North Korean Economy Watch

Institute for Far Eastern Studies (IFES)
2011-9-14

At the seventh China Jilin and Northeast Asia Investment and Trade Expo (NEASIAEXPO), the North Korean delegation actively promoted the Rajin-Sonbong (Rajin) Economic and Trade Zone to attract investment.

During the expo, the DPRK’s Ministry of Trade and China’s Ministry of Commerce and People’s Government of Jilin Province co-sponsored the “(North) Korean Business Day and China-DPRK Trade and Investment Session” at the Changchun International Conference and Exhibition Center on September 7. Hwang Chol-nam, the vice mayor of Rason City, briefed the attendees on the current situation, advantages, and special benefits of his city.

According to Hwang, “The spacious 470 square-kilometer Rason Economic and Trade Zone is one of the largest economic trade zones,” and advertised the geographic and economic advantages of Rason as the “transportation hub of Northeast Asia that connects China and Russia via Tumen River and with Japan across the East Sea.”

He also introduced the three ports in the region. “Rajin Port is equipped with the annual loading capacity of 3 million ton and Sonbong Harbor is able to transport 2 to 3 million ton of oil while Ungsang Harbor is able to handle up to 600,000 cubic-meter of lumber annually.” He also boasted the ports to be deep enough where it does not freeze during the winter.

Rason was also introduced to have received the “special city” designation in 2010 and will grow to have a population of one million. The recently amended “Law on the Rason Economic and Trade Zone” was revised and supplement with over 50 articles.

Hwang also elaborated on the eight preferential policies providing special tax benefits to foreign investors. He asserted, “The government of North Korea will guarantee the investment of the foreign investors by not nationalizing or demanding requisitions. For inevitable cases where such demands occur, proper compensation will be provided.”

The income tax is also at 14 percent, which is 11 percent lower than other areas in North Korea. For companies with business plans over ten years, foreign capital companies will receive three years of tax-free benefit starting from the profit earning year and two years thereon after will receive 50 percent tax-free benefits. According to Hwang, over 100 foreign companies and offices are operating businesses currently in the special economic zone.

He also announced that the current highway construction project connecting Rajin with Wonjung is expected to be completed in October, and that the Tumen-Rajin port railway system is to be upgraded to a broad gauge railway next month.

Specifically, Russian Railways reached an agreement with North Korea to repair the Hasan-Rajin Railway and improve the Rajin port facilities, especially focusing on Pier 3. The plans include upgrading Rajin as a container harbor to be capable of transporting twenty-foot equivalent units annually. Russia and the DPRK have already conducted measurement and geological surveys and reached the process design phase.

However, Seo Gil-bok, the DPRK’s vice minister of commerce, stated in a speech that North Korea would “actively work hard to make the Rason region a successful collaboration between the DPRK and China,” saying further that they would “pull out all the stops to realize the goals agreed by the best leaders from both nations.”

Many foreign media and correspondents were present at the event to cover the “Korean Business Day.” At the event, North Korea actively promoted the Rason Economic and Trade Zone by also presenting a promotional video of the zone.

Over the last couple of decades, Pyongyang has shown a callous reluctance to part with its foreign currency reserves to acquire the necessary amount of food needed to sustain its population.  The DPRK government has, however, promoted a number of domestic initiatives, some financed locally and others with international assistance, intended to boost regional food security (and decrease individual mobility) which have cost it little in the way of scarce foreign currency. Some of these projects have been previously documented on this web page: The construction of regional fish and fruit farms, as well as large-scale land rezoning, land-reclamation (and here), and sea-scaping projects.

Today the Russian media reports yet another clever idea the North Koreans are pursuing to increase domestic food production: renting farmland in Eastern Russia.  According to RIA Novosti:

A delegation from North Korea, which is facing severe food shortages, has held talks with authorities of the Amur region in Russia’s Far East on leasing land to grow vegetables and grain, a regional official said on Thursday.

North Korea plans to rent several hundred thousand hectares of land in the Amur region, which has about 200,000 hectares of idle land in regional, municipal or private ownership.

“The North Korean authorities are planning an unprecedented agricultural project – to create a farm in the Far East to grow soybeans, potatoes, corn and other crops. Everything that Korean citizens need, because the issue of food shortages there are acute from time to time due to land shortages,” the official told RIA Novosti.

North Korean state media said the country’s chronic food problems have been exacerbated by heavy rains in June and July. A tropical storm washed away or inundated 60,000 hectares of land in farm regions.

Amur region minister of foreign economic relations Igor Gorevoi said the land must not be abandoned.

“We are also interested in investment in farm machinery and equipment. Another key condition is that the newly-formed Korean company must be registered in the Amur region, which means tax revenue for the budget,” he said.

The initial lease of the land, which is to be auctioned off, amounts to 50 rubles ($1.70) a year per hectare.

The Korean delegation plans to consider the terms of the lease next week.

North Korean leader Kim Jong-il, whose country faces increasing international isolation because of its nuclear program, visited Russia in August in his own armored train on a rare foreign trip and had talks with Russian President Dmitry Medvedev. Russia then promised to send 50,000 tons of grain to Pyongyang.

It will be interesting to see if this project can be realized.

Additional Information:

Kim Jong-il recently met Russian president Medvedev in this area.

Russia is sending 50,000 tons of grain to the DPRK in flood relief.

Read the full story here:
North Korea to rent farm land in Russia’s Far East
RIA Novosti
2011-9-1

Pictured Above (Google Earth): The Taedong Credit Bank offices at the Potonggang Hotel.  See in Google Maps here.

London UK/Pyongyang DPRK, 26 August 2011
The Board of Daedong Credit Bank is pleased to announce that the foreign shareholding in Daedong Credit Bank has been sold to a Chinese based corporate entity, the “Nice Group”.

The foreign-appointed directors on the Board of Daedong Credit Bank have resigned with immediate effect, and have no further interests (financial or fiduciary) in the company.

Outgoing CEO of Daedong Credit Bank, Nigel Cowie noted:

“I am now heavily involved with a second joint venture company in the DPRK, Hana Electronics JVC. Established in 2003, this company has enjoyed solid commercial success and has recently opened its new headquarters building, together with the expansion of its business lines.

The success of both ventures has been such as to necessitate a decision to focus on one or the other, and a commercial decision had to be made.

The bank is continuing to enjoy the commercial success it has seen for the past 16 years, but ironically the decision has been made easier by the general sanctions-laden environment in which financial business here is framed these days.

As to the possibility of ever re-entering the bank, any decision we make will be based purely on commercial considerations.”

Both Hana Electronics and Phoenix Commercial Ventures bank with DCB, and will continue to do so.

About Daedong Credit Bank

Daedong Credit Bank is a joint venture retail bank based in Pyongyang. It was established in 1995 as “Peregrine Daesong Development Bank”. The Bank underwent a change of name and foreign ownership in 2000.

The wealth of experience garnered over Daedong Credit Bank’s 16 years of successful operation is unrivalled.

Daedong Credit Bank was the first, by fifteen years, foreign majority held bank in the DPRK. DCB is proud to be regarded as a flagship successful joint venture in the DPRK, and a key part of the infrastructure needed to assist the foreign-invested joint ventures, which contribute to the country’s economic development.

The bank’s principal function is to offer normal “high street” banking facilities in hard currency to foreign companies, joint ventures, international relief agencies and individuals doing legitimate business in the DPRK.

Daedong Credit Bank was the first bank in the DPRK to introduce, and vigorously implement, a comprehensive set of anti-money laundering procedures. DCB’s anti-money laundering procedure manual was introduced eight years ago, and subsequently updated based on anti-money laundering guidelines provided by the Asian Development Bank. The manual has been sent to, and accepted by, DCB’s international correspondent banks.

Daedong Credit Bank also maintains strict procedures for the detection and rejection of counterfeit bank notes; it uses regularly updated note checking machines, and has personnel with over 15 years of experience of handling notes.

Daedong Credit Bank is strongly positioned in relation to the future economic development of the DPRK, and, being the oldest established foreign invested commercial bank in the DPRK, it is the intention of the bank to capitalise on these advantages.

CONTACT INFORMATION
Daedong Credit Bank office address in Pyongyang is:
Daedong Credit Bank
Suite 401, Potonggang Hotel
Ansan-dong
Pyongchon District
Pyongyang
Democratic People’s Republic of Korea
www.daedongcreditbank.com

According to the Choson Ilbo:

According to the Unification Ministry, 123 firms were operating in the industrial park as of July, with combined production output amounting to US$34.87 million in May, up 25 percent from $27.79 million year-on-year.

The total volume of inter-Korean trade through the industrial park reached $825.88 million in the first half of this year, up 19.5 percent from last year and a whopping 135.8 percent from 2009.

South Korean staff dwindled from 1,461 in 2008, when inter-Korean trade was at its height, to 801 in May this year, but the number of North Korean workers rose from 36,650 to 47,172. And some 3,700 more North Korean workers were hired even since May last year when the South banned new investments there after the North sank the Navy corvette Cheonon in March.

At the moment, the regime is unlikely to shut down the industrial park, since nearly 50,000 North Koreans are working there. But experts stress that the government should take the seizure of the properties in the resort as a warning and be prepared for anything that the regime could do.

“There’s nothing we can be sure of in inter-Korean relations,” said Dong Yong-seung, a researcher at the Samsung Economic Research Institute. “Risk factors always exist because the government launched the Kaesong project without providing any safety net to protect its people and properties, as in the case of the Mt. Kumgang tour project.”

South Korean investments in the industrial park amount to W920 billion (US$1=W1,079) — W540 billion invested by the 123 firms, and W380 billion from the government and public corporations to lay the infrastructure, including electricity and communications facilities, and landscaping.

If the regime shuts down the industrial park, the South would suffer double the losses it incurred from the regime’s seizure of the properties in Mt. Kumgang, which are worth W484.1 billion.

Read the full story here:
Kaesong Firms Worry as N.Korea Seizes Mt. Kumgang Assets
Choson Ilbo
2011-8-24

UPDATE 1 (2011-8-17): The recently sanctioned bank denies it has ties to Iran and the DPRK. According to Lebanon’s Daily Star:

The Lebanese subsidiary of a Syrian bank sanctioned by the United States denied on Wednesday “unfounded political allegations” that it dealt with North Korea and Iran.

“Since the establishment of our institution, we have never had any operation with either a North Korean or an Iranian entity even before the existing sanctions,” the Syrian Lebanese Commercial Bank said.

“As a result, we deny all accusation of being involved in any illegal activity with any suspected country,” a statement added.

The United States Treasury has charged that the state-owned Commercial Bank of Syria allegedly supported Syria and North Korea’s efforts to spread weapons of mass destruction.

Washington last week imposed sanctions on the bank, the Syrian Lebanese Commercial Bank and telecoms company Syriatel over President Bashar al-Assad’s increasingly brutal crackdown on pro-democracy protests.

The move freezes the US assets of the businesses targeted and prohibits US entities from engaging in any business dealings with the two banks.

ORIGINAL POST (2011-8-14): The US has sanctioned a Syrian Bank for its involvement in DPRK proliferation activities.  According to Yonhap:

The Treasury Department said the Commercial Bank of Syria has provided financial services to North Korea’s Tanchon Commercial Bank and Syria’s Scientific Studies and Research Center, both of which were blacklisted for the proliferation of weapons of mass destruction.

The Syrian bank’s Lebanon-based subsidiary, Syrian Lebanese Commercial Bank, and Syriatel, the largest mobile phone operator in Syria, were also sanctioned under Wednesday’s measure.

“By exposing Syria’s largest commercial bank as an agent for designated Syrian and North Korean proliferators, and by targeting Syria’s largest mobile phone operator for being controlled by one of the regime’s most corrupt insiders, we are taking aim at the financial infrastructure that is helping provide support to (President Bashar) Asad and his regime’s illicit activities,” Under Secretary for Terrorism and Financial Intelligence David S. Cohen said in a press release.

The Commercial Bank of Syria also holds an account for Tanchon Commercial Bank, the primary financial agent for the Korea Mining Development Corp., North Korea’s premier arms dealer and main exporter of goods and equipment related to ballistic missiles and conventional weapons, according to the department.

The U.S. is stepping up efforts to isolate the Assad regime amid its brutal crackdown on anti-government protesters.

NTI has additional information here.

Other DPRK-Syria stories below:
1. Syria and the DPRK collaborated on the construction of Syria’s nuclear facility which was destroyed in 2007 by an Israeli air strike.

2. According to Joshua Pollock, over the last decade the DPRK and Syria have cooperated on missile development.

3. The UNSC was investigating a shipment of North Korean chemical safety suits to Syria.

4. Syria’s Tishreen War Museum was designed and built by North Koreans!

Another North Korean is suing for an inheritance claim in South Korean courts.  According to the Joong Ang Ilbo:

A North Korean man is seeking to inherit part of the assets left behind by his father who died in the South, government and court officials here said yesterday, just weeks after a similar case ended in assets being split among family members across the two Koreas.

The man in his 50s is currently preparing to file a lawsuit with the help of an agent in China and a lawyer in South Korea, the officials said on condition of anonymity. The man’s late father reportedly left behind an inheritance worth millions of dollars.

The alleged case comes on the heels of a similar inheritance dispute that ended earlier this month after a Seoul court mediated the split of assets worth 10 billion won ($9.35 million) between South and North Korean family members of a North Korean man who died here in 1987. It was the first time North Koreans were awarded assets left by a relative in the South.

The lawyer in charge of the new case visited South Korean ministries last month to discuss the possibility of transferring assets out of the country, according to a government official.

The large amount of assets involved in the recent inheritance lawsuits has raised suspicions of the North Korean regime’s involvement, the official added.

“Judging from the recent cases, it seems like the North Koreans are filing lawsuits with detailed knowledge of their parents’ inheritance. Wouldn’t that be difficult without the [North Korean] government’s help?” the official said.

An earlier report indicated that a new South Korean law is supposed to go into effect in January 2012 which prevents inheritance claims from being sent to the DPRK without the permission of the Seoul government.  This would mean that if this case can be resolved quickly (slim chance) the funds might find their way back to the DPRK.

After January 2012, should North Koreans continue to file these cases, we can expect that Pyongyang would put them on the table in any kind of inter-Korean negotiations.  This could potentially make a few North Koreans opposed to reconciliation between the two governments since it would imply the South Koreans would release the funds to the North Korean government rather than holding them in escrow for the individuals themselves.

Read the full story here:
N. Korean man sues to get father’s inheritance
Joong Ang Ilbo
2011-8-1

It has been a couple of years since we heard from Sean Garland, but the Irish Times reports that the alleged purveyor of alleged North Korean “supernotes” is fighting his exztradition to the US at Ireland’s high court.  According to the story:

A veteran republican handed over almost $250,000 in Russian hotels in an international plot to spread the notes across Europe, a court heard.

Authorities in the US have accused Sean Garland of being the ringleader of a massive forgery racket that distributed the top grade counterfeit $100 bills.

The former IRA leader is fighting his extradition to the US at the High Court in Dublin, which heard Garland met a co-conspirator twice in Moscow with the fake cash.

Garland, 77, also the ex-president of the Workers’ Party of Ireland, denies the allegations.

In an affidavit to the court, Brenda Johnson, assistant US attorney, said: “This case involved a long-standing and large-scale supernotes distribution network (the Garland organisation) based in the Republic of Ireland and headed by Sean Garland, a senior officer in the Irish Workers’ Party.”

The US Secret Service (USSS) discovered the ‘supernotes’ were sourced in the Democratic Republic of North Korea, she said, and were transported around the world by North Korean officials travelling under diplomatic cover.

They also allege Garland and six co-conspirators used couriers to transport supernotes and payments to avoid detection themselves.

The international probe, which also involved the UK’s National Crime Squad (NCS) – now the Serious and Organised Crime Agency (Soca) – and the interior ministry of Russia (MVD), found the high-grade counterfeit bills were in worldwide circulation from the late 1980s until at least July 2000.

Ms Johnson alleged one of Garland’s alleged co-conspirators, Hugh Todd, later told investigators he purchased more than $250,000 of supernotes from “the Garland organisation” which were redistributed into the world economy through currency exchanges across Europe.

He maintained he first met the Irishman in the Radisson Hotel in Moscow in April 1998, where Mr Garland emptied a leather bag packed with approximately 80,000 dollars of counterfeit US notes on to a bed for $30,000 in genuine notes.

Two months later, the pair met in the Savoy Hotel in Moscow, where between $160,000 and $180,000 of counterfeit US currency was handed over, it is claimed.

Records with Scandinavian Airlines prove Mr Garland was in Russia on both occasions, she added.
An undercover NCS officer infiltrated the group in 1999 and met with members in several pubs and hotels around Birmingham, where they discussed the counterfeit notes and how their boss ’Sean’ sourced them in Russia.

Ms Johnson’s affidavit states Garland knew the Federal Reserve notes were counterfeit, that he travelled circuitous routes and met with other conspirators to discuss the supernotes operation and engage in transactions.

“Some members who were apprehended in possession of or passing notes have admitted that Garland was the source and leader of an illegal supernote distribution organisation and that (Christopher) Corcoran was his direct contact, communicator and negotiator,” she said.

“Their statements are substantiated by documentary evidence, physical and electronic surveillance and other witness accounts.”

Garland, of Beldonstown, Brownstown, Navan, Co Meath, was a former IRA leader in the late 1960s and early 1970s. He was a key figure in securing the official IRA ceasefire of May 1972.

He was initially arrested by the PSNI on foot of an extradition warrant by the US authorities in October 2005 at the Workers’ Party annual conference in Belfast. He fled to the South when released on bail.

He was later arrested outside the Workers’ Party in Dublin in January 2009 and released on strict bail conditions, which included surrendering the title deeds to his family home.

Barristers for Garland maintained the pensioner should not be extradited as the alleged offence happened in Ireland and was based on hearsay.

Michael Forde, senior counsel, argued his client had been accused of a complex, sophisticated trans-national conspiracy, but that the charge fell under Ireland’s own forgery or money-laundering laws.

“The rationale is very simple,” said Mr Forde. “If the offence was committed against Irish law, and a substantial part committed in the State, then the State should prosecute.”

His legal team also argued Garland’s fundamental rights have been infringed, that there had been a delay is making the second extradition order and that the extradition was connected with a political offence.

Mr Forde also claimed the application was hearsay based on hearsay and had not established a prima facie case.

“The question this court has to ask itself is there enough admissible evidence here to justify putting Mr Garland on trial,” he added.

The extradition hearing before Mr Justice John Edwards is listed for four days.

Stories related to the DPRK’s alleged counterfieting activites can be found here.

Read the full story here:
Ex-IRA man Garland ‘led fake dollars plot’, court told
Irish Examiner
2011-7-18

Picture above from the Daily NK.

According to the Donga Ilbo:

China has begun cracking down on North Korea`s narcotics trade in China along with South Korean intelligence, having seized 60 million U.S. dollars worth of drugs from the North last year, according to a South Korean government source Monday.

“It’s only a fraction. The volume of drug trafficking in China will be much greater than that,” the source said.

This is the first time for China to unveil the volume of narcotics made in North Korea.

Beijing had been reluctant to raise the matter in public though it found Pyongyang`s increased drug trafficking as a threat. China diplomatically protects the North in nuclear issues but started a crackdown with South Korea apparently because it can no longer tolerate the North`s narcotics, which threatened China`s three northeastern provinces bordering the North.

The drugs seized by Beijing are said to have the best quality, going beyond the level individuals can produce. So Pyongyang is considered to be manufacturing narcotics on the national level at factories.

“China is pretty much pissed off,” a diplomatic source said, adding, “China believes that North Korea’s drug trafficking has grown more serious since last year.”

Though Beijing did not specifically mention the North when it stressed a crackdown on drugs, it implied North Korean-made narcotics.

In a previous post, we linked to a Newsweek story on the Chinese crackdown:

Twenty years ago, Yanji had only 44 registered drug addicts. Last year, the city registered almost 2,100 drug addicts, according to a 2010 Brookings Institution report, with more than 90 percent of them addicted to meth or similar synthetic drugs. Local officials acknowledge that this is very likely a gross undercount and that the actual number may be five or six times higher. “Jilin Province is not only the most important transshipment point for drugs from North Korea into China, but has itself become one of the largest markets in China for amphetamine-type stimulants,” the Brookings report said.

Chinese authorities recently conducted a provincewide crackdown, code-named Strong Wind. But for law enforcement, the drug presents a particular problem. Unlike other drugs, it’s nearly impossible to trace the origin of meth. Still, officials, residents, and experts believe that much of the methamphetamine consumed in this Chinese region is manufactured across the border in North Korea, a longtime exporter of drugs. “Clearly,” the Brookings report said, amphetamine-type stimulants “from North Korea have become a threat to China in recent years.”

In an article published last year, Cui Junyong, a professor at Yanbian University’s School of Law, posited that a large amount of the illegal drugs ingested in Yanji came from North Korea. Supporting his point, the border patrol last year arrested six North Koreans in a high-profile bust, including a dealer named “Sister Kim.” Although sources estimate that a gram of meth in North Korea costs roughly 10 times the price of a kilo of rice—about $15—it’s still much cheaper than in China.

“Selling ice is the easiest way to make money,” says Shin Dong Hyuk, who was born in a North Korean concentration camp in 1982 and escaped to South Korea in 2005. Every defector, he added, “knows about ice.”

Perhaps because of its alliance with its benighted neighbor, the Chinese government has been extremely careful about pointing its finger at North Korea; reports on drug busts in Jilin province euphemistically refer to the drugs as coming from a “border country.”

“We don’t publicize” the drugs coming from North Korea because it would touch on “the good relationship between China and North Korea,” an official, requesting anonymity, from Jilin’s anti-drug unit says. But he adds, “Of all the drugs we’ve seized this year, it’s mostly been ice, because that’s our main drug here.”

…

According to Yun and others, North Korea’s methamphetamine production is centered in Hamheung, the site of a chemical-industrial complex built by the Japanese during World War II, which has a high concentration of chemists and was reportedly one of the worst-hit cities during the famine.
…

Earlier this year, a US Department of State report to the Congress alleged that the DPRK’s state-sponsored drug production was on the wane–though “private” production and trade along the Chinese border remained a problem.  According to one report:

In an annual report submitted to Congress, the US State Department said “no confirmed instances of large-scale drug trafficking” involving the North Korean state or its nationals were reported in 2010.

It said there was not enough information to confirm that the communist state was no longer involved in drug manufacture and trafficking “but if such activity persists, it is certainly on a smaller scale”.

This is the eighth consecutive year that there were no known instances of large-scale methamphetamine or heroin trafficking to either Japan or Taiwan with direct North Korean state involvement, it said in the 2011 International Narcotics Control Strategy Report.

“The continued lack of public reports of drug trafficking with a direct DPRK (North Korea) connection suggests that such high-profile drug trafficking has either ceased or been sharply reduced,” the report said.

The report said, however, that trafficking of methamphetamines along the North Korea-China border continues and press reports about such activities have increased in comparison to last year.

“These reports… point to transactions between DPRK traffickers and large-scale, organised Chinese criminal groups” in locations along the border.

“Press reports of continuing seizures of methamphetamine trafficked to organised Chinese criminals from DPRK territory suggest continuing manufacture and sale of DPRK methamphetamine,” the report said.

This and continued trafficking in counterfeit cigarettes and currency suggests that “enforcement against organized criminality in the DPRK is lax”, it added.

Additional Information:
1.  Back in March, Andrei Lankov wrote about this situtaion.

2. Earlier this year, the DPRK arrested some Japanese men in Rason for “trafficking and counterfeit”.

3. In June, China intercepted a meth shipment from the DPRK.

4. Marcus Noland also has posted on this topic.

Part 1: The Illogicality of Anti-Socialist Policy
Lee Seok Young
2011-6-22

In North Korea today, those actions which are subject to the harshest oversight and most excessive punishment are those deemed anti-socialist, an expression of the extent to which such actions are seen as a threat to the regime.

Yet these very actions have already taken deep root in people’s lifestyles, spreading rapidly as a result of chronic economic difficulties, food insecurity, endemic corruption and the inflow of information from abroad.

First of all, every North Korean and defector the Daily NK meets says much the same thing; that if people had not followed an ‘anti-socialist’ path during the mid-90s famine, they could not have survived. The power which maintains North Korean society through the hardest times is that derived from anti-socialist actions, and it is those actions which the authorities would like to put an end to.

The blocking of these so-called ‘anti-socialist trends’ nominally began with Kim Jong Il’s 1992 work, ‘Socialism Is a Science’, issued following the fall of the Eastern Bloc. A time of great fear for the regime, ‘Socialism Is a Science’ expressed a determination to block out anti-socialist phenomena.

However, a famine exploded nationwide shortly after the publication of the thesis, placing these very anti-socialist modes of behavior at the core of the lives of almost everybody in the nation.

Having completely replaced Kim Jong Il and the Chosun Workers’ Party as the alpha provider of sustenance, money is now uppermost in the minds of the people. If they can, they are moving away from the collective farms, factories and enterprises to become more active in the market.

“At a time when the state didn’t provide rations and workers were not even receiving their monthly wages, the ones who started trading early on were all best able to avoid this predicament,” said one defector, “Others followed after their example and, rather than trying to find work, went straight into the market.”

Money, then, is the fundamental toxin that now threatens to shake the very basis of the Kim regime, completely undermining the ‘let’s work the same, have the same and live well’ lifestyle that the regime has long been demanding from the people.The authorities, as part of a losing battle to halt this slide, ‘educates’ the people with the mantra, “Don’t become a slave to money,” but it makes no difference.

People are growing more and more money-oriented. What simply began as a desperate rearguard action to survive extreme poverty has become a preoccupation with accumulating wealth. The many who don’t have the capital to start a business are keen to work with those who do.

One interviewee, a woman hailing from North Hamkyung Province, told The Daily NK, “They have to keep trying, but they can’t eliminate it. How could they, when the state itself is actually encouraging its spread? Everywhere you go, they demand bribes, and people with money never get punished even when clearly guilty, because everyone is desperate to earn money.”

Given that the central authorities demand Party funds from regional bodies, and regional Party and military cadres in turn work with smugglers, and the cadres charged with inspection turn a blind eye to criminal acts in exchange for bribes, the whole system is, as the interviewee said, rotten from the top down.

One defector who left his position as a cadre in a Yangkang Province enterprise agreed, recalling, “The Party periodically collected money from our factory, but since all the machinery had long since stopped running, they made us work in the market and give 30% of the profits to the authorities. It was the state that promoted anti-socialism in consequence.”

Another defector originally from North Hamkyung Province said in a similar vein, “The National Security and People’s Safety agents stationed on provincial borders stop people without the right permit to travel, but let them pass in exchange for a few packs of cigarettes. Some even ask for your wrist watch. It’s not just the people; the whole nation is busy being anti-socialist.”

Increasing exposure to foreign materials is also influencing the situation somewhat. Such things are especially popular with students and women working in the markets, two groups which are more up-to-date than most.

South Korean and Western culture is being transmitted quickly via DVD, and materials that are brought into the state from China by traders and smugglers are also pushing forward new trends such as the ‘Korean Wave.’

To the North Korean people, who once lived in near complete isolation from the rest of the world, the introduction of foreign materials has intensified their yearnings for a new life style. The stricter the regulations become, the thirstier for something else the people become.

Part 2: Crackdowns Enhancing Anti-Socialist Cycle
Mok Yong Jae
2011-06-23

‘Anti-socialism’ in North Korea is a destabilizing force disturbing the foundations of the system. For that reason, the authorities place a great emphasis on rooting it out. Inspections are frequent and their targets varied. But the fact is that this has done little to stop the growth of such activities; in fact, quite the opposite; some believe that targeted inspections actually increase instances of smuggling, for example.

These focused inspections are handed down in the name of the ‘Party Center’ in other words Kim Jong Il. The latest inspections over anti-socialist trends in border areas have been being carried out by Kim Jong Eun’s direct instruction. First people are educated about and warned against ‘anti-socialist behavior’, then provincial Party and military cadres launch an inspection.

If a concerted inspection is to be unleashed on a given area, an inspection unit is set up, and it does the work. In the case of recent inspections targeting drugs and defection, the inspection units have even been sent from the Central Committee of the Party. The makeup of the unit can differ slightly depending on the target of the inspection, but usually includes agents from the National Security Agency (NSA), People’s Safety Ministry and Prosecutors Office. Precise search sites are usually selected at random and the searches conducted without warning, while ‘criminals’ are flushed out in part by getting citizens to report on one another.

However, the effectiveness of this system has a limit. This is primarily due to an overwhelming degree of official corruption at nearly all levels.

The Spread of Bureaucracy and the Limits of Inspections

The primary agents conducting the inspections, agents from the NSA and PSM, collude with smugglers for their own benefit. Anti-socialist activities are not a new means of survival, and the more commonplace the inspections become, the more focused the agents doing it become on their own self-interest; i.e. rent seeking rather than uncovering instances of wrongdoing.

For example, agents seek out big smugglers only in order to offer them an opportunity for their actions to be ignored, something they will do for a price. A source from Yangkang Province explained to The Daily NK, “Hoping not to lose their goods, also so as to avoid prison, in many cases smugglers try to win over agents. They talk to the official for a while, and if they think ‘this guy can be won over’ then some even gently encourage them to find a way to forego any punishment.”

Then, when the inspecting agents begin dropping heavy hints about expensive merchandise, electronics or a piano, for example, the smugglers say, “I’d be delighted to buy that for you,” and for that receive their freedom.

Thus, it is rare for money to change hands directly; goods are bought in China and handed over when the inspection period has come to a close. The smuggler also obtains a permit to import a certain amount of other goods without penalty in the future. By winning over agents in this way, assistance in future times of trouble can also be secured.

In addition, as Lee Jae Won, the former chairman of the Korean Bar Association Committee on Human Rights in North Korea and someone who has interviewed a great number of defectors as author of the 2010 White Paper on Human Rights in North Korea, concludes, “Anti-socialist activities are extremely common for North Korean cadres in public positions such as prosecutors and judges.” The bribing of prosecutors and judges in exchange for leniency or to escape conviction is a daily occurrence, as much as bribing the security forces and cadres.

What Anti-socialist Counteroffensive? Officials are the source of Antisocialism

Now much more so than in the past, cadres and agents are directly involved in the antisocialist activities.

A Chinese-Korean trader who often goes between Dandong and Shinuiju told The Daily NK, “There are so many drugs in North Korea that even the officers supposed to be policing it are taking drugs themselves. Some of them even asked me to take opium to China and sell it. I go back to North Korea every year to visit relatives, and I’ve seen officers there doing bingdu (methamphetamines) with my own eyes.

It is also said that the families of cadres are the main source of South Korean movies and dramas on DVD. Party cadres are, in effect, the very source of the Korean Wave that their bosses in Pyongyang ban on the premise of defending the state from the ‘ideological and cultural invasion of the South Chosun reactionaries’.

A source from Pyongan Province confirmed the story, telling The Daily NK, “These DVDs and VCDs come from the houses of cadres who travel overseas a lot. The children of cadres love watching them. The families of traders have a lot of them, too, but it’s the cadres they’re spreading from.”

Thus, while the central Party single-mindedly attacks anti-socialist behaviour, the cadres and agents who are meant to be carrying out the orders are deeply involved in the ‘anti-socialism’ themselves. The more crackdowns that occur, the more contact there is between the elite and security forces on the one hand and smugglers and traders on the other, offering more opportunities for symbiosis. It is for this reason that some claim the inspections are actually catalyzing the anti-socialism.

Meanwhile, An Chan Il of the World North Korea Study Center pointed out to The Daily NK that the whole thing is completely inevitable, saying, “These inspection teams are not receiving proper rations from the state, so of course they take bribes instead when sent out into the field. Administrative irregularities and corruption are at the very heart of these anti-socialist inspections. The only way for the families of inspecting agents to survive is for the father to be a part of this anti-socialist behavior.”

Choi Yong Hwan from the Gyeonggi Research Institute agreed, adding, “These inspections are intensifying social inequality. The fundamental cause of this is the collapse of the state rationing system due to economic difficulties. It’s a situation where even the agents are hungry, so there is a permanent pattern of them attempting to guarantee their own survival via corruption. There is a vicious cycle repeating here, whereby those who are able to ingratiate themselves with the inspecting agents and cadres survive, and those who do not or cannot get punished.”

According to KBS:

South Korean firms doing trade with North Korea must will soon make payments only at government-designated banks.

The Unification Ministry said it will revise the law on inter-Korean cooperation and exchange to this effect. It said the measure aims to provide a greater understanding of the monetary flow of inter-Korean trade and secure transparent transactions.

The ministry has announced the qualifications a bank must meet to deal in inter-Korean trade payments and through June third, any of the 18 commercial banks in the country can apply for the designation. Two or three banks will be selected.

The revised law will also state in clearer terms the conditions and procedures relating to cross-border exchanges. It further calls for obtaining government approval when South Korean residents wish to transfer money to families in North Korea or when overseas chapters of South Korean firms seek to invest in North Korea.

The South Korean government is also seeking to gain control over remittances to families of DPRK defectors.

Read the full story here:
Designated Banks to Process S-N Trade Payments
KBS
2011-05-25