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North Korea wants to revive search for US MIAs

Sunday, January 31st, 2010

Michael Rank

I posted last year about a British Korean War pilot who is buried in North Korea. This got me interested in MIAs (missing in action) in the Korean War more generally, particularly Americans as there was in the 1990s rather surprisingly a joint US-North Korean programme to recover their remains.

This Clinton-era project foundered after a few years, not at all surprisingly, but there are now, equally surprisingly, signs the North Koreans want to revive it.

Admiral Robert F. Willard, the head of U.S. Pacific Command, said on Jan 27: “We’re going to enter into discussions with [North Korea] [about MIAs]. That is what we know right now.”

“They are willing to talk about it and we’re willing to address the particulars with them.”

“It’s a complex problem. We’ve been in (North Korea for recovery missions) before, and it appears that we’re being invited to consider going back again,” Willard told reporters at Camp Smith, Hawaii, according to the Honolulu Advertiser. “It’s something that we’ll take seriously and we’ll enter into dialogue with them and find out where it will lead.”

No date has been agreed on restarting the search for the remains. More than 8,100 Americans remain unaccounted for from the Korean War, according to the Department of Defense.

During Operation GLORY in 1954, North Korea returned the remains of over 2,000 Americans, the Department of Defense says .

“Between 1954 and 1990, the U.S. was not successful in convincing North Korea to search for and return additional U.S. remains,” the Defense Prisoner of War/Missing Personnel Office (DPMO) states on its website.

“However, from 1990 to 1994, North Korea exhumed and returned what they claimed were 208 sets of remains. Unfortunately, their records and recovery methods have hampered U.S. efforts to identify most of these. The North Koreans co-mingled the remains and the associated personal effects. These difficulties underscored clearly the need for joint field activities in which U.S. expertise would guide the recovery process and improve the identification results.”

Larry Greer, director of public affairs of the DPMO in Arlington, VA, confirmed to me that the North Korean army “informed the United Nations that they were willing to talk about remains recovery operations. That was at a Panmunjom meeting on the 26th [Jan], our time. The U.S. has not yet responded.”

The US military newspaper Stars and Stripes last year quoted a US Defense Department anthropologist who had taken part in the hunt for MIA remains in the North as saying he was frustrated that the operation north of the border had been suspended.

“I am always disappointed when politics interfere with human rights and bringing closure to families whose relatives died in Korea so long ago,” said Jay Silverstein during a search for remains in South Korea close to the border with the North.

He said he hoped some day to return to North Korea to continue to search for the remains of U.S. service personnel. “I found the North Koreans very pleasant to work with,” said Silverstein, who was overseeing the excavations in Hwacheon county about eight miles from the border with North Korea.

“My experience was very positive. It gave me a lot of hope for the future … that relations between the North and the South and the West and the rest of Asia will someday be improved.

“I found [the North Koreans] to be very reasonable people. Very friendly. We could sit down and have a beer, or smoke a cigar, and talk. It was quite pleasant,” he added. [Surely the first time a US military official has ever said anything nice about North Koreans? Ed]

Apart from the suspended agreement with North Korea, the United States reached an agreement with China in 2008 “to formalize research in Chinese archives on Korean War POW/MIA matters.”

The Chinese side seems to have been reluctant to share much information with the Americans so far, but the Chinese news agency Xinhua reported last October that “Chinese military archivists have identified more than 100 documents that could lead to the repatriation of the remains of the United States personnel who disappeared during and after the Korean War”.

It added that “China’s People’s Liberation Army (PLA) Archives Department has been combing more than 1.5 million archives of the then People’s Volunteer Army (PVA), the Central Military Commission (CMC) and the PLA headquarters during the Korean War.

“Archivists have given at least four valuable archives found in the first 10 percent to the Defense Prisoner of War/Missing Personnel Office (DPMO) of the U.S. Department of Defense.”

The Chinese report mentioned how archivists had located the site where a U.S. bomber crashed in 1950 in the southern province of Guangdong. “After visiting the site and interviewing 19 witnesses who helped them identify the burial site of U.S. crew, they believe the possibility of finding the remains is high,” it added.

The DPMO’s Greer said that “We are making slow steady progress” in the joint archive project.

He said that in September 2009 the US hosted six PLA archivists for annual discussions and to review arrangements, and that the archivists provided additional information on the Guangdong crash site which was part of their annual report in June 2009.

In October 2009, General Xu Caihou 徐才厚, vice-chairman of the PLA’s Central Military Commission, presented four Chinese-language documents to Defense Secretary Robert Gates during a visit to Washington.

“The documents concerned the Guangdong site and a F-86 Korean War crash site in China about which we were already aware.We have requested permission to investigate the Guangdong Province crash site in April this year,” Greer told me in an email.

“At the September 2009 meeting we also discussed amending our arrangement to facilitate the transfer of actual documents from the PLA archives to us and to permit joint PLA archives-DOD accounting community remains recovery work in China. The amendment process is underway now, but not final,” he added.

The South Koreans, who lost tens of thousands of soldiers in the war, would also like to hunt for their remains in the North.

President Lee Myung-bak said in a New Year’s address this would be an appropriate way to mark the 60th anniversary of the start of the Korean War.

But relations between the two Koreas are so frigid that I would lay a much bigger bet on the US search for MIAs restarting than on a similar agreement being signed between Pyongyang and Seoul.

With many thanks to Daily NK for drawing my attention to North Korea’s interest in reviving the MIA search.

The US has rejected the DPRK offer. According to Reuters:

The United States on Thursday rebuffed a North Korean offer to reopen talks on finding U.S. soldiers missing since the Korean War, saying Pyongyang must first resume discussions on ending its nuclear ambitions.

Posted in Finance, Fiscal & monetary policy, Military, United Kingdom, USA | Comments Closed

DPRK price level and exchang rate still unstable

Wednesday, January 27th, 2010

According to the Choson Ilbo:

North Korea is struggling to apply its new official foreign exchange rate, revised on Jan. 1, to hotels and shops in Pyongyang, according to a source.

A foreign diplomat stationed in Pyongyang said that the exchange rate is still “fuzzy,” citing hotel exchange rates in the capital dropping to W40 to one euro and rising to W51 a few days later. This is even after the North’s Central Bank initially set the rate at W138 to one euro earlier this month.

The source also said that shops near railway stations had stacks of goods unsold due to uneven prices.

Source:
New N.Korean Currency’s Value ‘Anyone’s Guess’
Choson Ilbo
1/27/2010

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

First meeting of Korea Taepung International Investment Group held

Thursday, January 21st, 2010

UPDATE: According to the Choson Ilbo:

North Korea recently announced it wants to create a bank to finance national development projects and appointed a Korean-Chinese businessman named Pak Chol-su to head what is to be called the [North] Korea Taepung International Investment Group, which is to attract foreign capital for the bank. The seven-member board of directors at the investment company include usual suspects like Kim Yang-gon, the director of the Workers’ Party’s United Front Department, Jang Song-taek, Kim Jong-il’s brother-in-law, and other key players.

But analysts say Pak, a foreigner, is the only one with the ability to attract overseas capital, leading to a sense among South Korean intelligence analysts that Pak was brought in to save what he can of the North Korean economy. It is not the first time. In 2002, the hermit country appointed Chinese-Dutch entrepreneur Yang Bin governor of the Sinuiju Special Administrative Region, though the plan belly-flopped when the Chinese arrested Yang on corruption charges.

According to North Korean sources, Pak was born in 1959, graduated from Yanbian University and has a master’s degree in business and commerce from another university in China. He later developed close ties with high-ranking North Korean officials selling Chinese gasoline in the North. “Since Chinese gasoline is used in cars, it is sold directly to North Korean military officers or key government agencies” since top officials are practically the only ones likely to have one, said one North Korean source. “Pak appears to have gained the confidence of high-ranking officials in the process.”

Pak is believed to have been responsible for setting up a secret meeting between Kim Yang-gon and South Korean Labor Minister Yim Tae-hee in Singapore last October. “Pak used his connections to help North Korea when it was looking for a contact point with the South Korean government after August last year, and it appears this position is his reward,” said Cho Bong-Hyun, a North Korea analyst with the Industrial Bank of Korea. There is speculation that Pak may be tasked with luring South Korean capital for investment in North Korea.

The Taepung International Investment Group was established in China and Hong Kong in September 2006 to lure foreign investment to North Korea. In 2007, Taepung signed an agreement with China’s Tangshan Iron and Steel to build a production plant in North Korea and was involved in getting the New York Philharmonic Orchestra to perform in Pyongyang in February 2008. The North announced last Wednesday that both Taepung and the bank would be headquartered in Pyongyang.

It remains to be seen whether Pak will generate the results the regime hopes for. Lee Jo-won, a professor of North Korean studies at Chung-Ang University, said, “Unlike the appointment of Yang Bin, there seems to have been a certain level of consent in terms of the role Pak will play. But without progress in the North Korean nuclear crisis, it’ll be virtually impossible for him to attract foreign investment.” One senior South Korean government official said, “Last year, North Korea apparently held an investment blitz in the EU and was disappointed to learn that continued economic sanctions due to its nuclear weapons program in effect prevent other countries from making any investment there.”

UPDATE: DPRK establishes national development bank in order to attract foreign capital
Institute for Far Eastern Studies (IFES)
NK Brief No.10-01-22-1
1/22/2010

On January 20, the (North) Korean Central News Agency (KCNA) reported that the North’s most powerful government organization, the National Defense Commission, ordered the establishment of a ‘National Development Bank’ to “carry out investment affairs for projects important to national policy and to conduct business with international commercial banks and international financial institutions.”

Furthermore, the committee decided to establish the main branch of the ‘Korea Daepung International Investment Group’ in Pyongyang, which will operate as an economic consortium attracting foreign monies and ensuring the flow of capital for the National Development Bank. The KCNA reported that an announcement was made at the Pyongyang Yanggakdo International Hotel explaining that “the first meeting of the Korea Daepung International Investment Group board of directors had opened, and that at the meeting, the National Defense Commission’s decision regarding the establishment of the National Development Bank and the mediation committee of the Korea Daepung International Investment Group had been created.”

The news agency went on to explain that the National Development Bank would conduct business with international financial institutions and commercial banks according to “modern financial standards and systems,” ensuring necessary investments in support of projects central to the promotion of national policy. The KCNA also reported that at the meeting, an order from Kim Jong Il was passed down with the title “On Ensuring the Operations of the Korean Daepung International Financial Group.”

Kim Yang-gun (a member of the National Defense Commission and director of the Unification Strategy Department) was selected as Chairman of the Korean Asia-Pacific Peace Committee, while Chinese-Korean Bak Cheol-su was chosen as president and chairman of the board. The 7-member board of directors is reportedly made up of representatives from the National Defense Commission, the Cabinet, the Ministry of Public Finance, the Korean Asia-Pacific Peace Committee, the Korea Daepung International Investment Group, and other related offices.

The board of directors meeting also discussed and voted on bylaws, a 2010 action plan and an annual budget for the Korea Daepung International Investment Group as well as activities for a preparatory committee for the establishment of the National Development Bank. It was also decided to form a secretariat for the board of directors.

In September 2006 the Daepung International Investment Group was established in Hong Kong by North Korean authorities in order to serve as a window for foreign investment, and the group was part of the effort in October 2007 to entice investment from the Chinese Tangshan Iron and Steel Group. It also played a role in bringing the New York Philharmonic Orchestra to Pyongyang in February 2008.

This latest measure appears to indicate that the North Korean leadership is taking a more aggressive drive to entice foreign capital, but it is not yet clear if the move will have any significant impact. It stands out that as sanctions enforced against the North by the international community make it difficult for Pyongyang to attract foreign investment, the North is stressing its intention to uphold “modern standards” for those willing to invest.

The Daepung Group rose to prominence in 2007 as a new window for attracting foreign investment into the North when it reached agreements with China’s Dangshan Steel and Iron Group, the country’s 3rd largest steel company, and Datang Power to form a joint venture to build a 1.5 million-ton processing plant and a 600,000 kW coal-burning power plant in the Kimchaek Industrial District.

ORIGINAL POST: According to KCNA:

Pyongyang, January 20 (KCNA) — The first meeting of the Board of Directors of the Korea Taepung International Investment Group took place at Yanggakdo International Hotel on Wednesday.

It was attended by directors of the board of the group and officials concerned as observers.

Conveyed there were an order of the chairman of the DPRK National Defence Commission “On ensuring the activities of the Korea Taepung International Investment Group” and decisions of the DPRK NDC “On establishing the State Development Bank” and “On setting up the Coordinating Committee of the Korea Taepung International Investment Group”.

At the meeting Kim Yang Gon, chairman of the Korea Asia-Pacific Peace Committee, was elected director-general of the board of the group and Pak Chol Su, a Korean resident in China, permanent deputy director-general and president of the group.

The board of directors is made up of seven persons including representatives of the National Defence Commission, the Cabinet, the Ministry of Finance and an office concerned of the DPRK, the Korea Asia-Pacific Peace Committee and the Korea Taepung International Investment Group.

The meeting decided to set up a secretariat of the board of directors and named its members.

It deliberated and decided on the draft rules of the Korea Taepung International Investment Group, its action program and financial budget bill for 2010, a resolution on starting the operation of a preparatory committee for establishment of the State Development Bank and other agenda items related to the work of the group.

Kim Yang Gon made a keynote report and Pak Chol Su an address on the work of the group at the meeting.

The group, an external economic cooperation body, will play the role of an economic complex ensuring the induction of investment and finances for the State Development Bank, and it will be headquartered in Pyongyang.

The State Development Bank is to provide investment on major projects to be carried out according to the state policy after being equipped with advanced banking rules and system needed for transactions with international monetary organizations and commercial banks.

The Choson Ilbo has more:

North Korea will establish a state development bank which will deal with international financial organizations and commercial banks and invest according to state policies, the official [North] Korean Central News Agency reported Wednesday. The decision was made by the powerful National Defense Commission, which is headed by leader Kim Jong-il.

It will also set up an international cooperation agency called the Joson Daepung International Investment Group to take charge of attracting investment for the bank, KCNA said.

KCNA claimed the bank has “modern financial rules.” Kim Yang-gon, the director of the Workers’ Party’s United Front Department, has been named chairman of the Joson Daepung Investment Group, and Pak Chol-su vice chairman.

A North Korean source said Pak is a Korean-Chinese businessman who maintains relations with South Korean officials and businessmen. He apparently once arranged a secret inter-Korean meeting.

Pak is also believed to have been involved in a secret meeting held between Labor Minister Yim Tae-hee and Kim Yang-gon in Singapore last October.

Rumor has it that Jang Song-taek, Kim Jong-il’s brother-in-law and the director of the Administrative Department of the Workers’ Party, is also on the board of directors.

North Korea will establish a state development bank which will deal with international financial organizations and commercial banks and invest according to state policies, the official [North] Korean Central News Agency reported Wednesday. The decision was made by the powerful National Defense Commission, which is headed by leader Kim Jong-il.

It will also set up an international cooperation agency called the Joson Daepung International Investment Group to take charge of attracting investment for the bank, KCNA said.

KCNA claimed the bank has “modern financial rules.” Kim Yang-gon, the director of the Workers’ Party’s United Front Department, has been named chairman of the Joson Daepung Investment Group, and Pak Chol-su vice chairman.

A North Korean source said Pak is a Korean-Chinese businessman who maintains relations with South Korean officials and businessmen. He apparently once arranged a secret inter-Korean meeting.

Pak is also believed to have been involved in a secret meeting held between Labor Minister Yim Tae-hee and Kim Yang-gon in Singapore last October.

Rumor has it that Jang Song-taek, Kim Jong-il’s brother-in-law and the director of the Administrative Department of the Workers’ Party, is also on the board of directors.

(From a reader): The Korea Taepung International Investment Group (조선태풍국제투자그룹) will attract and coordinate investment – ostensibly from China as a founding member is a Korean Chinese. The group’s charter came from Kim Jong-il , Chairman of the NDC, and its board members include Kim Yang-gon, chairman of the Korea Asia-Pacific Peace Committee (who was elected chairman of the board), Pak Ch’ol-su, a Korean-Chinese (elected standing vice chairman of the board and president), and seven persons representing the NDC, Cabinet, Ministry of Finance, relevant ministries, Korea Asia-Pacific Peace Committee, and the Choson Taep’ung International Investment Group. This seems to be a major salvo in North Korea’s current campaign to ease international tensions, curry desperately needed investment, and ultimately get the country back on its centralized economy track.

According to NK Leadership Watch: In the video footage of the meeting (1/20/2010 on Elufa.net) Kim Chang-sun can bee seen. He is on Kim Jong il’s secretariat.

The Pyongyang Times has more here.

Posted in Banking, Finance, Korea Taepung International Investment Group (Daepung Investment Group), National Defense Commission, State Development Bank | 1 Comment »

DPRK won exchange rates falling after currency reform

Monday, January 18th, 2010

Institute for Far Eastern Studies (IFES)
NK Brief No.10-01-18-1
2010-01-18

Following the currency reform undertaken by North Korea at the end of 2009, the Chinese newspaper International Herald Leader (國際先驅導報) reported on January 7 that the Choson Bank of Trade had set the USD:DPRK Won exchange rate at 1:96.9. There have been other reports of the DPRK’s new exchange rate through organizations related to North Korea, but this is the first report of an official exchange rate by an official Chinese media source. The International Herald Leader is the global news paper of the government-run Xinhua news agency.

Good Friends, a South Korea-based organization working for human rights in the North, had reported earlier that the new exchange rate was 1 USD:35 Won. The conflicting reports appear to be a result of a constantly changing exchange rate. North Korean authorities control the exchange rate, announcing changes to the exchange rate system at their whim.

According to the International Herald Leader, the exchange rates for the new DPRK Won are 96.9:1 USD, 138.35:1 Euro and 14.19:1 Chinese Yuan. These new rates are approximately 25-30 percent lower than previous rates, indicating a rise in the value of the DPRK Won.

North Korean security forces released a notice titled ‘Regarding the Strict Punishment of Those Overissuing Foreign Currency Within the Republic’ on December 28, and banned the use of foreign currency across the country beginning January 1. Immediately following the announcement of the measure banning the use of foreign currency, the DPRK Won:PRC Yuan exchange rate rose sharply, indicating a steep drop in the value of the Won.

Until the December 28 announcement banning foreign currency, North Koreans were exchanging Chinese money for the new DPRK Won at a rate of 1:5 (the official rate was 1:1.6). Before the currency reform, the Won:Yuan exchange rate was 600:1. However, after the ban on foreign currency, the value of the new North Korean money quickly fell, with the exchange rate toppling 4-5 times over within just days. According to a Daily NK report, on January 5 of this year, the Won:Yuan exchange rate in Hyesan, Yanggang Province hit 20:1, while in North Hamgyeong Province’s cities and towns of Hoeryeong, Onseong, Musan, and Cheongjin, the Won is being exchanged for Yuan at a rate of 1:15. Therefore, it appears that the Chinese media’s report of a 1:14.19 exchange rate reflects the reality of only some regions of North Korea.

Posted in Banking, Black markets, Finance, Fiscal & monetary policy, Foreign Trade Bank | Comments Closed

Nicholas Eberstadt on the DPRK’s new monetary policy

Tuesday, January 12th, 2010

Nicholas Eberstadt has some interesting statistics in a Wall Street Journal op-ed this week:

For a variety of reasons—possibly including unintended reverberations from the past decade’s nuclear drama—the remonetization [of 2002] did not work well. Too much new money was chasing too few goods, sparking significant inflation. By November 2009, the North Korean won’s black-market value in dollars was barely 5% of the level when the 2002 measures were implemented, a depreciation averaging over 3% per month.

…

The speed and depth of the won’s resulting plunge has been dizzying. The nominal market price of rice is reportedly higher today than it was in November 2009, before currency reform. This would imply 100-fold inflation and then some in just over one month. The won-yuan exchange rate along the North Korea-China border has reportedly dropped by almost 50% over the past month, even after discounting for the 100-to-1 currency conversion. The government apparently has no confidence in its own currency move, and is now betting against it. News reports indicate that Pyongyang this month is issuing soldiers in its public security forces twice their nominal monthly pre-reform wages (a 20,000% raise in light of the currency conversion). If the government finances more wage hikes like this by running the printing presses, it will turn the currency into a toxic asset no one wants to hold.

…

The botched currency reform also has revealed how little North Korean decision-makers understand their own economy, much less the outside world. On a related note, the regime’s supposed heir apparent, Kim Jong Eun, was the mastermind behind the North Korean currency reform, according to South Korean intelligence. This may just be bad intelligence or disinformation. But if accurate, it raises disturbing questions about the judgment of the rising generation of North Korean leadership.

Read the full story here:
North Korean Money Troubles
Wall Street Journal
Nicholas Ebererstadt
1/11/10

Posted in 2002 Economic reforms, Banking, Finance, Fiscal & monetary policy, Food, Price liberalization | Comments Closed

North Korea plans to restrict foreign exchange on open market

Tuesday, January 12th, 2010

Caijing (Chinese Finance Magazine)
12/20/2009
Translated by Bert Acosta

A Chinese reporter from the Chinese state media outlet Xinhua saw a government public notice posted on the entryway to a market stating that beginning January 1, 2010, North Korea will prohibit the circulation of foreign currencies on the open market.

Issued by the DPRK’s Public Safety Bureau, these regulations will apply to official state administrations, enterprises, social organizations (such as the military and special organizations), citizens, and foreigners. After these rules come into effect, citizens of the DPRK will not be permitted to use the Dollar, Euro, and other foreign currencies in stores and restaurants. Foreigners bringing these currencies into the DPRK must exchange them for Wan – even at the airport and international hotels. The various exchange and transportation fees of the past will also change to a Won-centric system.

The notice also states that, in accordance with government authority, related institutions will adopt steps to establish a strict national monetary circulation system. The foreign exchange needs of all organizations will be guaranteed by state planning, and all related banks will be required to established foreign currency and Won exchange programs to responsibly undertake the task of exchange.

Furthermore, the notice stated that organizations found violating exchange regulations will be ordered to cease operational activities or be disbanded – with the government confiscating its trade capital and other resources. Regarding products purchased with foreign currencies, black market trading, usury loans, broker activities, bribery, illegal currency exchange, and other illegal actions, violators will be prosecuted in conformity with legal provisions.

This is North Korea’s first economic management measure since revaluing the Won on November 30th, 2009. Since revaluing its currency, North Korea has not announced an official exchange rate.

Posted in Banking, Finance, Fiscal & monetary policy, General markets (FMR: Farmers Market), Ministry of People’s Security (Criminal Police) | Comments Closed

DPRK cracks down on money lenders

Monday, January 11th, 2010

According to the Choson Ilbo:

North Korean authorities have been rounding up money changers in major cities since Jan. 4, it emerged Friday. Sources in North Korea said an average of 20 money changers were arrested in each major city, including 17 in Pyongyang and 23 in Sinuiju since Jan. 4.

After a shock currency reform in early December, authorities banned the use of foreign currency. In the past, residents had used U.S. dollars in hotels or markets without having to change them into North Korean won.

It seems the State Security Department and the Ministry of Public Security and members of the village resident organizations secretly investigated people’s dollar holdings prior to the currency reform, the sources said.

Heads of the resident organizations from each village reportedly discovered who spent dollars, and the two security agencies investigated foreign currency managers in agencies and enterprises.

The crackdown on money changers appears to be aimed at confiscating the dollars they hold. But more broadly, the North seems determined to ferret out all newly wealthy people by gathering information about state agencies or individuals who have engaged in under-the-counter foreign currency dealings, the sources added. A North Korean businessman who was recently in China said, “The crackdown has quickly frozen the exchange market in the North.”

Rich people who were not affected as seriously by the currency reform because they hold cash in foreign currency are reportedly becoming edgy. Some are now experiencing hardship because they have not been able to change their dollars into North Korean won.

A huge private exchange market has come into existence in the North since 2000. In the early days, only small-scale dealers were engaged in the market, but once they had more than US$100,000, they even opened clandestine offices. In some cases, dealers handle nearly $1 million and work closely with state agencies in Pyongyang.

Officials who handle foreign currency whose source is hard for them to reveal reportedly rely on private money changers instead of government banks. Many money changers even in provincial regions are said to hold more than $100,000.

Read the full story here:
N.Korea Cracks Down on Money Changers
Choson Ilbo
1/11/10

Posted in Banking, Black markets, Fiscal & monetary policy, General markets (FMR: Farmers Market) | Comments Closed

Food prices continue to increase

Sunday, January 10th, 2010

According to an AFP report that cites Good Friends:

Good Friends, citing its own contacts in the reclusive North, said prices for rice and corn doubled last week at markets in the capital Pyongyang and in the eastern port city of Chongjin.

Rice prices ranged from 120-150 won per kilogramme (2.2 pounds) in Pyongyang and 110 to 140 won in Chongjin last week — up from 40 to 50 won reported on December 30, the group said.

Corn also traded higher at 70-75 won last week — up from 20-25 won on December 30 in the areas, it added. Seoul’s unification ministry, handling cross-border issues, could not confirm the data.

The official exchange rate is 135 won to the dollar but the black market rate is between 2,000 and 3,000 won.

The report came as the World Food Programme struggles to raise relief funds for the food shortage-hit North.

Major donors — including South Korea and the United States — refuse to help in protest at its second nuclear test in May last year.

Statistics available at the WFP website display it raised 89.8 million dollars as of late last month, around only 18 percent of its target of 492 million dollars in relief funds for the communist North.

Read the full article here:
Food prices soaring in N. Korea: group
AFP
1/10/10

Posted in Agriculture, Finance, Fiscal & monetary policy, Food, General markets (FMR: Farmers Market), International Aid, Price liberalization, UN World Food Program | Comments Closed

New DPRK currency plummets against Chinese yuan

Sunday, January 3rd, 2010

According to Yonhap:

North Korea’s new currency introduced in late November has plummeted in value compared to the Chinese yuan, a local radio broadcaster claimed Sunday.

The Seoul-based Open Radio for North Korea (ORNK), citing unidentified sources along the Sino-North Korean border, said that merchants were exchanging one yuan for 1,000 new North Korean won as of late last month, plummeting from the 50 won traded for every yuan on Dec. 3, right after Pyongyang introduced the new currency.

Under the move, the communist country knocked two zeros off its currency without warning on Nov. 30 in the first such value adjustment since 1959.

The radio, which aims to inform North Koreans on events happening in the outside world, said the value of the new North Korean currency fell to 520 won to the yuan by the middle of last month, indicating a steady depreciation throughout the month.

Before the currency reform took place, 1 yuan was worth around 588 old won, which is equivalent to 5.88 new won.

The ORNK speculated that the reason for the new currency’s weakness may be Pyongyang’s decision to not allow foreign currency to circulate in the market.

“The official proclamation to ban foreign currency use was made on Dec. 28, but there have been rumors circulating after the currency reform took place, causing the new won to depreciate against Chinese money,” the radio station report said.

It said that with Pyongyang unlikely to allow the use of foreign money as a medium of exchange or to bolster its new currency, it may be hard to determine when the value of the new won will stop falling.

North Korean media reported early last month that authorities were introducing new money to curb the mushrooming free market and raise the value of the country’s legal tender.

There have been unconfirmed reports that the currency reform has drawn resistance from ordinary citizens and merchants, whose savings have been drastically cut by the unannounced measures.

Read the full article here:
N. Korea’s new currency plummets against Chinese yuan: report
Yonhap
1/3/10

Additional info:

1. Previous posts on the DPRK’s recent monetary changes can be found here.

Posted in Banking, Fiscal & monetary policy | Comments Closed

DPRK bans use of foreign currency

Friday, January 1st, 2010

According to ABC News:

North Korea has banned the use of foreign currency, another sign its hard-line communist government is intent on reasserting control over the country’s nascent market economy.

Reports say the decree warns of severe punishment for anyone using U.S. dollars, euros, yuan and other non-North Korean currencies. Foreign currencies previously were accepted in some shops, restaurants and other outlets, particularly those catering to foreigners.

The order, issued by North Korea’s state security bureau and going into effect Jan. 1, aims to “forbid the circulation of foreign currency,” China’s state-run CCTV television said in a brief report late Wednesday.

The Daily NK, a Seoul-based online news outlet, said the order prohibits all individuals and organizations apart from banks from possessing foreign currency. It said the decree was posted in public and at workplaces, and went into effect Dec. 28.

There was no mention of the new ban Thursday in official North Korean state media. In Seoul, a South Korean official confirmed the ban, speaking on condition of anonymity because he was not authorized to speak to the media on intelligence matters.

The order comes weeks after the government redenominated North Korea’s currency, the won, as part of a far-reaching currency overhaul aimed at curbing runaway inflation and reasserting control over the economy.

The latest currency decree gives businesses 24 hours to deposit all foreign currency in banks. “When it is needed for trade, it can be withdrawn after obtaining approval,” it said, according to the Daily NK.

The ban is aimed at seizing foreign money tucked away by those still engaging in private market commerce, analysts said.

“North Korea has a problem with people trying to exchange their money for foreign currencies, and then storing the savings in their cabinets since they don’t know how the value of the local currency might change, said Jeong Kwang-min, a research fellow at the state-run Institute for National Security Strategy in Seoul.

The new ban shows the regime’s intention to “firmly” resolve and bring the black market under control, Jeong said.

“The ban is meant to root out people still trading at markets,” said Yang Moo-jin of Seoul’s University of North Korean Studies. “More broadly, it’s aimed at smoothly completing the currency reform by restricting the use not only of local currency but also foreign currency.”

The latest ban also applies to foreigners, who must exchange foreign bills into North Korean won in order to purchase items, reports said.

Sweden’s ambassador to North Korea, Mats Foyer, said by e-mail Thursday that he had received no official notification of the decree.

If this policy change does take effect, it will represent the republic’s third foreign exchange management regime.

Initially, the DPRK (like most communist countries) used Foreign Exchange Certificates (FECs) to control the circulation of foreign currency. When foreigners arrived in Pyongyang, they changed their local money for FECs which could be spent in various sanctioned retail outlets. The DPRK’s Foreign Trade Bank issued FECs which were different from local North Korean won (issued by the central bank) in both color and and purchasing power. Capitalist Westerners received green FECs and expats from fraternal socialist governments received red FECs. Coins were also differentiated.

Shopping could be a bit confusing, however. Price tags could potentially hold three numbers: the green FEC price, the red FEC price, and the won price. I believe that shops that catered to repatriated Japanese Koreans (such as the Rakwon Department Store near the Changwang Health Complex) were priced in actual yen, but it is possible these individuals were forced to exchange their yen into green FECs. Expats from fraternal socialist countries reportedly complained because although their governments were underwriting the DPRK, the red FEC prices in department stores were often higher than the green prices.

As in China, FECs were eventually abandoned and hard currency shops and state-owned retailers began accepting hard currency directly. I am not sure how, why, or when this transition occurred, but it was in effect until this week. Under this regime, tourists, diplomats, business persons and other visitors spent their dollars, euros, yen and yuan directly on goods and services in the DPRK, but the retail outlets in which they were allowed to make purchases were severely limited. Prices were originally denominated in dollars but in 2004 they were changed to euros (though dollars remained just as acceptable).

Under this regulatory regime, most visitors to the DPRK could arrive and leave without ever seeing any local currency. Some percentage of the foreign exchange undoubtedly ended up in KWP, KPA, and state coffers, however it is likely that quite a bit was skimmed off the top, legally or otherwise, in the process. This would explain the shift to the new regime.

This third foreign currency management regime is interesting but not for the reasons cited in the media. In addition to striking a blow at the country’s markets, which it most definitely will, this policy brings all of the overseas trading companies operating under the protection of the KWP, KPA, and select ministries, under the indirect control of the Foreign Trade Bank. Whereas these organizations were previously allowed to hold some level of foreign currency on site for discretionary purposes, they will now be forced to deposit these funds in a Foreign Trade Bank branch or exchange them for won at the official rate. Additionally, all of the future earnings that these organizations generate abroad will need to be handed over for won when their agents return from assignments overseas. It is highly likely that these companies will choose to keep their earnings overseas rather than repatriating them, or use their earnings to purchase cheaper goods which they can import into the DPRK (while pocketing the difference and keeping it in a foreign bank account).

The implications for tourists, visitors, and expats are also interesting. This new policy would imply that the Korea Trade Bank will set up currency exchange kiosk at the airports, border crossings, retail outlets, and hotels for foreigners to swap their currency for local won. Although we will have to declare our hard currency when entering the country, the fact that we are carrying local currency makes it easier for us to take advantage of spontaneous purchases–even potentially from private merchants and restaurants. In other words, knowing that locals will not come into possession of hard currency, the North Korean government might give us more “economic freedom” in our time there. Of course this is probably just wishful thinking. The gap between the official and market exchange rate will also give rise to black market currency traders who will seek out foreigners to the best of their abilities.

Overall, it is difficult to see this policy as anything but a power grab. Foreign exchange will become more difficult to obtain and so will the goods manufactured or grown overseas (including China). North Koreans will be left with fewer choices and as a result will come under greater control of the state. I am willing to believe that most North Koreans have enough sense to predict this outcome as well. It will be interesting to see how well this policy sticks or whether entrepreneurial North Koreans will find ways to evade the new rules as they have done countless times before.

Additional Links:

1. Here is a link to the original ABC story.

2. Here is a wikipedia page about the DPRK’s monetary history.

3. Here is the Daily NK story mentioned above.

4. Here are previous posts related to the DPRK’s currency revaluation.

5. This Reuters article adds additional information.

6. Here is a report by the Institute for Far Eastern Studies (IFES)

7. Here is a rather humorous report on the “benefits” that the currency fiasco is bringing the North Korean people.

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