms of recent years to the grotesquely regimented but stable and predictable existence of the bygone era, but it seems that socially active people do feel that way and do not want to go back. Endemic corruption also constitutes a major obstacle: officials will be willing to ignore all regulations if they see a chance to enrich themselves.

It is telling that government could not carry out its 2005 promise to fully restart the public distribution (rationing) system. Now full rations are given only to residents of major cities while others receive reduced rations that are below the survival level. A related attempt to ban trade in grain at markets also failed: both popular pressure and police inclination to take bribes undermined the policy, so that grain is still traded openly at markets.

Even so, whether the government will succeed in re-Stalinizing society, its true intent remains the revival of the old system. North Korean leaders do not want reforms, assuming that these reforms will undermine their power. They are probably correct in this assumption.

Back story: It looks like Suzanne Clark’s efforts are finally paying off…

Yonhap
1/29/2008

North Korea’s national symphony orchestra will perform in Britain as part of its planned concert tour to Europe in early September, a U.S. radio station reported Friday.

The North’s 120-member State Symphony Orchestra will hold three concerts in London and Middlesbrough Sept. 2 to 14, Radio Free Asia said, quoting a British businessman who arranged the tour.

Joong Ang Daily
1/29/2008

A Canadian citizen detained for more than two months in North Korea has been released, the Canadian Embassy in Seoul said yesterday.

Kim Je-Yell was deported to China on Saturday and was met at the border by Canadian consular officials, said Shauna Hemingway, head of public affairs at the embassy.

“Canadian officials are facilitating his reunion with his family,” she said, without saying where he is now.

“We are grateful to North Korean authorities for providing us with consular access to Mr. Kim.”

She declined to give further details, saying Kim’s family had asked for privacy.

Kim, a Korean-born Canadian in his 50s, appeared to have fallen afoul of the state due to his religious connections, according to media reports.

He was detained in the remote northeast part of the country on Nov. 3, the Toronto Star reported last week.

The news had not been announced earlier pending diplomatic efforts to have him freed, the newspaper said. The Star cited the humanitarian group he worked for, Christian Aid, as saying Kim was held on charges related to “national security.”

Kim had been bringing in dental supplies and setting up clinics in northeastern North Korea for nearly a decade with official approval, the report said.

A Voice of America radio report said Kim had written in a statement during interrogation that he had criticized the North Korean regime and tried to establish a church in the North.

Canada’s ambassador to South Korea, Ted Lipman, visited Pyongyang last week in an apparent effort to secure his release.

The North’s constitution provides for freedom of religious belief. “However, in practice the government severely restricts religious freedom, including organized religious activity, except that which is supervised tightly by officially recognized groups linked to the government,” the U.S. State Department said in its 2007 report on religious freedom.

“Genuine religious freedom does not exist.”

Joong Ang Daily
1/29/2008

While dragging its feet again on its pledge to denuclearize, North Korea is expanding its cultural outreach to the West.

The move is drawing a mixed response from North Korea watchers. Some hail it as a prelude to a long-awaited opening of the isolated nation, recalling China’s “ping-pong diplomacy” that served as a catalyst for a thaw in its relations with the United States in the 1970s.

Others, however, caution against expecting too much, citing the communist nation’s track record of using arts for propaganda.

Regardless, Pyongyang looks set to provide a rare chance for Europeans to see its elite orchestra perform.

The North’s State Symphony Orchestra is scheduled to hold performances in London and Middlesbrough in September in what would be its largest-ever shows abroad, according to Radio Free Asia. The concerts will be telecast live, added the U.S.-government funded station.

The orchestra is said to have been nurtured by the North’s all-powerful leader Kim Jong-il, reportedly a big fan of film, music and other arts.

In the North’s latest cultural diplomatic activity, five North Korean movies were screened over the weekend in San Diego, California during the first inter-Korean film festival organized by a university in the United States. North Korean authorities selected the films. Pyongyang’s No. 2 two diplomat in the North’s United Nations mission, Kim Myong-gil, attended the event after receiving U.S. government approval. Members of North Korea’s UN mission are required to stay within a small radius of New York and need Washington’s approval for trips outside the city.

The film festival came two weeks after a North Korean movie, titled “Schoolgirl’s Diary,” was screened in Paris. It marked the first-ever commercial distribution of a North Korean movie in the West.

One of the most awaited shows in coming weeks is a concert by the New York Philharmonic in Pyongyang. During the performance, the orchestra will perform the U.S. and North Korean national anthems as well as classical music. The historic concert, backed by the U.S. State Department, will be broadcast live via satellite on Feb. 26.

“This journey is a manifestation of the power of music to unite people,” said Zarin Mehta, the orchestra’s executive director, reiterating remarks he made last month.

Assistant Secretary of State Christopher Hill, Washington’s point man on Pyongyang, said earlier the performance bodes well for their bilateral relationship.

“We haven’t even had ping-pong diplomacy with these people,” he said. “It would signal that North Korea is beginning to come out of its shell, which everyone understands is a long-term process. It does represent a shift in how they view us.”

Hill expressed hope that the cultural exchange will help resolve the North Korean nuclear crisis.

Many experts here agree cultural diplomacy can be an effective way of dealing with the North. They view the North’s move as reflecting its cultural pride and determination to break its isolation. “It also appears to be aimed at diluting the North’s negative image as a repressive nation and silencing criticism from hard-line U.S. officials,” said Yang Moo-jin, a professor at the University of North Korean Studies in Seoul.

But skepticism lingers with the nuclear crisis still unresolved.

“Even if the orchestra plays music from heaven, it will have nothing to do with most North Koreans outside of the venue,” said Joo Sung-ha, who defected from North Korea in 2001 and now works as a journalist in Seoul. “We need to think about for whom such one-time shows should continue.”

Daily NK
Yang Jung A
1/25/2008
 
A job in a factory at the Kaesong Industrial Complex is fast becoming the ideal job for North Korean citizens, and positive feelings toward the South are continuing to grow.

Good Friends reported on the 23rd that most North Koreans are aware that economic cooperation at Kaesong is thriving as South Korean enterprises supply advanced materials and management, and North Korea supplies labor.

“South Korean advisory managers supervise workers. If workers do not come to work on time in the morning or they do not work diligently, the managers simply say, ‘You don’t need to come here tomorrow’” reported one North Korean citizen through Good Friends.

The citizen added, “Workers try to complete their appointed tasks under all conditions, while monitoring the South Korean supervisors’ attitudes.”

As the Kaesong Complex grows, the internal customs procedures into Kaesong become more complicated.

Good Friends reported, “Kaesong was originally a strictly controlled zone because of its location just north of the 38th parallel. If a North Korean wanted to visit Kaesong, they had to register, undergo an investigation and get a pass. Now, If they try to go to Kaesong, the process is much more complicated.”

A cadre working at the Kaesong Complex said that this is because people have growing positive feelings toward South Korea. The authorities worry about the great gap between the North and the South and worry about growing public disillusionment.”

He added, “The only place people can talk about South Korea is at Kaesong. They have a yearning for South Korea, especially after they’ve encountered South Korean products.” 

Daily NK
Lee Sung Jin
1/22/2008

The citizens of Hoiryeong are worried about ongoing evacuation training they must undergo as part of a joint winter military drill with the army that began on January 17, said a source.

The winter military drill used to be held in December each year but this year it was delayed.

“People feel uneasy because of the sudden beginning of the drill and the strict regulations on the jangmadang in the cold winter,” one source reported on the 21st.

At 3 am on January 17th, in Hoiryeong, North Hamkyung Province, the North Korean army announced an emergency summons, modified the Worker and Peasant Red Guards, Local Reserve Forces and Youth Red Guard, declared a state of national preparation for war and started inspection of emergency supplies. The Local Reserve Forces rushed to occupy strategic positions and the Worker and Peasant Red Guard started a scouting drill.

During the winter military drill, ordinary citizens must leave their residential districts, taking one day’s worth of food with them, and live in an encampment for Local Reserve Forces around 8-12 km away from their homes.

The average temperature in Hoiryeong drops to around minus 10 degree Celsius in January. As defectors in Seoul testified, it is terribly hard to put up with the lack of heat at the encampments.

This drill is limited only to Hoiryeong. The source said: “It is actually a type of civil defense training. It was ordered by the People’s Safety Agency, but the army participated as well.”

This year’s drill was more intense than previous year’s. Vehicles without camouflage netting were prohibited from the streets and all citizens were forced to wear camouflage while outdoors.

The source said the drill was so similar to actual warfare that Local Reserve Forces and Worker and Peasant Red Guards wore their real rank badges.

When the drill started, factories and People’s Units in Hoiryeong began holding lectures entitled, “Let’s complete preparation for war against the American imperialists’ constant war maneuvers!”

Daily NK
Moon Sung Hwee
1/11/2008

Rodong Sinmun, the official mouthpiece of the Chosun (North Korea) Workers Party, discussed the construction of new electrical infrastructure in Samjiyeon in a feature titled, “The New Legend from the Night-less City, Samjiyeon,” on December 26.

Rodong Sinmun praised Samjiyeon’s current condition, saying that “It is literally a night-less city where countless lights from houses and streetlights along the beltway shine like stars.”

The newspaper implied that providing electricity to hotels and other lodging for visitors was the reason for setting up the electrical infrastructure, noting that “Visitors who have completed long distance marches would want to take a rest, sing songs, and play accordions in the heated rooms of lodgings by the lake of Samjiyeon.”

The newspaper revealed, “The electricity produced by the Samsoo Power Plant, which was completed in May 2007, is now flowing to Samjiyeon.”

It added, “The June 18 Shock Brigade and workers form the Ministry of Electric Power pursued the lofty goals of the great General to expand the electrical infrastructure of the Mt. Baekdu region. They provided materials and equipment for the construction of power-transmission wires and towers and built them.”

To accomplish the goal of the North Korean authorities, in there words: “to improve the hometown of the General to meet global standards” – the Propaganda and Agitation Department organized the “Shock Brigade for the Propagation of the Party Ideology” (June 18 Shock Brigade) and made the brigade tear down houses and start reconstructing the city.

Although North Korean authorities said that they redeveloped the Samjiyeon district for the purpose of restoring Kim Jong Il’s hometown, a rumor is spreading among cadres that this reconstruction project was actually carried out in preparation for the commencement of Mt. Baekdu tours for South Koreans, according to inside sources.

In 1998, when the North and Hyundai Asan started Mt. Geumgang’s tour business, they agreed that Hyundai would offer 942 million dollars to the North in return for the right to use the tour site and to run the tour business for 30 years. Similar preparations to the ones being made in Samyijeon were completed prior to the opening of the Geumgang site.

It appears that North Korea has been carrying out construction work in Samjiyeon since 2001. Experts point out that reconstruction of the houses in the area was inevitable because these sites would soon be revealed to South Korean tourists.

North Korean authorities stressed that the newly-built houses are on par with international standards but residents complain of insufficient electrical supplies, according to the inside sources.

Sources said that the power situation was so dire that residents are forced to cook outdoors and bring heated stones in their houses for heating.

Daily NK
Yang Jung A
1/10/2008

It was confirmed that the customs director of the city of Hoiryeong in North Hamkyung province was arrested last December for alleged corruption.

Multiple sources in Hoiryeong reported on the 8th that “The customs director of Hoiryeong was arrested at the end of last December on suspicion of assisting in the drug trade with China. It is known that a large sum of U.S. dollars was found in the customs director’s house.”

A source in North Korea reported through a phone call that, “The arrested customs director regulated small-scale merchants heavily and gave benefits to a couple of merchants who regularly gave bribes. Ultimately, the result was that access to commercial licenses in Hoiryeong was limited to the merchants who dominated the jangmadang.

Hoiryeong is one of the major crossing points along the North Korea-China border. Recently, cases of extortion in which the customs director demanded bribes in exchange for not confiscating goods were on the rise. Criticism had been rising.

The outcry from Korean-Chinese who regularly visit relatives in North Korea has been especially loud. Customs officers have required bribes from the Korean-Chinese who visit North Korea to deliver food, clothing, medicine, and daily necessities claiming them as customs fees. Such actions have become commonplace. (more…)

Daily NK
Yang Jung A
1/3/2008

Through its publication “North Korea is Changing” the Korea Institute for National Unification (KINU) highlighted numerous changes and reforms that have occurred in North Korea due to the 2002 “July 1st Economic Maintenance Reform Policy” (Hereon referred to as the “July 1 Policy”). This publication deals with the changes the North Korean economy is undergoing following the economic crisis of the 1990s, and expounds on the country’s prospects for future economic reform.

The following is a summary of the main points introduced in the publication.

The “Invisible Hand” at Work in North Korean Markets

Following the enactment of the July 1 Policy in 2002, agricultural markets transformed into general markets. Soon, industrial products were being sold alongside agricultural products as the free market spirit spread to the country’s distribution system.
Along with the rise of general markets, street markets, and individualized commercial activities, a new merchant class is emerging. People who are able to put to use business acumen and an understanding of market principles are able to accumulate personal wealth. This demonstrates that aspects of Western-style rationalist thinking, including the pursuit of profit-seeking are being instilled in the minds of the North Korean people.

It is difficult to say if this experiment in free market economics will be successful in the long run. More than anything, due to the rigidity of the North Korean regime, the realm in which the “Invisible Hand” can operate is greatly restricted. This is the fundamental paradox facing North Korea’s prospects for reform and opening.

“Hardworking Heroes” Become “People with Two Jobs”

As the economic difficulties became severe, work opportunities evaporated. Living off of the wages provided by the state became impossible. North Korean laborers responded to this by taking on side jobs or engaging in independent sales.

According to defectors living in South Korea, after the July 1 Policy, there has been an increase “People with Two Jobs.” These are people who are engaging in economic activities additional to their primary occupations. People are beginning to accept the notion that it is better to work for personal benefits than to receive the title of “Hardworking Hero.”

Such phenomena have also changed people’s perceptions about occupations in general. For example, the elite classes now prefer diplomatic positions and jobs where they can make international connections, rather than working in party or government positions. The common people prefer agricultural jobs with the benefits of access to the food distribution system and the ability to earn side profits by being a merchant. In addition, common people also prefer being personal drivers, photographers, workers at the Food Distribution Office, servicepersons, or fishermen.

Business Conglomerates Are Emerging in North Korea

With the implementation of the July 1 Policy, North Korea has witnesses the creation of its first business conglomerates. A case in point is the Korea Pugang Corporation, which has expanded to include 9 subsidiaries and 15 foreign offices engaging in various lines of work. The website of the “Korea Pugang Corporation” reveals that the company has around $20 million in capital and does an average of $150 million of business each year.

The executives in charge of the company’s growth are brothers Jon Sung Hun and Young Hun. President Jon Sung Hun is in his early 50s and studied abroad in Tanzania before returning home to teach English at Kim Il Sung University. He later became a businessperson. His English skills are among the top 10 in North Korea. Young Hun is in his 40s and is the president of a company affiliated with the Finance and Accounting Department of the Workers’ Party. His company dominates North Korean diesel imports.

If the Jon brothers are the representative examples of conglomerate-based new capital, Cha Chul Ma ranks high among those who earned capital due to their power in North Korean society. With his focus on doing business with China, Cha is known for his ability to earn foreign currency and dominates the foreign currency earning businesses belonging to the Standing Committee of the Supreme People’s Assembly. His personal wealth is said to be over $10 million.

As the son-in-law of Lee Jeh Gang, the First Vice Director of the Guidance Department of the Workers’ Party, Cha gets some support from his father-in-law. Cha, who is known to live so freely that he was seen wearing Bermuda shorts on the streets of Pyongyang, is said to be a “Representative Case of a North Korean who succeeded in business on his merits, regardless of assistance from surrounding figures”.

The Number One Worry is Sustenance

North Koreans are said to live three different lives: their family lives, their working or school lives, and their political lives. Their lives are organized by politics from “cradle to grave,” and they must attend various political meetings, organizations, and study sessions. However, there are many people who are unable to participate in regular meetings of their political units due to economic difficulties. As they do not receive sufficient food distributions and their wages are too low, they must seek their food independently through individual economic activities.

Because the transportation infrastructure in the country is not advanced, it takes at least half a month to one month to go into the countryside to search for food and then they must return and sell the food or daily-use items they acquired, leaving little time for any other activities. Ninety percent of North Koreans engage in some form of business, and as a result, only an estimated 30% to 60% participate in required political activities.

Marriage Culture

These days, in North Korea, the ideal spouse is the one who makes the most money. Previously, when North Korean women chose their spouses, they considered the social status of their potential suitor. However, after the economic crisis, they started to prefer businesspersons and people who earn foreign currency, instead of discharged soldiers and cadres. For men as well, they now prefer money to looks as society increasingly revolves around the economy. As a result, an overwhelmingly higher proportion of men marry older woman than before.

Marriage customs are simplifying as well. Before the economic crisis, women usually provided the domestic items for the household and men provided the estate. However, after the economic crisis, dowries have downgraded into simple things like clothes. Because the allocation of estates has been delayed, more and more people are living at their parents’ homes.

Especially for women, there have been some phenomenal changes. Many women consider marrying late or not marrying at all. Reasons for this include the fact that woman cannot marry men just because the men can’t work and needs a woman to bring home money. Even in such a patriarchal culture, such complaints are becoming increasingly common.

Institute for Far Eastern Studies (IFES)
Nk Brief No. 08-1-3-2
1/3/2008

North Korea has announced the winners of its sixth drawing for payouts of ‘People’s Life Bonds’, through which it provides ticket buyers with not only payment of principal, but also additional lottery winnings. From July to November of 2003, North Korea sold 10-year bonds worth 500, 1000, and 5000 won, and since then has held drawings once or twice per year repaying the bonds and lottery winnings as a way to pull in idle cash from the people.

(North) Korean Central TV reported that the 6th People’s Life Bond drawing had taken place and provided some numbers regarding the payments. In the latest drawing, thirteen 5000 won, eight 1000 won, and ten 500 won tickets were drawn. The television announcement explained that winners could report to the appropriate bank during the first quarter of 2008 to collect their winnings. It was also reported that during the latest fourth-quarter drawing, one first-prize, ten second-prizes, and fifteen third-prizes had been chosen, but provided no concrete details regarding the amount of the prize winnings. North Korean bonds do not pay interest to the investors, but rather, provide prize winnings greater than the amount of interest that would have been paid to winners each quarter.

The fifth round of drawings took place in January 2006 in Sariwon, North Hwanghae Province, when thirty tickets were drawn. North Korea’s savings and bond lottery system appears to be an attempt at improving financial difficulties faced due to the government’s collection of idle hard currency from each family.