North Korean Economy Watch

Financial Times
Anna Fifield
9/19/2007

Pak Hyun-yong was, by North Korean standards, an entrepreneur. Too much of an entrepreneur. During the famine that ravaged the country in the late 1990s, Mr Pak watched his family die of starvation – first his younger brother, then his older sister’s children. Then, eventually, his sister too.

Somehow he pulled through this period, dubbed by the regime as “the arduous march”, and was spurred into taking some very non-communist, almost subversive action. He began selling noodles.

Every day he would take 10kg of “corn rice” – a poor North Korean imitation in which dried kernels are fashioned into grains – and turn it into noodles. Then he would get on his bicycle and pedal around his home town of Hamhung on the east coast, bartering the noodles for 12kg of corn rice: 10kg for tomorrow’s noodles and 2kg for his remaining family.

“The police would come by and try to persuade me not to sell the noodles, saying that I should not succumb to capitalism and that the Dear Leader would resolve our food shortages,” says Mr Pak, who escaped from North Korea a year ago and is upbeat and energetic considering the hardships he has endured.

Now 32, he is in hiding in a bleak, remote village in northern China not far from the North Korean border, together with his wife, with whom he escaped, and their new baby. They live in a one-room house with no bathroom – protected by locals who are helping them settle.

“The [North Korean] police even threatened to imprison me if I didn’t stop selling. Suddenly I realised that North Korea was a country where they would stop people’s efforts to survive,” he says, sitting on the warm floor of his house, still dressed in the apron he wears to work in a nearby butchery.

“I heard that China was a rich and modern country – that they had tractors and that people could eat rice every day, even in rural areas,” he says, shaking his head. “Chinese dogs wouldn’t eat our rice – they would ask for better.”

In almost 20 interviews along the border with China, ethnic Koreans born in China and North Korean escapees, some of whom had been in the isolated state as recently as two months ago, describe a country where change is taking place from the ground up rather than under the direction of its leader, Kim Jong-il.

North Korea remains the most tightly controlled state in the world. But recent escapees tell of the changes that are being driven by necessity in areas near China, especially in the cities of Rajin and Hoeryong in the north and Sinuiju at the southern end of the border.

While it would be an overstatement to say that this represents the type of nascent transition to free-market reforms that has occurred in countries such as Russia and China, the worsening state of the North Korean economy is leading to widespread trading and the emergence of a fledgling merchant class crossing into China, the escapees say.

Some agricultural markets – rather than just state markets – were permitted during the “economic improvements” of 2002, but ad-hoc markets have since sprung up around the country with the tacit approval, if not the encouragement, of the regime. These markets are now the backbone of North Korea’s creaking economy as the regime provides almost nothing by way of rations any more.

The parlous state of the economy is probably the driving factor behind Mr Kim’s decision to roll back his nuclear programme. The six-party denuclearisation talks are making surprisingly good progress, analysts say, as his regime seeks heavy fuel oil for its rusting industries and an end to economic sanctions.

Certainly, recent escapees from North Korea describe a desperate situation inside the country. Somewhere between 10,000 and 30,000 North Koreans are thought to be living in hiding in the north-eastern provinces of China, especially in Jilin and Heilongjiang, areas considered backward by Chinese standards.

The Financial Times travelled throughout this region to meet North Koreans while seeking to avoid endangering their lives. (North Koreans who are repatriated from China face detention in labour camps or worse, and even those who are not caught put the lives of family members at risk by talking to journalists. For that reason, names have been changed.)

“In Rajin, all the factories have stopped,” says Oh Man-bok, a 22-year-old who escaped in September from the city near the borders with Russia and China, considered relatively prosperous because it is one of the North’s main trading channels. “The men still have to go to work and have their name checked off but there is nothing to do. Sometimes they sit around and sometimes they go home. They don’t get paid but sometimes, in a good month, they get 15 days’ worth of corn in rations,” he says.

That means women are increasingly becoming the breadwinners, going to the mountains to collect edible plants or to the market to sell home-made snacks. “People survive by selling. They do whatever they can to earn money – selling fried dough sticks or repairing shoes and clothes,” Mr Oh says. “But it’s very difficult to earn enough to survive and even in Rajin, many people have to eat porridge made from the whey left over from making tofu.”

Rajin and Sinuiju, as the main thoroughfares for trade with China, have been more open than the rest of North Korea for some time, but the experiment with capitalism that has been taking place in these two cities now appears to be expanding to Hoeryong.

The city of Hoeryong can be clearly seen from the Chinese side of the border, which is marked by a shallow river only 20 metres wide in places. On the bridge between the two countries, the Financial Times watched North Korean trucks trundle into China and dozens of Chinese – and a few North Koreans wearing badges stamped with the image of Kim Il-sung, Mr Kim’s late father and founder of the state – lug bags across.

A Chinese border official says that about 100 a day cross the bridge from the Chinese side, mainly going to visit family members, although in summer as many as 300 go on tour packages to the beach on North Korea’s east coast. About 10 North Koreans a day cross into China for trading or to see their relatives. “With Rmb1,000 [$135, £65, €92] they can come to China even if they don’t have family here. So they often borrow money to come here and buy things for trading in the market in Hoeryong,” the official says.

Bribery appears to be becoming more widespread as trade and travel increases – from a few cigarettes needed to pass through internal checkpoints to the few hundred renminbi expected at border crossings. “Everyone wants to be a border guard these days,” says one Chinese-Korean trader. “They don’t explicitly say, ‘Give me money’ – they just keep going through your paperwork and asking you questions until you offer them money.”

Again, Pyongyang seems to be aware that this is happening and allows it as a way to keep people happy – rotating border guards every six months to give officials from around the country a chance to earn extra money, according to escapees.

In Hoeryong, the market used to be beside the bridge on the outskirts but this year it was moved to a school building right in the centre of town. Its 180,000 residents enjoy a relatively privileged existence because Kim Jong-il’s late mother was born there.

The market has become central to the city and to people’s lives, driven by grassroots demand, says Song Mi-ok, an ethnic Korean living in China who has made several trips to the city recently. She has gained access by visiting fake relatives, a family to whom she pays Rmb1,000 every time she pretends to visit them.

“You can find everything there,” she says of the market, which opens at 7.30am and closes at dusk. “People usually start by selling food that they have grown or made, using the profits to move into goods trading.”

North Koreans say one can buy everything in the markets “except cat horns”, as their expression has it. Rice given as aid from South Korea is on sale and people even display the bag – even though they risk having it confiscated by the authorities – because people know that South Korean rice is of high quality, Ms Song says.

One kilogram of rice in Hoer­yong market costs 900 North Korean won – a huge amount in a country where the average wage for a government employee is about between 3,000 and 4,000 won a month, or slightly more than one US dollar.

“There are a lot of people buying and it’s all money trade; there’s no bartering now,” Ms Song says. “North Koreans are poor, so it’s quite surprising to see people with a lot of money. They don’t receive money from the state – it’s all money they have made themselves.”

One Korean-Chinese man who visited relatives in Hoeryong last year also describes an increasingly active drug trade. It is not uncommon, he says, to be approached by people in their twenties or thirties selling a white narcotic called “ice” – probably a form of crystal methamphetamine. The drug fetches 20 times the North Korean price in China, making smuggling a lucrative business, but the punishment for drug trafficking in China is so severe that Hoeryong dealers try to sell it to visiting Chinese.

The markets are thriving thanks to new border regulations. While the number crossing illegally has dropped because of tighter restrictions in both countries, the number of North Koreans who are allowed to cross into China legally has steadily increased, according to several Korean-Chinese who help those who make it across the border.

North Koreans with relatives in China but not in South Korea are allowed to apply for passports to cross the border. This is creating a new group of migrant workers – those who are legal but working for themselves and their families rather than for the state. “Young people come here to work for one or two months and earn some money – they’re coming from Pyongyang as well as the regions,” says Ri In-chol, an ethnic Korean missionary from China who supports border crossers, legal or otherwise.

“They pay Rmb300-Rmb400 to get a passport and then they can cross. There is now a much freer flow because Kim Jong-il realises that this is the only way to keep the people alive. They take back money, used sewing machines and used clothes from their relatives that they can sell in the markets,” Mr Ri says.

Although Chinese clothes are most prevalent, North Koreans prefer South Korean products for their higher quality. “The labels have to be cut out of South Korean clothes, so if they don’t have a label then people assume that they’re South Korean and they like them more,” says another Chinese-Korean who has recently visited Rajin.

Indeed, Mr Ri says that North Korean officials are picky about what they will let through. “When North Koreans come to China they are allowed to take used clothes back. But when Korean-Chinese people want to give clothes to their relatives in North Korea, they have to be new because otherwise the officials think they are being looked down on,” he says. (Jeans and short skirts, seen as representative of American immorality, are still not allowed.)

The economic changes – particularly the lessening dependence on the state – are potentially destabilising for Mr Kim’s regime because they weaken the tools of control. That means that there is a fine line between what is permissible and what is not. “Kim Jong-il is tolerating this much openness because people need to survive, but if he wakes up one morning and sees capitalism is spreading too far, he will order it all to be stopped,” says Gao Jing­zhu, professor of Korean studies at China’s Yanbian University, near the border.

“North Korea is small, so if there is too much change it will threaten the sustainability of the regime and it will collapse,” Prof Gao says. “North Korea is in a dilemma.”

Good Friends, a Seoul-based civic group that monitors life inside North Korea, this month said Pyongyang was cracking down on women working in street markets. “The authorities have judged that female merchants have reached a point that threatens the country’s government,” Good Friends quoted a North Korean official in China as saying.

“The men are tied to their workplaces but they don’t receive proper rations,” the official reportedly said. “This has shifted the men’s burden of supporting their families on to the women. With trade directly linked to the people’s survival, the crackdown isn’t going well.”

Indeed, it may already be too late. The increased economic interaction with China means that the flow of information to North Koreans is steadily increasing. “People’s awareness and illusions have changed,” says one Chinese-Korean who drives trucks into North Korea.

This is just the kind of contact that threatens Mr Kim’s regime, which has kept the 23m-strong population under control by cutting off access to the outside world and telling them they live in a socialist paradise. Mr Ri, the missionary, says: “People living in open areas like Rajin and Hoeryong are more exposed to the outside world but that is not the case when you go further into North Korea. So even if it is becoming more open, you never know when that is going to change. They will still come after you if you are involved in political activities.”

But recent escapees from North Korea say that people are increasingly discussing – in private – one topic that they say would have been unimaginable until very recently: the eventual death of the Dear Leader. “State control is still as strong as before but now, when people gather together as families, they say that the system is really wrong. That never used to happen before,” says Mr Pak, the man who left Hamhung last year.

“Kim Jong-il always says he will feed the people and make them happy, but that has not happened. There are many people who hope that Kim Jong-il will die soon,” he says, shrugging his shoulders. “I have to admit it: the state is already kind of breaking down.”

Joong Ang Daily
Ser Myo Ja
11/19/2007

Seo Myeong-hee has traveled the world to see the pyramids of Egypt, the Great Wall of China and the Grand Canyon in the United States, but she said her visit to Chonji, the crater lake on the peak of Mount Paektu, was the best trip of her life.

“It was a beautiful sunny day in May last year. I was just taken away by the magnificent view,” Seo, 57, recalled of her visit to the mountain that straddles the border between China and North Korea. “After walking along the ridge for about three hours, we were there. The lake was a mysterious blue, and there were wildflowers everywhere.”

Standing 2,744 meters (9,002 feet) tall, Mount Paektu has been worshipped for centuries as the place of Korea’s ancestral origins. In addition to its beauty, it is this rich cultural tradition that prompted Seo, like many South Koreans, to travel through China to see the mountain, since there is currently no way to visit the area via North Korea. “It was a five-day trip, but mostly we spent time in Chinese towns seeing ancient ruins of the Goguryeo Kingdom and other tourist attractions,” she said. “The highlight was definitely Mount Paektu, but you have to sit on the bus for many painful hours to actually get there.”

All that, though, is about to change. Last month’s inter-Korean summit finally opened the door for South Koreans to fly directly to the mountain. It promises to be a popular destination once the infrastructure is complete.

In 2005, North Korean leader Kim Jong-il promised Hyundai Asan Chairwoman Hyun Jeong-eun during a visit to Pyongyang that he would allow a tour program for Mount Paektu. Nothing was done for more than two years, however, until the October summit between Kim and President Roh Moo-hyun resulted in a deal to allow passengers to fly from Seoul to an airport on the mountain.

With cooperation from the Korea National Tourism Organization, Hyundai Group’s North Korea business arm, Hyundai Asan, has begun preparations in cooperation with North Korea’s Asia-Pacific Peace Committee, which handles civilian inter-Korean projects.

Hyundai Asan, which has the sole franchise to operate tours to the North from South Korea, plans to begin offering tours to Mount Paektu in May 2008. The only other tour program from the South allows visitors to travel to Hyundai’s resort at Mount Kumgang, a project that began in 1998. A South Korean team including officials from the KNTO, the Roh administration and Hyundai will make an on-site survey of Mount Paektu before the end of this month.

Yoon Man-joon, president of Hyundai Asan, told the JoongAng Daily in an interview Thursday that he is extremely optimistic about the tour project. Yoon and Hyun visited the mountain personally early this month.

“The Mount Kumgang tour had more of a symbolic meaning, because it was the first opportunity for South Koreans to go to North Korea for tourism,” Yoon said. “Mount Paektu, however, has much more potential to succeed solely as a tour program.”

Yoon thinks demand will be high and response immediate once the tours begin. “Mount Kumgang is praised for its scenic beauty, but Mount Paektu is more than that,” Yoon said. “The place is the origin of all Koreans, and it is an extraordinary experience for us to visit there.”

Seo could not agree more. “When I saw Chonji, the crater lake, I became so emotional that I almost cried,” she said. “The lyrics of our national anthem even begin with the mountain ― ‘Until the East Sea’s waves are dry, and Mount Paektu is worn away, God watch o’er our land forever!’”

The mountain has long been considered sacred. In Korea’s creation myth, Hwanung, a son of the Lord of Heaven, was allowed to descend onto Mount Paektu with 3,000 followers and found the City of God.

There a tiger and a bear told Hwanung that they dreamed of becoming human, and Hwanung gave them 20 cloves of garlic and a bundle of mugwort, ordering them to eat only those foods and remain out of the sunlight for 100 days. The tiger failed, but the bear endured and eventually was transformed into a woman.

The bear-woman then prayed for a child, and Hwanung took her for his wife. A son, Dangun, was born, and he built the walled city of Pyongyang and called his kingdom Joseon. Not to be confused with the Joseon Dynasty, the kingdom is referred to in Korean history as Gojoseon or Ancient Joseon. Historians believe his kingdom began in 2,333 B.C.

This mythology is still marked on the modern Korean calendar, with Oct. 3 celebrated as Gaecheonjeol, or National Foundation Day, which marks the establishment of the first Korean kingdom.

The opening of Mount Paektu is not without controversy. Other travel agencies have expressed their displeasure with Hyundai Asan’s monopoly on tours to the famous mountain. On Nov. 13, Shim Joong-mok, the president of the Korea Tourism Association, held a press conference and said the group wants a share of the potentially lucrative market. He said the association, which represents more than 20,000 travel agencies in Korea, may take legal action if their request is not met.

Hyundai Asan President Yoon rebuffed the demand. “The agreement we have with North Korea for exclusive rights to Mount Paektu tourism is a legitimate commercial deal,” Yoon said. “They act as if we received this right for free, but we have made vast investments in North Korea over the past nine years and earned the North Korean authorities’ trust. The tour program was given in return.”

Yoon said the tourism industry should respect market principles. “It would be the same for any other beautiful mountain. Would it make sense for me to develop a resort under an exclusive contract and then have other travel agents demand that they also want to do business there?” Yoon asked. “The travel agents’ demand is unreasonable.”

According to a Hyundai Research Institute report, it will cost up to $1.26 billion to develop a resort on the mountain comparable to the facilities in Pyeongchang, the South Korean city that hopes one day to host the Winter Olympics.

Yoon said he is confident about the Paektu program’s potential, citing his recent visit to the mountain. “There are two lodging facilities built by North Korea on the mountain. One is Sobaeksu State Guest House and the other is Baegyebong Hotel. Both are modern, and they will be usable after some modifications,” Yoon said.

He said the survey team, which will leave before the end of this month, will also study what work is needed for Samjiyon Airport on Mount Paektu to begin receiving flights from South Korea. “We will have a better idea after surveying the runway and traffic tower,” he said, adding that Korean Air and Asiana have both expressed interest in flying to North Korea.

The modernization of the airport may also be expensive. The Ministry of Construction and Transportation said in a report last month that repairs will cost 280 billion won ($304 million).

The price of the tour program is also still to be decided. “It will be competitive with tour programs via China,” Yoon said. “We don’t want to make it too expensive or too cheap.”

Seo said she paid 1.2 million won for her five-day package to visit the mountain via China. “I didn’t think it was too expensive,” Seo said. “If I can fly to the mountain in just two hours at a similar cost, I will be more than willing to go one more time.”

Running a tour program for Mount Paektu is also tricky because there are only few weeks in the year when Chonji Lake can be seen in good weather. “I was happy because the May weather was fantastic,” Seo remembered. “The tour guide said we were lucky because many groups could not see the magnificent view due to the weather.”

According to Yoon, Hyundai Asan is reviewing other plans to use the mountain’s winter weather as a possible attraction for sports and hot springs.

The new tour may take away one small attraction of the Chinese route ― a chance to see the low-key North Korean border with China. “The border is not heavily guarded,” Seo said. “Our guide even allowed us to cross the border on foot. The North Korean guard smiled at us, and we took a souvenir photo together. I gave him a chocolate, and he was really thrilled.”

Yonhap
11/19/2007

A South Korean company operating businesses in North Korea said Monday it plans to add the North’s capital to the itinerary for future tours of the North’s highest peak, located on the border with China.

Hyundai Asan, the North Korean business arm of Hyundai Group, is preparing to launch tours of Mount Paekdu in May next year, after the leaders of the two Koreas agreed to establish direct flights from Seoul to the mountain at the second-ever inter-Korean summit early last month.

“We already asked South and North Korean authorities to include Pyongyang in the tour route to Mt. Paekdu,” said Yoon Man-joon, chief executive officer of Hyundai Asan.

Yoon said he was “optimistic” about adding the North Korean capital to the route because the North shared a “similar view as a business partner.”

Yoon made the remark during a press conference at North Korea’s Mt. Geumgang, where the company operates the only South Korean tourism business in the North, to mark the ninth anniversary of the start of the tourism project.

Although Yoon gave no exact timetable for the Pyongyang tours for ordinary South Koreans, company officials hinted they will probably be available in early 2009.

The Mt. Geumgang tourism program, which started in 1998, is the only one that gives foreign tourists an opportunity to easily see parts of North Korea.

Hyundai Asan is believed to pay hundreds of millions of U.S. dollars to North Korea in fees for the program, which has drawn more than 1.5 million tourists.

At the inter-Korean summit last month, President Roh Moo-hyun and North Korean leader Kim Jong-il agreed that their countries would work together on a wide range of economic projects, even though the two states are still technically at war because the 1950-53 Korean War ended in an armistice.

Korea Times
Yoon Won-sup
11/16/2007

The prime ministers of the two Koreas have agreed to set up Internet, wire and mobile phone services including mobile phones in the Gaeseong Industrial Complex in North Korea.

They also agreed to allow free movement of people and vehicles of the South in the complex starting next month in order to expand inter-Korean economic cooperation.

The agreement was made between Prime Minister Han Duck-soo and his North Korean counterpart Kim Yong-il Friday.

The rare talks between the prime ministers, the first in 15 years, went smoothly.

The North Korean delegates were very favorable to suggestions made during the three-day talks in Seoul, according to sources.

Particularly, Han and Kim took a stroll together in the morning and toasted each other with soju at dinner, Thursday, boasting of their friendship.

President Roh Moo-hyun hosted a lunch for the delegations, Friday, and thanked them for reaching an agreement. The North Korean delegates returned to Pyonyang by plane afterwards.

The two prime ministers issued a joint statement after the talks, which were aimed to follow up agreements reached at the second inter-Korean summit held in Pyongyang from Oct. 2-4.

They agreed to create a committee for a special zone of peace and cooperation in the West Sea coastal area under which five subcommittees will be set up to deal with an economic zone in Haeju, North Korea; the common use of Haeju port and the southern part of the Han River estuary in South Korea; the safe passage of private ships near Haeju; and a common fishing area in the West Sea.

The first committee meeting, chaired by a minister-level official, will be held in Gaeseong next month.

They also agreed to have a premier-level meeting and vice premier-level economic cooperation committee’s meeting every six months, one in Pyongyang in the first half of 2008 and the other in Seoul.

A cross-border freight and cargo railway linking Munsan in the South and Bongdong in the North will start operation from Dec. 11.

Working-level talks will be held in Gaeseong for two days from Tuesday to finalize the agreement on the cross-border train service, according to the statement.

As part of reconciliation measures, South Korea will help North Korea repair the Gaeseong-Sinuiju railway and Gaeseong-Pyongyang highway in 2008.

Han and Kim agreed to start the construction of shipyards in Anbyeon and Nampo next year.

For family members displaced since the 1950-53 Korean War, the two Koreas will allow exchanges of video calls starting next year and complete the construction of a family reunion center at Mount Geumgang next month.

A series of talks will be held next month to discuss the launch of a tourism program to Mount Baekdu, as well as the use of the North’s Pyongyang-Shinuiju railway to transport a joint supporters group from the two Koreas to the 2008 Beijing Olympic Games.

“The agreement is the first step toward enhancing inter-Korean relations through the virtuous circle of peace and economy,” Unification Minister Lee Jae-joung said.

Lee said the joint statement contained implementation measures for the summit accords, except the military measures that guarantee the cooperative plans.

Apparently mindful of the importance of these, he added: “The coming inter-Korean defense ministers’ talks will deal with the implementation.” The military talks are slated for Nov. 27-29 in Pyongyang.

Korea Times
Ryu Jin
11/16/2007

The Mt. Geumgang tour business marks its ninth anniversary this Sunday. Hyundai Asan, the South Korean operator of the tour project to the resort mountain across the border in North Korea, says that it sees a more prosperous business for its 10th year.

Hyundai Asan is set to hold a ceremony to celebrate the anniversary, which comes after encouraging news such as the agreement with the North to open the 1,638-meter Biro-bong, the highest peak of the auspicious mountain, early next year.

According to the firm, a total of 1.72 million people have so far visited the “caged” area of the tightly controlled Stalinist nation over the past nine years since Nov. 18, 1998, when the cruise ship “Geumgang” arrived at the site for the first time.

A land route was opened through the heavily militarized border in 2003, terminating the cost-heavy sea travel from 2004 onwards. And North Korea opened more and more sites including “Naegeumgang” (the inner, western part of the mountain).

A company spokesman expects that the number of Mt. Geumgang travelers this year, which has already exceeded 300,000 as of October, to reach above 350,000 by the end of the year, a new record.

Hyundai Asan’s successful business, despite some political uncertainties in recent years, is largely due to its endeavors to diversify tours in the limited area of the 530-square kilometer mountain.

The Naegaumgang Tour, launched last June, added more prospects for South Korean climbers who until then could only enjoy “Oegeumgang” (the outer part of the mountain) and “Haegeumgang” (the seashore).

Beside, cultural events such as concerts as well as visits to hot springs and restaurants with unique Northern cuisine, an 18-hole golf course and a duty-free shop that opened in the resort area recently, will provide visitors with additional pleasures.

However, some experts point out that there remains much to be done in order for the Mt. Geumgang tourism business, which still remains largely a symbol of inter-Korean reconciliation, to be reborn as a more lucrative business.

The complicated processes of immigration control in addition to the long journey of 4-5 hours to the eastern coastal area are among major problems that should be addressed, along with the insufficient infrastructure such as hotel accommodation.

“We plan to expand facilities in the tourism zone further, as more visitors will come to the mountain when Biro-bong is opened next year,” the company spokesman said. “In particular, we will also pay attention to more safety measures.”

Daily NK
Lee Sung Jin
11/16/2007

It is reported that the North Korean authorities have been regulating Jangmadang (markets) by placing age limit on who can do business in the market and controlling sales items and prices.

45-year old Ahn Hyuk Jun said in an interview with DailyNK conducted on Wednesday, “A decree is posted at the entrance to many markets in Pyongyang that the state would control sales prices and the quantity of sales items.” Ahn, a resident of Pyongyang, came to Yanji, China on November 4th to visit his relatives.

Mr. Ahn said, “According to the decree, the state forbids merchants from bringing out more than 15 items for sale and selling more than 10 kg of sea products in the market.”

The decree is another controlling measure of markets adopted by the state. Previously, the state has conducted a campaign to fight anti-socialist trends appearing in many market places. Moreover, it has banned female merchants who are under the age of 39 from doing business in the market. In Pyongyang, the age limit is 49. It seems that North Korea has adopted a rather extreme measure as both the number of people engaged in business and products circulated in the markets continue to increase.

However, few merchants would follow the new measure which limits sales items and prices because they cannot make a profit that way. It is certain that the new decree would likely turn out futile.

Mr. Ahn said, “For example, the decree lowered the price for octopus from 3,700 won/kg to 2,200 won/kg, and the price for flatfish from 3,500/kg to 1,800/kg.”

Ahn said, “No one in the market would abide by the state decree at the risk of losing profit,” adding, “many merchants would bring out items for sale that are low in quality and matches the state-imposed price anyway. However, a real business is done in a clandestine manner.”

According to Ahn’s explanation, the real business is done as follows. Many merchants on their way to the market stop at neighboring households and unload their sales items. Then they pay the households to keep their items there. At the market, they bring out low-quality items on sales stand, and post a sign with a list of real sales items right next the stand.

When there are customers checking the list, merchants approach to them and begin bargaining. Once it is done, they both come out of the market and go the household where the merchant hands over the asked item to their customers.

Ahn said, “Overall, many markets of Pyongyang are stagnant due to the state regulation on market transactions.” He added, “Many Pyongyang citizens argue that the state, instead of distributing food, should allow them to do business in the market so that they can make a living.”

“There is a rumor that Kim Yong Il was appointed as the prime minister because he pledged to close all markets,” Ahn said, “Many people worry that a man who lacks knowledge about how money works is now in charge of the nation’s economy.”

Good Friends, the Seoul-based relief organization dedicated to North Korea also reported yesterday that the North Korean authorities have lately produced a great amount of lecture material which bans business activities across the country.

According to the lecture material, the authorities asserted that market transactions would destroy North Korea’s own socialism from within and facilitate the infiltration of capitalism into the society. They urged that the state should strengthen mass ideological training in order to educate the public about why it is important to place age limit on who can do business in the market.

As mentioned earlier, North Korea has banned females under the age of 39 from doing business in the market. There is a rumor that the state would increase the age limit to 45 at the end of this year.

In North Korea most working age females are forced to work at factory complexes. In Pyongsung of South Pyongan Province, the state sends out a dispatch to local females under the age of 30 in order to have them work at neighboring factory complexes. However, few would actually work at the designated complexes because many complexes already have enough workers. Even if they could get a position at factories, it is reported that those employed barely receive wages and food distribution.

Institute for Far Eastern Studies
NK Brief No. 07-11-15-1
11/15/2007

Recently, North Korean authorities have adopted a measure prohibiting women under the age of forty from selling goods in Pyongyang markets. According to DPRK media sources, as internet videos of footage shot in Pyongyang markets by hidden cameras have emerged, and have been viewed with great interest by many in South Korea, authorities have increased restrictions on the markets. Just since last month, three videos shot in Pyongyang’s Sungyo Market have been shown on Japanese news programs.

While currently, North Korean authorities are carrying out a campaign preventing trading in markets by women under the age of forty, the age requirement for trading will be raised to forty five in North Hamkyung Province beginning this December. Women’s groups are said to be fiercely opposing the move. Pyongyang City’s People’s Committee recently passed down an order for women under the age of forty to return to work in offices, however businesses were in no position to take on new employees due to the small scale of work available and current overstaffing, and were unable to provide wages or rations, leading to the failure of the new policy. The authorities’ current restriction on market trading, aimed at pushing these women back to government-assigned work, will likely not last. Because almost all North Koreans, including the authorities, rely on the markets to sustain their lifestyles, market restrictions cannot be anything but temporary.

According to a domestic publication by the DPRK Workers’ Party obtained through diplomatic channels, North Korean authorities are calling for “a crackdown on markets that have degraded into hotbeds of anti-socialism.” An article published last October in the name of the Workers’ Party Central Committee reported that the Kim Jong Ill had stated, “the current state of anti-socialism should not be moderately opposed. A strong and concentrated attack must be laid out in order to thoroughly eliminate [this anti-socialist behavior].”

This report continued, “Citizens can ease their lives by using the markets, but currently [markets] have degenerated into areas that cause disorder to national discipline and social conditions,” and, “in any city tens of thousand of traders are out on the roads, disturbing pedestrian and vehicle traffic.” The article went on to criticize, “and an even more serious problem is that most women of hirable age are trading in the markets,” and, “women who received a high-school education through the benevolence of the State and Party and dismiss their responsibilities by falling into trade work are throwing away fundamental conscientiousness and even faithfulness.” This article amounts to the Party’s recognition of reliance on markets by everyone, including government officials, and the rampant anti-socialism in the air around these areas.

Korean PMs ‘agree rail-link deal’
BBC
11/15/2007

A regular freight train service over the heavily-armed border between North and South Korea could start before the end of the year, officials say.

The deal, on the second day of talks between prime ministers from the two countries, marks the first agreed schedule for the train link.

The South has pushed for reliable transport links to supply the factories its firms run in the North.

It follows an agreement made last month at a summit of the countries’ leaders.

‘Shared understanding’

North Korean Prime Minister Kim Yong-il and his counterpart from the South, Han Duck-soo, are spending three days in discussions in the South’s capital, Seoul.

The South’s Unification Ministry spokesman, Kim Nam-shik, said the two sides were now trying to set a specific date for starting the rail service.

The 25km (16 mile) track runs from the heavily-guarded border to a joint industrial complex in the North’s city of Kaesong.

“Both sides shared an understanding that it would be meaningful in further vitalising the Kaesong industrial complex,” said the spokesman.

The meeting – the first at prime ministerial level for 15 years – follows October’s historic summit in Pyongyang between the two countries’ leaders.

Divided families

The summit between the North’s Kim Jong-il and the South’s President Roh Moo-hyun was only the second such meeting since the Korean peninsula was partitioned over half a century ago.

The two leaders signed an accord calling for greater peace and economic partnership, despite the two countries remaining technically at war with each other.

They also agreed in principle for the regular cargo rail service to be established.

The prime ministers are using their meeting to discuss more specific proposals.

One key issue is the establishment of a joint fishing area around the disputed western sea border – the scene of naval clashes in the past – and a new economic zone around the North Korean port of Haeju.

The South also hopes to increase the number of reunion meetings for families separated when the peninsula was split.

Prime ministerial meetings between the two Koreas were suspended in 1992 amid growing concern over Pyongyang’s nuclear ambitions.

Ministerial infidelity
Joong Ang Daily
11/16/2007
Lee Yang-soo

The prime minister of North Korea holds one of the top positions in the country’s hierarchy, officially fourth in political power.

Many believe, however, that the prime minister may actually be about 20th in actual influence, as there are plenty of hidden power elites in the political and army circles.

The post of prime minister in North Korea was created after the introduction of the state president in 1972. Since then, eight people have occupied the post. Among them, the person who impressed us the most was Yeon Hyung-muk, who held the job from 1988 to 1992.

The prime minister of North Korea faces tough and dangerous working conditions.

Kim Il Sung emphasized the significance of the post by insisting that the “prime minister is the general of the nation’s economy.” The prime minister, in turn, has often been made the scapegoat for the people’s discontent about the country’s struggling economy.

And to make a bad situation worse, the public economy always took a backseat to the military economy, which led to nuclear and missile development.

One after another, numerous ministers have stepped down in dishonor or suffered incurable illness.

After the dishonorable withdrawal of former Prime Minister Li Gun-mo (1986-1988), Li’s successor, Yeon Hyung-muk, was demoted after four years to the post of candidate member for the Political Bureau Presidium, or secretary of Jagangdo Provincial Party. In addition, Prime Minister Park Bong-ju was demoted last April to manager of a small-town company.

Since assuming the reins of government, Kim Jong-il has recruited people who know the economy well to the top posts.

However, he took a “military first” attitude whenever the cabinet, the Workers Party, and army were in discord over the issue of opening and reform.

In contrast, the president of the People’s Republic of China, Jiang Zemin, gave Zhu Rongji, premier of the state council, a carte blanche to decide every affair in public administration and the national economy.

For example, when rumors spread that the yuan would be further devalued, he consulted Zhu. At that time, Zhu’s nickname was “emperor of the Chinese economy.” China has shown great fidelity to the principle that the “prime minister is the general of the national economy.”

Come to think of it, South Korea has had 27 prime ministers since 1972, representing its own infidelity to the prime minister. Six of one, half a dozen of the other.

Koreas agree to open cargo railway, but key issues remain unresolved
Yonhap
Kim Hyun
11/15/2007

South and North Korea agreed Thursday to open a cross-border cargo railway by the end of this year — resuming the service halted more than half a century ago — as part of economic cooperation projects agreed upon in their leaders’ recent summit.

Seoul proposed Dec. 11 as the date to start the railway service through the demilitarized zone, a Unification Ministry official said on condition of anonymity. But North Korea’s response was not yet known.

The agreement to open a freight railway came on the second day of talks between South Korean Prime Minister Han Duck-soo and North Korean Premier Kim Yong-il in Seoul. The rare prime ministerial talks were aimed at devising concrete plans to implement wide-ranging accords reached between the leaders of the Koreas.

In their summit in early October, President Roh Moo-hyun and North Korean leader Kim Jong-il agreed on a slew of economic cooperation and peace projects. They also agreed that the agreements should be implemented through two follow-up talks — one between prime ministers and the other between defense ministers.

“There is a growing understanding between the sides for the start of the cargo rail service,” Kim Nam-shik, a spokesman for the Unification Ministry, told reporters. He said that the project “seemed highly possible,” even though more consultations are needed to secure a military guarantee by North Korea.

The 20-km cross-border route between South Korea’s Munsan and the North’s Bongdong will allow the mass transport of goods from a joint industrial complex in North Korea to the South, Seoul officials say.

The Koreas also agreed to set up a joint committee to create a peace zone in the disputed border area in the West Sea, part of key summit accords to reduce tension, the ministry spokesman said. Bloody skirmishes occurred in 1999 and 2002 near the disputed sea border, which North Korea does not acknowledge. The western sea border was unilaterally drawn by the U.S.-led United Nations Command at the end of the 1950-53 Korean War. Pyongyang has called for a new line to be drawn further south.

The peace project in the West Sea will likely include the creation of a joint fishing area in the western sea border area, and the establishment of an economic special zone in Haeju in southwestern North Korea, which will transform the naval base area into an economic stronghold.

The Koreas also made progress in social and cultural areas, the spokesman said, without elaborating on specifics.

But key issues remained unresolved.

The top item on North Korea’s agenda is South Korea’s heavy investment in the renovation of its antiquated railways and roads, said the Chosun Sinbo, published by ethnic Koreans in Japan.

The North Korean premier said in the talks that such South Korean support will help implement the summit accords “in a relatively short amount of time,” the paper said.

Pyongyang also expects Seoul’s money to develop shipbuilding facilities in the country, Seoul officials said.

South Korea is expected to seek North Korea’s support in improving the business environment in the Kaesong industrial complex, where communication facilities are poor and border customs inspections are highly restrictive.

The Kaesong complex, where scores of South Korean factories produce garments, shoes and other labor-intensive goods with North Korea’s cheap but skilled labor, emerged from agreements at the first-ever inter-Korean summit in Pyongyang in 2000. But business restrictions and political strains have limited its development.

Other issues include reunions of families separated since the 1950-53 Korean War, with South Korea pushing to regularize the sporadic events.

The two Koreas are expected to issue a joint statement wrapping up their three-day talks on Friday. To settle outstanding details, Seoul has proposed to hold follow-up economic talks between vice prime ministers in the second week of December, a Unification Ministry official said on condition of anonymity.

The Koreas held eight rounds of prime ministerial talks until 1992, when they signed an accord calling for an end to Cold War hostilities on the Korean Peninsula. But the talks were suspended afterward as relations soured over a dispute on North Korea’s nuclear weapons program.

This week’s talks, covering economic projects, will put aside thorny issues on military tension, which will be dealt with in defense ministers’ talks set for Nov. 27-29 in Pyongyang, Seoul officials said.

Unification Minister Lee Jae-joung said on the first day that this week’s talks were “a bit more flexible, a bit more amicable” than previous inter-Korean meetings.

South Korea expects that improved inter-Korean ties will facilitate progress in ongoing multilateral talks to persuade North Korea to abandon its nuclear ambitions.

The communist nation has shut down five key nuclear facilities under an aid-for-denuclearization accord signed in early October in talks involving the two Koreas, the U.S., Japan, China and Russia.

Pyongyang is also supposed to disable its key nuclear facilities at Yongbyon and submit a full list of its nuclear programs by the end of the year in return for the normalization of ties with the U.S. and Japan, as well as economic and energy assistance from the other parties involved.

N.K. asks for help in repairs to facilitate implementation of summit agreement: report
Yonhap
Byun Duk-kun
11/15/2007

North Korea has asked South Korea to help repair its dilapidated railways and roads so the agreements at the recent inter-Korean summit can be quickly implemented, a pro-Pyongyang newspaper published in Japan reported Thursday.

In a rare report from Seoul, the Chosun Shinbo said North Korean Prime Minister Kim Yong-il proposed the modernization of North Korea’s railway between the border town of Kaesong and the northwestern city of Shinuiju at his talks with South Korea’s Han Duck-soo.

Kim, 63, was also quoted as saying that projects to modernize railways and roads will enable the joint declaration from the inter-Korean summit to be implemented “in a relatively short amount of time.”

The North Korean arrived here Wednesday for three days of talks to follow up on the summit held in Pyongyang on Oct. 2-4.

At the summit, President Roh Moo-hyun and North Korean leader Kim Jong-il called for a quick expansion of economic cooperation and an end to military hostilities between the divided Koreas.

This week’s talks had been expected to focus on economic issues as separate talks between the defense ministers of the two countries are to be held in Pyongyang later this month.

Seoul is also calling for an early opening of cargo rail service between the North’s border town of Kaesong, where dozens of South Korean businesses are producing over US$1 million worth of goods each month, and its border town of Munsan.

Still, the Seoul government is placing more weight on the opening of other areas in the reclusive North to South Korean businesses as well as establishing a joint fishing area in the West Sea, where a maritime border dispute led to deadly clashes between the navies of the divided Koreas in 1999 and 2002. The Koreas technically remain at war as the 1950-53 Korean War ended with an armistice, not a peace treaty.

Seoul officials are also calling for easier access for South Korean businesses to the South Korea-funded industrial complex in Kaesong as well as the relaxing of customs and quarantine inspections at the border.

The North Korean premier said his country is ready to resolve the difficulties facing the South Korean businesses operating in Kaesong, according to the report.

“The North side believes what the leaders (of the two Koreas) agreed are not mere economic cooperation projects, but projects that will lead to the reconciliation, unification and prosperity of the nation,” the report said.

Daily NK
Kwon Jeong Hyun
11/15/2007

North Korean authorities have recently tightened regulations in markets as a warning against private economics, according to inside sources.

The regulation of Pyongyang markets has continued since President Roh Moo Hyun’s visit to North Korea in the beginning of October. North Korean authorities closed all markets in Pyongyang during the Inter-Korea Summit under the whitewash of mobilizing a welcoming crowd. Afterwards, when it reopened the markets, street venders and women under the age of 40 were restricted from engaging in business.

The North Korean inside source said in a November 12th phone conversation that “With the increase in Pyongyang markets, the authorities are not looked at in a favorable light. Regulations worsened after President Roh’s visit to Pyongyang.”

“A week or two before President Roh’s visit, regulations became strict, such as prohibiting outsider visits to Pyongyang and ceasing the operations of the jangmadang (markets). From that point on, the jangmadang has been persistently regulated.”

Leading up to the Inter-Korea Summit, North Korean authorities implemented other civilian regulations as well, such as issuing “special travel permits.”

One Pyongyang trading company head, currently in Dandong, China, said in a meeting with a reporter, “Regulations were tightened after word got out that a clandestinely filmed video clip showing Pyongyang markets had been widely broadcasted in South Chosun (Korea).” He surmised that a clip showing Pyongyang’s Sunkyo Market has been broadcasted on Japanese news programs three times since last month.

He also said, “A decree was issued by the Pyongyang People’s Committee that women under the age of 40 should be employed in enterprises. Our enterprise received the same decree, so we have to take in 200 female workers.”

He said however, “Too many workers have been dispatched, even though our enterprise business is not that large. We objected, saying that we can not receive them because we can not even give them provisions. Other enterprises in Pyongyang are in the same position.”

He emphasized, “People go to the market, because the state cannot sustain them. The party leaders also survive relying on the market, so regulation of the market is impossible. Market control can only be a temporary because the wives and daughters of party leaders are in the situation of selling goods as well.”

He also added, “The number of people in charge of general markets is exorbitant across the country. Those who received 30,000 won per month have to go into enterprises where they will only get 2 to 3,000 won. Restricting the market is something nobody wants.”

The North Korean state is currently prohibiting the undertaking of businesses by women under 40. In North Hamkyung Province, the business age limit will be fixed at 45 and above starting in December, so the members of the Union of Democratic Women have put up a significant resistance.

According to an internal Workers’ Party document which has recently come into the hands of a diplomatic source, the North Korean government is supposed to have given the order to “regulate the markets, as they are hotbeds for anti-socialist activity.”

The document, which was published last October under the auspices of the Central Committee of the Chosun Workers’ Party, read, “The Great Leader Kim Jong Il pointed out, ‘In order to absolutely eradicate this anti-socialist phenomenon, we have to unfold a concentrated offensive.’”

The document states, “Civilians were able to attain some comfort through the market; but now, it has deteriorated into a place that breaks societal order and national rules. In one city, several tens of thousands of merchants come out to the sidewalks and even car lanes and have brought about a severe disruption in traffic.”

The paper gives evidence to the fact that the North Korean government itself recognizes the citizens’ growing reliance on the market due to market revitalization, and that anti-socialist activities are rampant.

The document further criticized, “A more serious issue is that mostly women under the age limit are conducting business in the market, and women who have received high-level education under the auspices of the Party and the nation have thrown away their positions to go into sales, an act which forsakes justice and the most basic conscience.”

Additionally, it specifically addressed those who disseminate illegal South Korean film products, “middlemen,” referring to brokers who secretly sell nationally-regulated, military, and electronic goods, and Chapan-Jangsa (selling goods off trucks) who earn excessive profits from wholesales.

Daily NK
Yoon Il Geun
11/15/2007

Today is the day for the national academic aptitude test in South Korea. In North Korea, there is an entrance exam similar to that in the South, a so-called preliminary examination.

Applicants for admission to universities among senior-middle school students can get letters of recommendation to enter universities according to their test results. When applicable universities are decided for students, they should take the college-specific entrance exams.

There are four kinds of freshmen in North Korean universities: entrusted students (Uitaksaeng), employed students (Hyunjiksaeng), discharged soldiers (Jedaegunyin), and direct students (Jiktongsaeng).

Entrusted students are those who were entrusted or asked to study by a special government or military department. You can be entrusted after you work for the military, National Security Agency, United Front Department under the Workers’ Party or other especial offices for over 5 years. These kinds of departments send their experienced workers who have not yet acquired a bachelor’s degree but have good records to universities in order to promote them. They must return to their positions after graduation. These entrusted students do not need to take the preliminary examination.

Employed students are those who get recommendations to study at universities from their place of employment. Discharged soldiers also have a right to enter the university after completing military service. However, they must take the preliminary examination lead by the Students’ Recruitment Department under the People’s Committee in each city, county or province. After that they can take the entrance exam.

The Students’ Recruitment Department issues letters of recommendation to students according to how they rank on the preliminary examination. For instance, the first and second top-ranking students may be recommended for Kim Il Sung University, the 3rd and 4th ranked students for Kim Chaek University of Technology, those ranking from 5 to 15 may be recommended for universities in Pyongyang, and the rest of students can get the recommendations for local universities.

Direct students are those who enter universities right after they graduate from middle school. The graduation examination for middle school counts as the preliminary exam for direct students.

Since the conscription system was adopted in North Korea in 2002, senior middle school graduates, with the exception of special middle schools such as foreign language schools or No. 1 senior-middle schools, cannot enter universities directly due to their compulsory military service.

Students all over the country take the preliminary exam on the same day, and the graduation examination is also taken on a nationally appointed day. However, graduation examinations differ among senior middle schools.

Grading the exam is handled respectively by the each local university. During this process, bribes in return for raising scores are common. The situation is the same for preliminary exams as well.

Corruption revolving around the examination process is getting more serious. The number of students recruited is determined by a regional quota system. The Education Department distributes an allocated number of letters of recommendation for universities to each middle school.

When the quota for each university is handed down to the provincial recruitment office, cities and counties compete to get more recommendation rights for top universities. This is because the more students a county sends to the universities, the more kickbacks that county will receive.

But in the end, it is evident that money and power, rather than student achievement, present a more effective means of entering universities.