North Korean Economy Watch

Institute for Far Eastern Studies (IFES) 
NK Brief No. 08-6-26-1
6/26/2008

One kilogram of rice in North Korea, the price of which shot up to as much as 4,500 DPRK won last month, has reportedly fallen in price this month by up to 2000 won.

According to a North Korean source, on June 10, one kilogram of rice was selling for between 2,500 & [] 2,700 across the country, quoting prices from cities such as Horyong and Chongjin (North Hamgyong Province), Wonsan (Kangwon Province), Sinuiju (North Pyongan Province), Kangye (Changang Province), Kangso (South Pyongan Province), and Haeju (South Hwangae Province). The source explained, “as soon as rice prices skyrocketed, smuggling in the border region picked up and permission to export 100,000 tons [of grain] came from the Chinese government, and as this occurred, the import food eased a little.”

The source also said that spreading news of food aid from the United States was also an important factor in the falling grain prices.

However, the source stressed, “While the price is falling, food prices are still more than three times what they were last year, so citizens with no money have a hard time feeding themselves…in agricultural regions with no money, famine is spreading regardless of falling grain prices.”

It was also reported that on June 11, a shipment of corn arrived at Chongjin Port (North Hamgyong Province) and distribution to workers has begun, while on the 12th, polished rice, corn, and other grains entered Heungnam Port (South Hamgyong Province) was distribution began the next day. Corn was priced at 800 won per kilogram, easier to purchase than the 1,200 & [] 1,300 won prices found in markets, but more than two times as expensive as market prices at this time last year.

Good Friends, an organization working to aid North Korean people, reported in its newsletter, “Between the end of June and beginning of July, workers in Pyongyang will receive 2 kg of polished rice, 7 kg of milled corn, and 5kg of Southeast Asian rice, for a total of 14 kilograms of rations per person…in the areas surrounding Pyongyang many people cannot work due to starvation,” and they had a hard time swallowing news of these rations.

Daily NK
Moon Sung Hwee
6/17/2008

The Central Committee of the Chosun (North Korea) Workers’ Party recently commanded the People’s Safety Agency (PSA) to increase its authority.

A source from North Korea reported in a telephone interview with Daily NK on the 11th that “According to a document from the Central Committee of the Party, the legal authority of agents of the PSA is being strengthened.”

The source explained that “From now on, agents of the PSA can investigate every criminal offense committed by the military, the National Security Agency, the public prosecutors and cadres of courts. This command from the Party was delivered to the cadres’ lectures over the country on May 10.

The most remarkable part is that in every field except anti-nation or anti-regime crimes the PSA can inspect and search the houses of suspects from the military, the Party, the NSA and the public prosecutor’s office.

Through this, control over the military, which abused its power and was acknowledged as a public enemy by average residents for a decade under the military-first policy, is being systematized.

The document stated clearly that the PSA has the right to detain anyone who disobeys the agents’ onsite inspections in their homes and even to arrest them, according to the source.

One proviso only was added that when the agents undertake a house search of the cadres of the Party, they have to receive prior approval from upper levels within the PSA and they do not have the authority to arrest cadres of the Party on the spot as a suspect.

The source explained that up to this point general crimes committed by soldiers were just dealt with by the military police or the Defense Security Command of the People’s Army. Since the Shimhwajo Case in 1998, the PSA has not examined the cadres of the NSA or prosecutors.

The source relayed that regulations regarding punishment towards agents who intentionally overlook an inspection or who leak information on an inspection are specified in the document.

Since Jang Sung Taek, a brother-in-law of Kim Jong Il, led the Ministry of Administration of the Chosun (North Korea) Workers’ Party, the political authority of the PSA accordingly started being strengthened. The source explained that “In the past, the PSA was not able to intervene in any case without the permission of the prosecutors, but since October 2007 the agents of the PSA were granted the authority to deal with the arrest of criminals and with sending them to court themselves.

The position that Jang Sung Taek took in October 2007 was that the Director of the Ministry of Administration of the Chosun (North Korea) Workers’ Party is responsible for general public security organizations such as the National Security Agency, the People’s Safety Agency, the Central Prosecutor Office and the Special Court.

The source analyzed that “The Party did not push legislation on the expansion of the authority of the PSA, because political conflicts with other governmental organizations would be brought out.”

Some say that the background to the promotion of the PSA stems from Kim Jong Il’s fear that the authority of the NSA and of the military were too big while the Party’s power was extraordinarily weakened.

One other source said that “Although the military or information organizations have attempted many coups in human history, the police force has always sided with the government. Therefore, Kim Jong Il drastically strengthened the authority of the PSA.”

The source added that “Regarding the promotion of the PSA, the cadres of the Party took concrete examples of assassinations such as Nicolae Ceauşescu of Romania and Park Chung Hee of South Korea, emphasizing the Romanian police’s fight against the military in order to protest Ceauşescu.”

“The People’s Safety Agents,” which is a newspaper circulated just in the PSA, and lecture materials for the PSA lately describe the PSA as the “escort warrior for the General” or “the second Escort Bureau,” the source explained, regarding the change of the PSA’s state.

Institute for Far Eastern Studies (IFES)
NK Brief No. 08-5-29-1
5/29/2008

It has come to light that North Korea has lowered, and in some cases abolished, medical requirements for new recruits conscripted in this year’s spring military draft. A source inside North Korea told the “Daily NK” on May 26th, “Originally, men had to be over 148cm tall and over 43 kg in order to enter the military, but this year conscripts under 148cm and less than 43kg are also required to enter military service provided they suffer from no diseases.” The medical requirements for military conscription in North Korea were lowered to 148cm height, 43kg weight, and 40/40 vision in 1994.

The source went on to say, “Originally, people with eyesight less than 40/40 could not enter the military, but this year even middle-school students with eyesight so bad they need to wear glasses are all being drafted,” and that since fall of last year, authorities from the military mobilization bureau in charge of carrying out medical checks have been working on orders that the only thing to prevent conscription is disease.

Adolescents being conscripted this year are those that were born between 1991~1993, the first generation from the period of North Korea’s devastating famine during the mid 1990s to be sent to the military. In addition, as the generation born at a time when the North’s birthrate was falling sharply, the population of the generation now facing conscription is considerably smaller than that of the older generations.

Daily NK’s source also added, “Because the number and health of the new conscripts is less than wanted, [authorities] pressed for enlistment of female students as well…Last March, a guideline was set that women not carrying out military service could not be promoted to executive positions.”

Beginning in spring of this year, parents of female students in middle schools in farming communities were summoned to “family conferences” at which they heard a political address telling them that “from now on, in order to become executives and develop socially, women also must go to the military, without exception.”

Rumors are spreading among North Korean middle-schoolers that “from now on, military service is being lengthened,” and, “Now women are also required to serve in the military.” The source added that there is also a sense of unease among commissioned soldiers, who do not know whether their time will be extended, as well.

In March of 2003, during the sixth session of the tenth Supreme People’s Committee, the ‘System of Military Service for All Citizens’ was adopted, requiring men to serve ten years in the military and women to serve in supporting roles for seven years. Those eligible for conscription are between the ages of 17 and 25, have completed middle school, and have no blemishes on their family tree.

Peterson Institute for International Economics Working Paper
May 2008
Stephan Haggard, University of California, San Diego
Marcus Noland, Peterson Institute for International Economics
Erik Weeks, Peterson Institute for International Economics

Download the paper here: haggard_noland_weeks_pb.pdf

Abstract:

North Korea is on the brink of famine. As detailed [in this policy brief], the margin of error between required grain and available supply has virtually disappeared. Local food prices are skyrocketing even faster than world prices. Aid relationships have been soured and the regime’s control-oriented policy responses are exacerbating distress.  Hunger-related deaths are nearly inevitable and a dynamic is being put in place that will carry the crisis into 2009, even if as expected, the US announces that it is sending 500,000MT in return for a signed nuclear declaration.
 
The US can provide aid in ways that maximize its humanitarian impact while limiting the degree to which aid simply serves to bolster the regime.  We know that aid is diverted.  Yet given the fragmented nature of markets in North Korea, diverted aid often finds its way into markets in the catchment area where it is delivered.  Geographically targeting aid to the most adversely affected regions and providing it in forms such as barley and millet that are not preferred by the elite can increase the ameliorative impact of assistance.  The Bush Administration has taken up the first part of this equation–requiring that most of its contribution to the World Food Program be targeted at the worst affected regions–but it could do more on the second part: providing aid in forms less preferred for elite consumption. It can also encourage others such as South Korea to follow suit.
 
The US should also exercise quiet leadership with respect to the refugee question as well. The Chinese government’s practice of returning North Korean refugees may reflect a natural self-protective response against the threat of a flood of migrants and even the breakdown of the North Korean regime; it was, after all, the notorious “hole in the fence” that helped precipitate the collapse of the Eastern European regimes. But the policy of returning refugees does not conform with China’s obligations under the refugee treaty and does not in the end serve the country’s underlying political objectives either; it simply serves to cutoff another escape valve, however small, that has contributed to taking pressure off of a rapidly deteriorating situation.

 “Nosotek is the first European-invested software development & research company in the DPRK, with the head office in Pyongyang.” – Interview with Mr. Ju Jong Chol (Vice-President of Nosotek)

Klaus-Martin Meyer: Mr. Ju, you are the Vice President of a very interesting company named Nosotek (www.nosotek.com). Could you please tell us something about this venture?

Ju Jong Chol: Nosotek is the first European-invested software development & research company in the DPRK, with the head office in Pyongyang.

It is founded by the General Federation of Science and Technology (GFST) of DPRK and experienced European IT-entrepreneurs. Felix Abt, the president of the European Business Association (www.eba-pyongyang.org) is one of Nosotek’s directors.

Nosotek is jointly run by European IT engineers together with their Korean counterparts. We have presently 50 engineers and a strong production line. We expect rapid growth thanks to our qualified, experienced and committed staff.

Klaus-Martin Meyer: What are Nosotek’s main products?

Ju Jong Chol: As we specialize on offshore IT outsourcing services we already have produced a large range of software products. Among our finished products, you find scientific software, video games, web applications, embedded software and 3D virtualization tools.

In case our customer needs a field of service where we don’t have experienced engineers in our own staff, the GFST will help us finding good people among the scientists of the universities. We can rely on sustainable DPRK and European engineering and business ressoucces.

Klaus-Martin Meyer: The DPRK is not the Silicon Valley or Bangalore. What are the customer’s benefits to do Business with Nosotek?

Ju Jong Chol: Of course, we’re not Silicon Valley or Bangalore. But we take the challenge to compete with these locations. The DPRK government took the strategic decision to give strong support to our IT industry which now bears fruits.

In the DPRK, software engineers have an average academic math level superior to their western or Indian counterparts.

Computer science education involves understanding of deep low level processes: when was the last time you hired a PHP programmer to realize he was quite at ease in assembler?

Klaus-Martin Meyer: Outsourcing to Asia is often identified with a risk of IP leak. Many western companies are complaining that after outsourcing their partners start copying their technology.

Ju Jong Chol: Then they are all invited to do their outsourcing projects in the DPRK! Our country is well known to have strong laws to protect secrets and we respect the value of IPs. And unlike what is common in other countries like China, there is only very little fluctuation of the workforce. Like in Japanese companies, our employees usually enter the company after university and stay their entire business life with the high personal motivation. This does not only help to keep trade secrets, it also helps to keep the experienced persons, who are needed for long-term partnership.

Klaus-Martin Meyer: How are the working conditions at Nosotek?

Ju Jong Chol: Our employee’s working conditions are far better than average, compared with both domestic and international standards: They work with state-of-the-art hardware, have free lunch, more holidays than in Europe and even a one-week vacation trip to a touristic place every summer, which is completely paid by the company.

Klaus-Martin Meyer: How difficult is it for you to acquire international business? What exactly are the main challenges?

Ju Jong Chol: Currently the main problem is the US sanctions against our country. For example, western customers are threatened by the US to prevent doing business with us. At the moment, it is very difficult to transfer money to DPRK. Luckily, together with our European partners we found good solutions and our customers will make their contracts with companies outside of DPRK.

Klaus-Martin Meyer: Is it possible to name some of your reference projects?

Ju Jong Chol: Unfortunately, this is not possible. Our policy is not only to respect our customer’s trade secrets and software IP, but also not to disclose the names of our customers. But please be assured, that some of our work products are used in large public companies, all over the world including USA.

Klaus-Martin Meyer: There are quite a lot companies from South Korea and also international companies working at the Kaesong special economic zone in North Korea. Are these Companies potential customers for Nosotek?

Ju Jong Chol: We are doing business all other the world. Of course, companies from Kaesong may be potential customers. Currently, our main focus is on Europe and Japan.

Klaus-Martin Meyer: The last question is our famous 5-years-questions. What is Nosotek’s outlook for the next five years?

Ju Jong Chol: Our goal is to create public awareness of the DPRK as a place where IT outsourcing can be done at the best ratio between price and quality. Nosotek will grow and the business volume will highly increase.

Source here.

Last August I posted an excerpt from Andrei Lankov’s book, North of the DMZ, on the preservation of Kim il Sung’s body in Kamsusan Memorial Palace.  This year, the Daily NK (here and here) provides some new information on Kim il Sung’s imposing presence on the North Korean landscape.

First some statistics:

1.  There are approximately 70 Kim il Sung statues in North Korea (large statues a la Mansu Hill in Pyongyang).

2.  There are approximately 30,000 plaster busts.

3.  There are approximately 140,000 monuments and memorials

4.  There is allegedly one Kim Jong il statue in Pyongyang (although the Daily NK is the only source I have ever heard make this claim). 

5.  The first Kim il Sung statue was at the Mangyongdae Revolutionary School on 10/24/1948.  The second was in front of the Changjeon School in 1949. The most recent is at Kim il Sung University in 1996. 

Apparently all of the statues are made of bronze, but are coated in a gold paint every two years to prevent them from corroding.  The gold paint is allegedly imported from Germany (Can any German readers/speakers find out which German company supplies the paint?  How much? And at what cost? ).   

All of the likenesses of the Great Leader are exclusively constructed by the Mansudae Art Studio’s “Number One Works Department”  in Pyongyang.  The workers in this group are tested annually by a deliberation committee so they can be certified to work on Kim statues, etc.  These individuals are the only ones legally allowed to reproduce the leader’s image in North Korea.

Once a Kim statue is completed, it is transported by numerous agencies (security, party, and artists) to its destination where it is erected.  Lamps are supposed to shine on the statues from 10:00pm until 4:00am.  Local citizens are charged with keeping the area around the statue tidy (which can be verified on Google Earth).  In the event of an emergency (such as a war), many statues allegedly have dedicated bunkers in which they can be stored.

UPDATE: Yonhap reports that the food shortage was also discussed at the cabinet meeting:

North Korea has recently convened a Cabinet meeting to discuss food shortages, China’s Xinhua News Agency said Sunday, as international concerns grow over the North’s economic woes.

The North’s Cabinet recently held an enlarged session and decided to address the chronic shortages of food and consumer goods, the news agency said, citing a recent edition of the cabinet daily Minju Joson.

DPRK budget expenditures grow 2.5% this year
Institute for Far Eastern Studies (IFES)
NK Brief No. 08-4-16-1
4/16/2008

On May 9, the sixth round of North Korea’s 11th Supreme People’s Assembly opened, at which this year’s budget expenditures were announced to be 2.5% greater than last year. It was also reported at the assembly that the Cabinet would pursue a new 5-year plan to develop the nation’s science and technology sector by 2012.

Despite officially holding a seat on the Assembly, General Secretary Kim Jong Il did not attend this year’s assembly meeting. In addition, there was no mention during the assembly of inter-Korean, U.S.-DPRK or other foreign relations.

Cabinet Deputy Prime Minister Roh Doo-chul announced this year’s budget, stating that “this year, in order to strengthen national defense, and while building strength, to decisively advance the people’s economy and existing industry as well as improve the lives of the people, the national budget expenditure plan will be expanded to 102.5% of last year.”

According to this statement, this year’s budget is estimated to be 451.5 trillion won (3.2 billion USD). An estimated 15.8%, or 71.3 billion won (510 million USD), is slated for national defense. Last year’s national defense budget was 15.7%, or 69.2 billion won (490 million USD), of the national budget.

North Korea has also decided to increase budget allocations for energy, coal, and metal industries as well as the railway sector by 49.8% as compared to 2007, and will focus investments on staple industries. In the past, the North had stressed the importance of the ‘four main sectors’ of improvement in the people’s economy, including energy, but this year the government will actually focus investment on these sectors.

Cabinet Prime Minister Kim Young-il stated, “From this year until 2012, we will proceed forward with a new 5-year plan for the development of national science and technology…As we systematically increase national investment in this sector, we will raise the sense of responsibility and the role of technicians and raise the level of science and technology development as quickly as possible.”

In 2012, North Korea will celebrate the 100th anniversary of the birth of national founder Kim Il-sung, and has set a goal of constructing an economically powerful nation by that year.

Read the Yonhap story here:
N.K. discusses food shortage in Cabinet meeting
Yonhap
4/20/2008

From Bloomberg: 

The country has a grain shortfall of 1.66 million metric tons this year, the United Nations agency said in a statement today, citing figures from the Food and Agriculture Organization. The shortfall was the highest since 2001, it said.

“It takes a third of a month’s salary just to buy a few days’ worth of rice,” Jean-Pierre de Margerie, the WFP’s country representative in North Korea, said in the statement. The situation is “not yet” on the scale of the 1990s famine but “yellow lights have to be flashed,” he added in an interview.

The Asian nation’s food deficit may exacerbate a global grain crisis that has driven prices of wheat and rice to records, stoking inflation and sparking civil unrest. International Monetary Fund Managing Director Dominique Strauss-Kahn said April 12 that “hundreds of thousands” may starve worldwide.

Prices of staple foods in the North Korean capital have doubled over the past year following floods last August that reduced agricultural output, the WFP statement said. Last year’s harvest was a quarter less than that gathered in 2006, it said.

The WFP assists about 1.1 million North Koreans at present, while 6.5 million people suffer from “food insecurity,” it said. That “figure can be expected to rise if action is not taken,” the statement said.

Even in normal years North Korea has a deficit of 800,000 to 1 million tons of grain, de Margerie said in today’s interview.

The gap is greater this year because of the flooding and as external assistance has fallen since 2005, when North Korea declared that it could do without humanitarian aid, he said.

People will “resort to any means they can to cope” from growing food at home and trading in the country’s private markets to skipping meals, as many did for long periods in the mid-to-late 1990s leading to high malnutrition rates, de Margerie said.  (Bloomberg)

From Time (AP):

The North’s annual food deficit is expected to nearly double from 2007 to 1.83 million tons, according to U.N. projections.

Reflecting the situation, prices for key staples at food markets have also doubled to reach their highest level since 2004, the World Food Program said. Although the communist North provides some food rations to its people, those who can resort to markets to help make up for lacking state handouts.

The WFP also called on the North to allow aid groups to operate more freely in the country. Countries giving food distributed by the WFP require monitoring by aid workers to ensure that those most in need are being fed.  (Time )

Read the full articles here:
North Korea Faces Food Crisis, UN Agency Warns
Bloomberg
Bradley Martin
4/16/2008

UN: North Korea Faces Food Crisis
Time
Burt Herman
4/16/2008

Daily NK
Park In Ho
4/9/2008

The 6th round of the 11th term of Supreme People’s Assembly will be held at Mansudae Assembly Hall on the 9th of April.

The Supreme People’s Assembly consists of 687 delegates from districts, cities, counties, and even sub-organizations of Chongryon (General Association of North Korean Residents in Japan). It also includes Kim Jong Il himself as the delegate of election district number 649.

The 687 delegates of the 11th term were elected in August 2003, and Kim Jong Il, the Top Secretary of the Chosun (North Korea) Workers Party, was also reselected to the de facto presidency of the National Defense Chairman in September of the same year. The term of office is five years, so the 6th round Assembly will be the last one for the 11th term delegates.

During this round, the Assembly is expected to evaluate the Party’s tasks as suggested by the 2008 New Year’s Common Editorial, to settle the year 2007 accounts and to ratify the budget for 2008.

Additionally, they will address more cases adopted by the Presidium of the Supreme People’s Assembly, such as bills, economic issues and foreign affairs.

People pay attention on what kind of blueprints will be suggested, regarding what the New Year’s Common Editorial of this year proposed with regards to the commemoration of the 60th anniversary of the regime’s foundation, that is, “We will build ‘the strong great nation’ by 2012 when it will be the 100th year anniversary of Kim Il Sung’s birth.”

It seems that details of the nuclear programs declaration issue, along with North Korea-U.S. relations and cold relations between the South and the North, will be ignored. However, at least with regard to North-South relations, a resolution supporting the position of the Party may be adopted.

Chief researcher of the Institute for National Security Strategy Lee Ki Dong predicted through a telephone interview with Daily NK that “Although there will not be any presentation on the current issues in North Korea-US relations, they may possibly mention some issues with the South. The most likely way of doing this would be a statement criticizing the ‘Vision 3000: Denuclearization and Openness’ of the Lee Myung Bak administration.”

It is predicted that after the Assembly elects the 12th term of delegates in late 2008, it would rebuild the structure of the national power system by the reselection of Kim Jong Il as the National Defense Chairman.

The delegate’s term of office in the Assembly is 5 years and one delegate per 30,000 people is elected by 100 per cent of favorable votes, with a 100 per cent voting rate. The general laws and ordinances are adopted by a majority vote and a revision of the constitution is ratified by a two-thirds vote of the enrolled delegates.

My friend Paul at Knife Tricks recently interviewed the producers of Crossing the Line about the logistics of filming in the DPRK.  Here are some excerpts:

Gordon and his crew brought their own equipment to North Korea because local film technology was not compatible with the needs of a modern documentary shoot. “As far as equipment goes, they film on 35mm, and we were filming on DigiBeta for the first two films and hi-def video for Crossing the Line,” says Gordon.

“I used standard Canon lenses,” notes Bennett. “When I needed to light, I used Kino Flos, but much of the film was shot with available light.” Gordon adds, “In North Korea, the electricity isn’t necessarily on, and when it’s on, it isn’t necessarily constant, so we tried to use available light wherever we could.” He carried batteries at all times and hooked into mains when possible.

In addition to Gordon, Bennett, soundman Stevie Haywood and co-producer Nicholas Bonner, the crew included one or two North Koreans assigned to the shoot by the Ministry of Culture. Gordon notes, “Your immediate suspicion is that they’re government plants — security people pretending to be film people. But the longer you work with people, you tend to find out what they are and what they’re not, and the people we worked with day by day were absolutely film people.”

“They basically took it upon themselves that they were going to work for us and get us the access that we wanted, whatever that took and whatever personal risks that took on their part,” he continues. “Had it all gone wrong, there would have been quite nasty consequences for everyone involved.”

The filmmaking process involved many nights of discussions with the North Koreans about access or other issues concerning the next day’s shooting. The topics to be discussed with Dresnok were provided to the North Koreans in advance, with the understanding that new topics would arise over the course of the interview. The minders occasionally reviewed the dailies. “There was never an occasion when they said, ‘No, you can’t shoot that,’” Bennett recalls. “There were lots of occasions where they’d hem and haw as to whether they wanted us to film something, and we shot it, and they had a look at it afterwards and said, ‘Yeah, it’s fine.’ You’re not always aware of what they’re looking for.”

“No footage was ever taken away from us,” adds Bennett. “We came away with everything we shot.”

The North Koreans had no hand in the edit, either. Gordon says the final cut was not shown to North Korean officials until after it was screened at the Busan Film Festival in South Korea.

Read the full article here:
Documentary filmmakers are granted rare access to shoot a project that provides glimpses of life in the closed-off society.
American Cinematographer
Paul Karl Lukacs
March 2008