State Offices « North Korean Economy Watch

Archive for the ‘State Offices’ Category

Pyongyang University of Science and Technology growing

Sunday, March 28th, 2010

Google has updated satellite imagery of Pyongyang so there are some interesting developments to point out. I will spread these out over the next few days, but I thought I would begin with the Pyongyang Univeristy of Science and Technology.

Here is imagery of the university’s construction in reverse chronological order:

January 28, 2009

November 12, 2006

October 30, 2005

August 6, 2005

April 7, 2005

May 11, 2001

If you open all the images in the same browser you can view them as overlays.

Here is the university’s Wikipedia page.

Here is a video on Youtube.

Here are previous posts about PUST.

Posted in Education, Pyongyang University of Science and Technology | Comments Closed

Behind the ecenes in North Korea’s markets

Saturday, March 27th, 2010

According to the Daily NK:

In recent days there has been a sudden decrease in both food prices and the North Korean won-dollar exchange rate, so people are looking at the activities of middlemen wholesalers, the lynchpin of the North Korean market economy, in more detail.

These wholesalers, who had been watching the market situation and waiting for the new currency to stabilize, are now making their move. The markets reopened in February, and restrictions on foreign-currency use have been eased. Rice prices, which had skyrocketed to more than 1,300 won per kilogram in late February, have reportedly fallen back below 600 won as the food which these wholesalers were hoarding entered circulation.

Meanwhile, the North Korean authorities’ plan, to take back control of the economy, came to nothing as they faced a hyperinflationary spiral. Currently, the economy seems to have simply returned to the pre-redenomination period, with markets providing most of the needs of the people, and wholesalers providing products for the market.

Until the early 1990’s, commercial distribution in North Korea was managed by executive fiat. The Ministry of Commerce of the Cabinet commanded the supply chain across the whole country via the works of the National Planning Commission. There was a central wholesale center, a commercial management center and a district wholesale center in each province, and a commerce management center in each district. The state maintained a pyramid control system beneath which each district managed its own commercial spaces.

According to size, these were classified into stores and booths, and into “general” and “special” according to the items sold.

However, after the famine of the 1990’s, state distribution ceased and North Korea’s national commercial network lost its capacity to function. From then on, North Korean people started obtaining their food and basic necessities through private distribution networks, and the jangmadang was spontaneously born.

This private distribution network soon came to include a small quantity of consumer products, so called “August 3 products,” produced in small industrial enterprises and circulated in the jangmadang, and foreign, mostly Chinese, products imported with the profits of trade.

Then, after the July 1st Economic Management Reform Measure of 2002, provincial factories that produced consumer goods started bartering between themselves. During this process, the distribution system expanded and the number and scale of the wholesalers expanded with it.

A cornucopia of items, from welding rods to belts, cotton yarn to copper wire, bearings and the nuts and bolts needed in factories and enterprises were traded through these wholesalers. A paper mill which needed 10kg of welding rods, for instance, could barter 20 notebooks for them. In order to exchange soap for 10kg of welding rods, 10 bars of soap were required. In the case of soju, a traditional liquor in both Koreas, two or three liters was needed.

Provincial factories also traded their production in order to earn the necessary funds to purchase needed materials and run the factories. This was done with the approval of the state through the five percent of booths in the markets allocated to factories after the July 1st Measure. Also, it was possible because the authorities permitted the by-products of regular production to be used for handicraft production, and factory workers to sell 30 percent of production in the market.

Under the changes, the wholesalers were classified into larger ones, called “vehicle traders,” smaller ones called “runners,” and retailers representing booth merchants. They shouldered the burden of providing North Koreans all over the country with their basic necessities.

These middle men wholesalers, known colloquially as “big hands,” get their stocks through trade with foreign currency-earning enterprises. They sell the products to “runners” or directly to stores. Big hands are mostly overseas Chinese, Korean Japanese and the families of those working in foreign currency-earning businesses.

Members of the Party administrative apparatus are another kind of middle wholesaler. It is impossible for them to officially run a business in the markets, so they earn money through middle wholesale after work. They make a huge amount of profit by buying products from factory enterprises at the state price and selling them at the market price. They also sell products accumulated through bribery.

“Runners” who obtain products from the wholesalers travel the different regions of North Korea and sell them to booth retailers. Making a profit through market price differences between regions, they sell those products to retailers at a price 30 percent to 40 percent higher than the price they paid.

One defector, who ran a “runner” business between Chongjin in North Hamkyung and Sinuiju in North Pyongan, bought fabric from traders in Chongjin and sold it in Pyongsung in South Pyongan. With the money earned in Pyongsung, he bought products and sold them in Sinuiju. He went along this same Sinuiju-Pyungsung-Chungjin route back and forth. He was like an 18th century Korean peddler.

Talking of his experiences, he said, “When travelling by train, I could usually make a 30 to 40 percent profit. But there wasn’t much left after paying the necessary bribes.”

When he bought fabric in Chongjin, he paid about 500 to 550 won (in old currency) per meter. When he sold that fabric to retailers in Pyongsung market, they paid him about 800 won per meter. He made about 300 won per meter, but he spent half the money on bribes paid to gatekeepers; for documents, to army troops in charge of trains, and to train inspectors during the process of issuing travel certificates or riding the train. He also had to pay for his board and lodgings, so the final profit he made was less than 100 won per meter, he explained.

Runners like that, going between North Pyongan and North Hamkyung, usually distribute things like fabric for shoes that traders bring across the border or in through Rasun. A runner usually carries between 150 and 200 kilograms of products. When travelling on the train, one person can only carry one or two backpacks-full, because anyone carrying too much baggage will be the target of inspection and have to pay bigger bribes.

Products transported by runners are sold to retailers in the markets. Retailers sell those products at a price 20 to 30 percent higher than the original price. Therefore, the fabric Kim conveyed was sold to the final consumers at approximately 1,000 won per meter.

It seems that the figures North Korean authorities wanted to eradicate via the redenomination were these middle wholesalers, the big hands. For primary producers, paying them with adequate rations and money alone could have wrestled back state control. Retailers, meanwhile, could be controlled by locking up the markets. However, the persistent viability and energy of the middle wholesalers was uncontrollable. This is primarily because low and middle-ranking authorities are working in total collusion with them.

Now, middle wholesalers who survived the carpet bombing of the North Korean authorities, such as the 100:1 currency exchange rate, the exchange limit of 100,000 won and the restriction on usage of foreign currency, are getting ready again. The second round between the North Korean authorities and middle wholesalers with the market as its stage is about to begin. It will be interesting to see how those middle wholesalers who have grown strong will react to the actions of the North Korean authorities.

Wholesalers at Forefront of Market Battle
Daily NK
Yoo Gwan Hee
3/27/2010

Posted in 2002 Economic reforms, Banking, Cabinet, Finance, Fiscal & monetary policy, General markets (FMR: Farmers Market), Ministry of Commerce, Public Distribiution System (PDS) | Comments Closed

Foreign exchange and smuggling again prevalnet in North Korea

Friday, March 26th, 2010

Institute for Far Eastern Studies (IFES)
NK Brief No. 10-03-22-1
3/22/2010

Foreign currency swaps and illegal trade are again prevalent in North Korea, despite recent currency reforms and bans on money exchanges.

Following last November’s currency reform, there has been a significant crackdown on the use of foreign currency and cross-border trade by individuals. However, reports indicate that North Korean traders continue to conduct business with outside entities, despite new regulations requiring them to remit profits through the Korean ‘Kwangson’ Bank. There has been a crack-down on unauthorized transactions, but it appears to have been ineffective.

The Korean Central Bank and Chinese People’s Bank established the Kwangson Bank in 2004 in Dandung as part of the North’s efforts to earn foreign capital. Even today, North Korean authorities rely on the Kwangson Bank to handle trade accounts, but most North Korean traders despise using the bank, and conduct most of their transactions privately, avoiding authorities. This is because the bank has a reputation for seizing the profits of private traders. The official decision to funnel foreign funds through the Kwangson Bank was part of the effort to crack down on smuggling, and was in conjunction with other currency reform efforts.

Economic reform attempts included crackdowns on illegal activity for a short time, but black market currency trade and smuggling has again become commonplace. Reform efforts were aimed at reducing unregulated and illegal trade by requiring transactions to be carried out through a government bank, but the costs associated with such a transaction further encouraged black market activity.

It also appears that currency exchange, banned as part of last year’s currency reform, is now again being allowed in order to ease rising prices and other detrimental side effects of the measures.

In North Korea, not only traders, but also average citizens are earning foreign capital through smuggling and other means. The latest reversal of policy to again allow currency exchange is seen as an attempt by authorities to sooth rising discontent within the masses.

In November of last year, North Korea implemented currency reforms and issued new notes, devaluing the currency by 100:1 and banning private holdings of foreign currency. This led North Koreans to lose faith in the value of their currency and sparked a drive on foreign monies. Now, the government appears to be implementing measures to underscore the value of the Won and to stave off inflation. Foreign visitors are allowed to again spend foreign currency and it appears that other restrictions are slowly being lifted.

Posted in Banking, Black markets, Central Bank, Finance, Fiscal & monetary policy, Foreign Trade Bank, General markets (FMR: Farmers Market), Korea Kwangson Banking Corp. | Comments Closed

Old Guard Returns to the Economic Fold

Wednesday, March 24th, 2010

According to the Daily NK:

Yun Gi Jeong, the 82-year old former Finance Director of the old Administration Council (now known as the Cabinet), has apparently been charged with resolving the crisis in the chaotic people’s economy.

Her elevation may represent an attempt to steady the ship following the disastrous currency redenomination and rumored execution of former economic boss Park Nam Ki.

The chair of a people’s unit in a neighborhood of Shinuiju told The Daily NK on Tuesday, “Prices have been fluctuating since the redenomination, but now a notice has been handed down from the Cabinet saying that they will be stabilized by April 1. It says the Cabinet will deal with this confusion in the people’s economy.”

He said that Yun Gi Jeong, who resigned her office in the Administration Council some years ago, had been brought back to the Cabinet to bring order to the chaos.

“Upon her return to the Cabinet,” the source added, “the rice price started dropping. It was over 1,500 won early March, but has now settled at around the 600 won level.”

According to his explanation, the North’s authorities intend to try and cap rising prices by April 1. The authorities released official price ceilings on February 4th; rice was 240 won and corn 130 won per kilogram, but these rapidly proved unrealistic.

Another source from North Hamkyung Province told the Daily NK yesterday, “When the rumor that they would restart distribution as normal came out, rice prices dropped drastically. As the news of Yun Gi Jeong came out, rice prices and exchange rates also went down. However, people still feel frustration at the fluctuating exchange rate.”

Yun Gi Jeong was born in Seoul in 1928 and served as the Finance Director of the Administration Council for almost 20 years from April, 1980. After her resignation in 1999 she became the President of the National Economic Institute, and is now an honorary professor at Kim Il Sung University, a member of the Party Central Committee and a delegate to the 12th Supreme People’s Assembly.

One defector who was a high official in North Korea explained to The Daily NK today, “Yun Gi Jeong is a person who Kim Il Sung was in favor of. After he died, she stepped back from the economic field.”

He added, “She tends to stick to her principles and is known to be a workaholic. Kim Jong Il presumably asked her to solve the economic problems because she is an old hand in the economic field.”

Read the full article here:
Old Guard Returns to the Economic Fold
Daily NK
Jung Kwon Ho
3/24/2010

Posted in Banking, Cabinet, Finance, Fiscal & monetary policy, Price liberalization | Comments Closed

North Korean logger detained in Russian east

Friday, March 19th, 2010

According to the Associated Press (via Los Angeles Times):

The North Korean’s note, scrawled in pen, was simple: “I want to go to South Korea. Why? To find freedom. Freedom of religion, freedom of life.”

The ex-logger, on the run from North Korean authorities, handed the note over to a South Korean missionary in the Russian city of Vladivostok last week in hopes it would lead to political asylum.

Just before he was to meet Thursday with the International Organization for Migrants, a team of men grabbed him, slapped handcuffs on him and drove off, rights activists in Moscow said Friday. He was spirited away to the eastern port city of Nakhokda, where he is sure to be handed back over to North Korean officials and repatriated to his communist homeland, activists said in Seoul.

Police in Vladivostok refused to comment. A senior South Korean diplomat in Vladivostok said he had no information. Officials from the U.S. consulate in Vladivostok could not be reached for comment.

The 51-year-old would be the third North Korean logger in Russia in a week to make a bid for asylum. On March 9, two other North Koreans who had fled their jobs as loggers managed to get into the South Korean consulate in Vladivostok.

Russia’s RIA Novosti news agency reported last week that two North Koreans climbed a fence, ran past the guards and entered the consulate, saying they wanted political asylum. ITAR-Tass carried a similar report.

The incidents focused attention on the precarious existence of tens of thousands of North Koreans sent by the impoverished regime to work in neighboring Russia.

Russian government figures from 2007 put the number of North Korean laborers at 32,600, most of them working in logging in the remote east.

The Rev. Peter Chung, a Seoul-based activist, said there are about 40,000 North Korean loggers in Russia, but that some 10,000 of them have fled their work sites. Some are finding work as day laborers while others are in hiding as they try to map out how to win asylum in foreign diplomatic missions.

The North Korean described the conditions as unbearable. His government took half his meager wages, while the North Korean company operating the logging camp took 35 percent. He kept just 15 percent — about $60 a month — an arrangement that rendered him “virtually a slave,” he told activists.

He eventually fled the logging camp, taking odd jobs to survive. He also became a Christian, Chung and Kim Hi-tae said, which could draw severe punishment, even execution, back home.

The successful asylum bid of two other former North Korean loggers inspired Kim to make a similar attempt, Chung said.

Previous posts on the North Korean loggers in Russia can be found here. More here. And here. And here.

Read the full story below:
3rd North Korean logger attempts to defect in Russia, propelled by dream of ‘freedom of life’
Associated Press (via Los Angeles Times)
Kim Kwang Tae
3/19/2010

Posted in Association No.2, Emigration, Emigration statistics, Forestry, International trade, Lumber, Ministry of Forestry, Russia, Statistics, Uncategorized | 1 Comment »

DPRK threatens to seize Hyundai assets at Kumgang

Thursday, March 18th, 2010

According to Yonhap:

North Korea has informed South Korea of its plan to look into all of the real estate owned by South Koreans inside the scenic mountain resort along its east coast, the South’s government confirmed Thursday, as Pyongyang apparently grows impatient with Seoul’s refusal to allow its citizens to travel there.

In a recently faxed message to the South Korean government, the North’s Asia-Pacific Peace Committee, a state agency in charge of cross-border exchanges, said, “South Korean figures who possess real estate in the Mount Kumgang district should come to Mount Kumgang by March 25,” according to the Unification Ministry, which deals with inter-Korean affairs.

The North went on to say, “All assets of those who do not meet the deadline will be confiscated and they won’t be able to visit Mount Kumgang again.”

An inter-Korean tourism program to the mountain, once a cash cow for the impoverished North, has been suspended since the summer of 2008, when a female South Korean tourist was shot dead by a North Korean soldier while traveling there. A luxury hotel, a golf course, and other facilities built by the South Korean conglomerate Hyundai there have since remained idle. A similar joint tour business to the ancient city of Kaesong, just north of the two Koreas’ border, has been also halted.

North Korea, feeling the pinch of U.N. sanctions imposed for its missile and nuclear tests, has called for the South to immediately resume the tours.

In its statement issued March 4, the North Korean committee said, “We would open the door to the tour of the Kaesong area from March and that of Mount Kumgang from April.”

It said it may revoke all accords and contracts on the business unless the South stops blocking the resumption of the joint ventures.

South Korea has urged the North to first fully guarantee the safety of South Korean tourists. Related working-level talks between the two sides last month failed to yield a deal due to differences over details on a security guarantee.

The Unification Ministry expressed regret over the North’s latest threat.

“North Korea’s measure violates agreements between South and North Korean authorities, as well as between their tourism business operators,” the ministry said in a press release. “It also goes against international practice.”

It stressed the North should abide by accords with the South, and all pending issues should be resolved through dialogue.

“As the tours to Mount Kumgang and Kaesong are issues directly related with our people’s safety, there is no change in the government’s existing position that it will resume them only after the matters are settled,” it added.

Meanwhile, the head of the South Korean operator of the tours offered to resign to take responsibility for snowballing losses from the suspended businesses.

Cho Gun-shik, president of Hyundai Asan Corp., expressed his intent to step down in a statement emailed to all staff earlier Thursday, company officials said.

The Choson Ilbo has more:

In the message, North Korea said, “From March 25, North Korean authorities and experts will conduct a survey of all South Korean assets in the presence of South Korean officials concerned,” including Hyundai Asan staffers, who have assets in the area. “All South Koreans with real estate in the Mt. Kumgang area must report to the mountain by March 25,” it added.

According to the ministry, Hyundai Asan signed a lease with the North for a plot of land in Mt. Kumgang until 2052. South Korean firms have invested a total of W359.2 billion (US$1=W1,134), including W226.3 billion from Asan, in a hotel, a hot spring spa, a golf course, and a sushi restaurant there. The South Korean government owns a meeting hall for separated families opened in 2008 that cost more than W60 billion to build.

Nonetheless the threat is likely to fall on deaf ears. A South Korean security official said, “The North apparently wants South Korean firms that are in danger of losing their assets in the North to put pressure on the government, but the government won’t back down.”

A South Korean businessman operating in the Mt. Kumgang region said, “The North is threatening to seize our firms’ real estate there while talking about attracting large amounts of foreign investment. What South Korean or foreign business will make new investments in the North under these circumstances?”

Read the full stories here:
N. Korea threatens to seize S. Korean assets at Mount Kumgang
Yonhap
3/18/2010

N.Korea Ramps Up Threats Over Mt. Kumgang Tours
Choson Ilbo
3/19/2010

Posted in Asia-Pacific Peace Committee, Finance, Foreign direct investment, Mt. Kumgang Tourist Special Zone, Special Economic Zones (Established before 2013), Tourism | 1 Comment »

DPRK seeks hike in embassy rent

Sunday, March 14th, 2010

According to the Joong Ang Daily:

North Korea has unilaterally raised rental fees for offices of foreign embassies and international agencies by 20 percent this year, at the same time that it tightens its grip on communications at the establishments, sources said.

A source privy to North Korean affairs said last week that the North Korean Foreign Ministry sent notices to the foreign offices last October and the increase took effect at the beginning of this year. The source also said commodity prices in markets specifically set up for foreigners have soared.

“Following the currency reform last November, the North may have wanted to earn some foreign currency by raising the rents and commodity prices,” the source said. “As far as I know, diplomats and their families are angry that the North has violated diplomatic protocols.”

Pyongyang has diplomatic offices for 25 nations, plus the office for World Food Program among other the United Nations agencies. Most rent out space in buildings owned by North Korea.

Pyongyang-based diplomats have also been asked to celebrate North Korean holidays by purchasing flowers or writing congratulatory messages.

“On Kim Jong-il’s 68th birthday last month, the North asked the diplomats to buy wreaths, made up of ‘the Kim Jong-il flowers,’ and write messages praying for Kim’s health under the ambassador’s name,” one source explained. The source did not know if the diplomats complied.

North Korea is also cracking down on the flow of information within foreign missions and agencies. The North rejected a request by a UN agency to use the Internet to send documents to UN headquarters. When diplomats make international phone calls, North Korean interpreters are there to listen in on the conversation, sources said.

“The North may want to block any details on Kim Jong-il’s health, disruption after the currency reform or other domestic affairs from reaching the outside world,” a South Korean government official said.

One Western diplomat, asking for anonymity, recently complained to a South Korean government official that diplomats in Pyongyang can’t talk to each other freely for fear of others listening in, and that they only vent their frustration when they’re out of North Korea.

In addition to making money from the foreign embassies in Pyongyang, the DPRK earns revenue from its embassies abroad. See here, here, here, here, here, and here.

Most Pyongyang embassies (aside from Russia and China) are located in Munsudong (satellite image here). Recent photos of Pyongyang’s diplomatic quater here.

This is a fascinating topic. What are the rental rates now? How are they determined? If anyone has an idea, please let me know.

Read the stories below:
Diplomats in North face price hike
Joong Ang Daily
Lee Young-jong
3/15/2010

Posted in Finance, Fiscal & monetary policy, International trade, Ministry of foreign Affairs, Political economy | 2 Comments »

DPRK State Development Bank holds first meeting

Wednesday, March 10th, 2010

According to the AFP:

Sanctions-hit North Korea on Wednesday formally launched a development bank aimed at attracting foreign funds to revive its economy, state media reported.

Directors of the State Development Bank held their first meeting to elect officers and decide on a management structure and annual budget, the Korean Central News Agency said.

The bank, set up on the orders of leader Kim Jong-Il, will have “advanced banking rules and system for transactions with international monetary organisations and commercial banks,” the agency said.

It would invest in major projects and act as a commercial bank.

The bank is the latest move by the North to revive its ailing economy and rebuild crumbling infrastructure. In January it upgraded the status of Rason, a free trade zone near the border with China and Russia, to boost foreign trade.

…

Analysts have said the decision to found the development bank shows leader Kim is confident the six-party talks will eventually produce a settlement.

The board is made up of members of the National Defence Commission (NDC), the nation’s top ruling body; the Korea Asia-Pacific Peace Committee, a state agency in charge of exchanges with South Korea; the finance ministry; the Korea Taepung International Investment Group and two independent directors.

NDC representative Jon Il-Chun was elected director-general and Pak Chol-Su, described as a Korean resident in China, as his deputy.

Previous State Development Bank posts here.

The KCNA story is here.

North Korean leadership Watch has more, including a picture of Jon Il-chun.

Read the full story here:
N.Korea launches bank to woo foreign capital
AFP
3/17/2010

Posted in Asia-Pacific Peace Committee, Banking, Finance, Fiscal & monetary policy, Korea Taepung International Investment Group (Daepung Investment Group), National Defense Commission, State Development Bank | Comments Closed

North Korea: It’s the Economy, Stupid

Thursday, March 4th, 2010

Nautilus Institute Policy Forum Online 10-015A
Aiden Foster-Carter
3/4/2010

Too many Kim Yong-ils

Korean names can set traps for the unwary. Amid a multitude of Kims, almost all unrelated, North Korea adds an extra twist. German speakers, and some others, tend to mispronounce the J in Kim Jong-il as a Y. Not only is this incorrect, but currently it can confuse; for North Korea’s Premier – head of the civilian Cabinet, as distinct from the Dear Leader who chairs the more powerful National Defence Commission (NDC) – is named Kim Yong-il.

To add to the confusion, another Kim Yong-il was until recently vice foreign minister (one of several), but in January became director of the ruling Workers’ Party of Korea (WPK)’s international department: a post apparently vacant since 2007. As such, this Kim Yong-il met his Chinese counterpart Wang Jiarui, head of the Chinese Communist Party (CCP)’s international liaison department, when Wang visited Pyongyang in early February. Since his promotion, Kim Yong-il 2 (as it may be best to call him) has been reported as frequently at Kim Jong-il’s side. This suggests he may see far more of the Dear Leader than does anyone else involved in DPRK foreign policy, including the man hitherto thought to be the eminence grise on that front: first vice foreign minister Kang Sok-ju, who negotiated the 1994 Agreed Framework with the US. It was Kang whom the current US special envoy on North Korea, Stephen Bosworth, demanded to meet when he visited Pyongyang in December, rather than the North’s main nuclear negotiator Kim Kye-gwan: a more junior deputy foreign minister.

Or is Washington behind the curve? That Kim Yong-il 2 is the DPRK’s new foreign affairs head honcho seemed confirmed on February 23, when he turned up in Beijing and went right to the top: going straight into talks with President Hu Jintao and separately with Wang Jiarui. This flurry of activity suggests two possibilities. Either Kim Jong-il will soon visit China, as he is overdue to do; or North Korea may return to the nuclear Six Party Talks (6PT), which have not met in over a year. Or perhaps both, if we are especially fortunate.

If both Kim Yong-ils are now leading players, perhaps one of them could change his name? That is not a frivolous suggestion. Some DPRK officials do this, for no clear reason. Often the change is small, so this is not a case of deception. Thus Paek Nam-sun, DPRK foreign minister – meaning chief meeter and greeter rather than top negotiator – from 1998 until his death in 2007, was originally Paek Nam-jun. Ri Jong-hyok, who as vice-chairman of the Asia-Pacific Peace Committee (APPC) now handles relations with the South, was Ri Dong-hyok in the 1980s when this writer knew him as head of North Korea’s mission in Paris.

(For completeness, yet another Kim Yong-il was Kim Jong-il’s late half-brother. He died of liver cirrhosis in 2000 aged only 45 in Berlin, where he had a diplomatic posting tantamount to exile – as his elder brother Kim Pyong-il, the DPRK ambassador to Poland, still does.)

Jong and Yong both say sorry

The past month saw both Chairman and Premier Kim doing something almost unheard of in Pyongyang. Apparently they both said sorry, although some reports got the two muddled up.

On February 1 Rodong Sinmun, daily paper of the ruling Workers’ Party of Korea (WPK), reported Kim Jong-il as lamenting his failure to fulfil his late father Kim Il-sung’s pledge, to which he had also alluded shortly before on January 9, that all North Koreans would eat rice and meat soup (everyday fare for even the poorest South Korean, be it noted). This time Kim said: “What I should do now is feed the world’s greatest people with rice and let them eat their fill of bread and noodles. Let us all honour the oath we made before the Leader and help our people feed themselves without having to know broken rice [an inferior version]”.

Given Kim Jong-il’s own notoriety as gourmet and gourmand, his professed “compassion” for his less fortunate subjects’ deprivation may induce queasiness. Yet even this not-quite-apology glosses over the truth. Broken rice? They should be so lucky. As readers of Barbara Demick’s excellent and heartbreaking new book Nothing to Envy will know, rice of any kind – whole or broken – is a rare luxury for most North Koreans. In the late 1990s a million or so starved to death; even today most remain malnourished. One refugee who fled to China saw her first rice in years in the first house she came to – in a dog’s bowl. That is the true reality.

Worse, all this was and is avoidable: the result of stupid and vicious policies, not the natural disasters that the regime blames. The real cause was the government’s failure to adapt in the 1990s after Moscow abruptly pulled the plug on aid. This hurt other ex-Soviet client states too. Cuba went for tourism; Vietnam tried cautious reform; Mongolia sold minerals. North Korea, bizarrely, did nothing – except watch its old system break down and growth plunge.

In a speech at Kim Il-sung University in December 1996, when famine was seriously biting, Kim Jong-il lashed out at the WPK and uttered this petulant but very revealing whinge:

In this complex situation, I cannot solve all the problems while I have the duty of being in charge of practical economic projects as well as the overall economy, since I have to control important sectors such as the military and the party as well. If I concentrated only on the economy there would be irrecoverable damage to the revolution. The great leader told me when he was alive never to be involved in economic projects, just concentrate on the military and the party and leave economics to party functionaries. If I do delve into economics then I cannot run the party and the military effectively.

Evidently Bill Clinton’s famously apt watchword, which helped him win the presidency in 1992, had not breached North Korea’s thick walls and heads. It’s the economy, stupid! The paternal advice was dead wrong. (The full speech can be read on the much-missed Kimsoft website. Unsurprisingly it is not part of the DPRK’s official canon of the dear leader’s works, but the scholarly consensus is that it is genuine. A slightly different version appears here.)

Redenomination disaster

Mass starvation, you might hope, would prompt some soul-searching and fresh thinking. From mid-2002 North Korea did essay cautious market reforms, but recently it has tried to squash Pandora back in her box. The latest such crass effort, a currency redenomination that deliberately wiped out most people’s meagre savings, was discussed in December’s Update.

By all accounts this has backfired badly, sparking runaway inflation (which it was supposed to stanch) and even riots. Forced on the defensive, the regime has issued an unprecedented apology. This being North Korea, it has not done so publicly; there are limits. Nor, in 2010 as in 1996, is Kim Jong-il about to take the rap, despite some newswires confusing J with Y.

But reliable intelligence claims that on February 5 Premier Kim Yong-il called all leaders of neigbourhood groups (inminban) to Pyongyang. The lowest unit in the DPRK’s still tight system of socio-political control, each comprises 20-40 households. This suggests that over 10,000 people heard the premier say what no leader had ever said to them before: sorry. In his words: “I offer a sincere apology about the currency reform, as we pushed ahead with it without sufficient preparation and it caused a great pain to the people… We will do our best to stabilize people’s lives.” The audience’s reaction is not recorded.

The situation on the ground remains confused, but markets appear to be functioning again unhindered. Good Friends, a seemingly well-informed South Korean Buddhist NGO, said on February 18 that after examining a report on food shortages and conditions nationwide by the Office of Economic Policy Review, the WPK Central Committee issued an ‘Order for Absolutely No Regulation Regarding Foodstuffs’. All markets are to reopen as they were before recent government crackdowns, and under no circumstances must local authorities try to regulate food sales – “until central distribution is running smoothly.” There may be a sting in that tail, but for now this is a complete, humiliating government U-turn and climbdown.

This is an astonishing episode, which history may record as pivotal. If the leadership learns its lesson and finally accepts that the market economy is as ineluctable as gravity, then the DPRK might conceivably survive on a reconstituted economic base and social contract, like today’s China or Vietnam. But if Kim Jong-il (or whoever) keeps trying to square the circle, under the delusion that correct politics is a substitute for sound economics, there is no hope.

Sea shells

Relations with South Korea remain an odd blend of sabre-rattling and dialogue. Four times in the past month, starting on January 25 and most recently on February 19, the North has declared a series of no-sail zones for varied time periods. Some of these adjoin two ROK-held islands close to the Northern coast, Baengnyong and Daechong. For three days (January 27-29) the Korean People’s Army (KPA) fired volleys of artillery shells near the Northern Limit Line (NLL): the de facto western sea border since 1953, which the North rejects.

Though no shells actually crossed the NLL, on the first day the South called this provocative and fired back – but again only within its own waters south of the line. By late February, a Southern defence spokesman called the latest shelling “a routine situation that is part of the North’s winter military exercise”, adding that this may go on till the end of March. Routine or not, a report submitted to the ROK National Assembly’s Defence Committee on February 19 said Pyongyang has reinforced its military along the west coast of the peninsula and has strengthened military drills.

Kaesong and Kumgang remain unsettled

The shelling did not stop the Koreas talking about their two joint venture zones just north of the Demilitarised Zone (DMZ). But they got nowhere, beiing far apart on the agenda, format and venue for talks. On the Kaesong Industrial Complex (KIC) – see last month’s Update for more details – the North suggested that the South’s issues – it wants smoother cross-border passage – were best left to military-level talks, which in the past have handled issues relating to the border and security. The South agreed, proposing February 23 at the border village of Panmunjom: the venue for all military meetings hitherto. The North then counter-proposed March 2, at Kaesong; but on February 22 the South said it will insist on Panmunjom, rather than set the precedent of holding a military meeting inside North Korea. With both venue and agenda still in dispute, the chances of progress on the substantive issues looks remote.

Mount Kumgang tours remain suspended

Separately, South Korea with some misgivings accepted the North’s request for talks on resuming tours to the Mount Kumgang resort, suspended since a Southern tourist was shot dead there in July 2008. At the talks held in Kaesong on February 8, North Korea asked for tours to restart from April 1. It breezily declared that the South’s three conditions – a probe into the shooting, efforts to ensure no repetition, and a cast-iron safety guarantee – had been met. But as the North well knows, the South’s key demand is to send in its own investigating team – which the North resolutely refuses. The Northern side proposed continuing the talks on February 12, but the South declined unless the North accepts their three conditions first.

More arms are interdicted

UN sanctions imposed last June after North Korea’s second nuclear test seem to be biting. In February South Africa told the Security Council that in November it inspected a ship headed for the Congo Republic (Congo-Brazzaville). The French owners reported suspicions about cargo they took on in Malaysia from a Chinese vessel. Seizing the containers, South Africa found that what the manifest called “spare parts of bulldozer” were in fact tank components. The shipping agent, and likely origin, is North Korean. China said it will investigate its own vessel’s role in the affair. UN resolution 1874 bans almost all DPRK weapons exports.

More ambiguously, on February 11 Thailand dropped charges against the crew of a plane seized in December and found to contain 35 tonnes of weapons from North Korea, including five crates of Manpads (man-portable air defence systems) which terrorists can use to shoot down aircraft. Next day all five were put on a flight to Almaty. Four are Kazakhs, and their government had asked that they be sent home to be tried. It will be dismaying if they are not.

Posted in 2002 Economic reforms, Arms shipment, Cabinet, Fiscal & monetary policy, Food, General markets (FMR: Farmers Market), Illicit activities, International Department (KWP), Kaesong Industrial Complex (KIC), Military, Mt. Kumgang Tourist Special Zone, Special Economic Zones (Established before 2013), Worker's Party | Comments Closed

DPRK government delivering rice to high risk areas

Tuesday, February 23rd, 2010

Daily NK
Jung Kwon Ho
2/22/2010

In late January, Kim Jong Il held a meeting of his highest officials, including Jang Sung Taek, Director of the Ministry of Administration of the Party, aiming to find ways to alleviate the negative side effects of November’s currency redenomination. In the meeting, the group apparently agreed to release emergency supplies of rice to those on the brink of starvation.

According to a Daily NK source, “Following the meeting, which he chaired, Kim Jong Il handed down a handwritten decree to the chief secretaries of all provinces on January 20 in which it was stated, ‘Preventing anyone from starving to death is your obligation.’”

Chief Secretaries of Provincial Committees of the Party, the recipients of the decree, handed on the threat to their subordinates, warning provincial cadres, “You will resign if anyone starves to death, because this was a direct instruction from the General.”

In the decree, the three most vulnerable provinces were named as Yangkang, South Hamkyung, and Kangwon Provinces, so the officials governing those provinces are understandably nervous. They are the provinces where most casualties occurred during the March of Tribulation, and they remain the most food insecure.

Under the decree, the Ministry of Procurement and Food Policy makes daily deliveries of 5kg of relief rice to each people’s unit and 5-15kg to each factory and enterprise. Chairpersons of people’s units and managers of factories are required to observe the circumstances of the people under their control and provide those in the greatest danger of starvation with relief rice first.

In late January, quite a number of households were reportedly facing starvation due to the aftermath of the currency redenomination; notably sky high prices coupled to strict market regulations. However, there have been no reports of starvation since relief rice deliveries began on February 1.

Alongside the chairpersons of People’s Units, cadres working for local government offices are required to cross-check whether or not starvation is occurring. In theory, they are reprimanded if they do not report the situation truthfully.

Upon hearing the news, a defector in Seoul commented, “It seems that the people will not lie still and suffer that dire situation. Kim Jong Il may have done this because he senses a crisis situation this time.”

Posted in Agriculture, Agriculture statistics, Banking, Finance, Fiscal & monetary policy, Food, Ministry of Administration, Ministry of Procurement and Food Policy, Political economy | Comments Closed

North Korean Economy Watch