Archive for the ‘Fiscal & monetary policy’ Category

Number of DPRK workers at Kaesong complex continues to grow

Tuesday, May 17th, 2011

According ot the Choson Ilbo:

The number of North Korean workers at the Kaesong Industrial Complex has been growing even as Seoul halted all other trade with the North after deadly attacks on the Navy corvette Cheonan and Yeonpyeong Island last year.

There were 46,420 North Korean workers at the industrial park at the end of February, up 11 percent from 42,415 a year ago, according to the Unification Ministry on Sunday. This represents a monthly increase of 334. The industrial park’s output rose from $256.47 million in 2009 to US$323.32 million last year.

Why the increase?

Since all other inter-Korean trade has been suspended, the Kaesong Industrial Complex is the sole window for the North to obtain a steady legal supply of hard cash. The monthly wage of workers at the complex averages at around $100, but they only see between 30 and 50 percent while the rest goes to the regime.

“The workers get their wages in North Korean won or daily necessity coupons, and the North Korean authorities take all the dollars,” said a North Korean source. That amounts to some $4.6 million every month.

If the number of workers keeps increasing at the same rate, the North is expected to earn nearly $60 million this year. With the sources of hard currency exhausted, the North finds it profitable to assign even one more workers to the complex, but that also benefits the South Korean firms there. “North Korean worker wages are far more competitive than those in China and Southeast Asia,” said a staffer with an apparel firm at the complex. “At present we employ 1,200 North Korean workers, and the more we employ, the more profit we can make.”

And Lee Im-dong, a former secretary-general of the businesses association at the complex, said, “We have asked the North Korean authorities for additional manpower of 20,000. As far as the Kaesong Industrial Complex is concerned, our interests completely coincide with those of North Korea.”

The supply of additional workers is not easy. The available labor force in Kaesong and vicinity was already exhausted several years ago, so there is even a joke that “all the healthy in Kaesong now work at the industrial park.” The authorities have turned old buildings in Kaesong into boarding houses for workers recruited from Pyongyang, Pyongan and Hamgyong provinces, said the source.

“The fact that the North is going extra mile to bring more workers to Kaesong shows how desperately it needs dollars,” opined the Unification Ministry official.

Read the full article here:
N.Korea Keeps Sending More Workers to Kaesong Complex
Choson Ilbo
2011-5-17

Share

China Exim Bank delegation visited DPRK in April

Monday, May 9th, 2011

According to the Donga Ilbo:

Members of the credit rating agency under the Export-Import Bank of China are known to have visited North Korea around the “Day of the Sun” on April 15, otherwise known as the birthday of the Stalinist country`s founder Kim Il Sung.

A source in Beijing said, “Around 10 people from the Export-Import Bank of China made a 10-day trip to North Korea ahead of the Day of the Sun. They not only visited Pyongyang but also other cities.”

The agency provides sovereign credit ratings for countries around the world. Critics say the members visited the North to seek further economic cooperation, adding their trip holds more meaning than attending the holiday event because they also visited other cities.

Another source in Beijing said, “The Chinese government is mulling financial benefits including no-interest loans to Chinese companies investing in the [North’s] city of Rason.”

Beijing seems to be preparing to invest in the Hunchun-Rason area near the Tumen River and Dandong-Sinuiju’s Hwanggeumpyong region near the Yalu River, where Pyongyang-Beijing economic cooperation is vital.

Read the full story here:
China`s Exim Bank delegation visited N. Korea last month
Donga Ilbo
2011-5-9

Share

SPA designates Kumgang resort intl tourism center

Friday, April 29th, 2011

UPDATE: DPRK to Set Up Special International Tour Zone at Mount Kumgang
Institute for Far Eastern Studies (IFES)
NK Brief (11-05-2)
2011-5-3

According to KCNA news agency, the Presidium of the DPRK Supreme People’s Assembly issued a decree on April 29 to set up a special zone for international tours at Mount Kumgang. It reported the special zone in Kangwon Province would include Kosong-eup and Onjong-ri of Kosong County; Samil-po, Hae-Kumgang, and Nae-Kumgang areas in Kumgang County, and Thongchon County.

The Central Tourist Guidance Agency expressed its intentions of increasing new tourist destinations depending on the progress made in the special zone. In addition, it also announced the annulment of October 2002 decree on the Kumgang Special Tourism Zone, which rescinded the exclusive rights of Hyundai Asan.

Previously on April 8, the DPRK’s Korean Asia-Pacific Peace Committee (KAPPC) informed Hyundai Asan that it would retract the monopoly rights of Hyundai. Instead, it expressed plans of entrusting the tours from the North through foreign businesses while Hyundai will continue to lead the tours from the South. The North announced the Mt. Kumgang tours will be renewed through appropriate national measures.

The KCNA explained, “The DPRK’s sovereignty will be exercised in the special tour zone.” Additionally, the DPRK is encouraging free investment in the special zone by corporations, individuals and other economic bodies and such investments are protected by law.

On the May issue of South Korean monthly magazine Minjog 21, the Committee of Investment and Joint Ventures of the DPRK and Kempinski Group was reported to have reached an agreement on its entrance into the Kumgang tourism project. The magazine also reported the Kempinski Group’s plans of modernizing the Wonsan Airport, development of Wonsan City into a resort town, and building roads connecting Wonsan with Kumgang.

Kempinski Hotels is a luxury hotel group known for its five-star hotels and resorts and recently expanded into Asia with current projects underway with India and China. Kempinski is majority owned by the Crown Property Bureau of Thailand and the royal family in Bahrain. Once the Kempinski Hotel is completed in Wonsan, it is expected to become an international resort town linked with Mt. Kumgang Special Zone.

The Mt. Kumgang tours from the North are expected to be managed by the Kempinski Hotels while the tours from the South will be still managed from Hyundai. An interview on April 13 by Ri Jong Hyok, vice-chairman of the KAPPC commented, “The buildings and facilities built by Hyundai will come to ruins if left at its current unoccupied stage. This is the reason why we are attempting to restart the tours, but only until the South decides to resume the tours.”

The Committee of Investment and Joint Ventures was upgraded from Joint Venture and Investment Guidance Bureau last July, becoming a central state organization in charge of all projects related to investments and joint ventures from overseas.

ORIGINAL POST: According to Yonhap:

North Korea’s rubber-stamp parliament said Friday that it will set up a special zone for international tours of the country’s troubled mountain resort in an apparent move to induce foreign investment.

The North “will encourage free investment in the development of the special zone by corporate bodies, individuals and other economic bodies and will protect by law the invested capital and properties and income and other profits to be gained through business,” the North’s Supreme People’s Assembly said in a decree carried by the country’s official Korean Central News Agency (KCNA).

The legislature said North Korea’s sovereignty will be exercised over the zone that includes several areas on Mount Kumgang, a scenic resort on the country’s east coast.

It also said the agency in charge of tourism will take relevant measures to increase new tourist destinations, depending on the progress in the special zone development. No details were provided.

Lee Jong-joo, a spokeswoman for South Korea’s Unification Ministry handling inter-Korean affairs, said the North’s move appears to be aimed at attracting foreign capital to develop the resort.

A spokesman for Hyundai Asan, a key South Korean tour operator in the mountain resort, said his company had no immediate comment on the North’s announcement. He asked not to be identified as he was not authorized to speak to media.

The decree came weeks after Pyongyang terminated exclusive tourism rights for Hyundai Asan, citing skepticism over the resumption of the joint venture.

The two Koreas launched the joint tour program in 1998 as part of moves to boost cross-border reconciliation and cooperation, providing a legitimate source of hard currency to the cash-strapped North.

However, Seoul suspended the tour program in 2008 when a female South Korean tourist was shot dead after straying into an off-limits military zone near the resort.

Pyongyang claims it has done everything to shed light on the shooting and guarantee the safety of future tourists, but Seoul says it has yet to receive a formal apology for the shooting or government-to-government promises to enhance safety.

Here is the KCNA statement:

Pyongyang, April 29 (KCNA) — A special zone for international tour of Mt. Kumgang will be established in the DPRK.

A decree on this decision was issued by the Presidium of the DPRK Supreme People’s Assembly on Friday.

According to the decree, the special zone is to be set in the area of Mt. Kumgang in Kangwon Province and the zone will include the township and some areas of Onjong-ri in Kosong County, Lagoon Samil, Sea Kumgang area, Inner Kumgang area of Kumgang County and some areas of Thongchon County.

The DPRK sovereignty will be exercised over the zone.

The DPRK will encourage free investment in the development of the special zone by corporate bodies, individuals and other economic bodies and protect by law the invested capital and properties and income and other profits to be gained through business.

The Central Tourist Guidance Agency shall take relevant measures to increase new tourist destinations, depending on the progress made in the SZ development.

The decree of the SPA Presidium on “Setting Up Mt. Kumgang Tourist Zone in the DPRK” issued on Oct. 23, 2002 is no longer valid.

Aside: So there are two DPRK agencies that deal with tourism: KITC and the “Central Tourist Guidance Agency”?

Historical information:

The Kumgangsan resort was the scene of a terrible tragedy, the shooting of a South Korean tourist.  Allowing a joint-Korean investigation of the murder became a precondition by the South Korean government for resuming tourism to the resort.

On March 4th 2010, the DPRK first threatened to revoke contracts with the South Korean Hyundai-asan stating that a future guarantee of safety was sufficient for resuming tourism.

Later in th month, Hyundai-asan’s chief offered to resign.

In April 2010, the DPRK “seized” the Hyundai properties in the Kumgangsan resort.

Shortly afterwards, Chinese tourists began arriving at the resort (here and here).

The Donga Ilbo reported that the NDC took over the properties and put them in the Korea Taepung International Investment Group portfolio.  If the property was under Taepung control and has now been put under normal ministerial control, then this signals that Taepung’s sun might have set.

If possible, I would expect that Hyundai-asan will attempt to bring suit in South Korea against whichever company chooses to set up in the zone.

Read the full sotry here:
N. Korea to set up special int’l tour zone at Mount Kumgang
Yonhap
2011-4-29

Share

DPRK owes ROK appx $1billion

Wednesday, April 20th, 2011

According to the Choson Ilbo:

North Korea owes South Korea more than W1 trillion in terms of food and other loans, it emerged Tuesday (US$1=W1,092). The North has to start repaying the debt from June next year, but given its economic difficulties and strained inter-Korean relations it is unlikely that Seoul will see a penny.

According to the Unification Ministry, the Kim Dae-jung and Roh Moo-hyun administrations gave the North 2.4 million tons of rice and 200,000 tons of corn from 2000 to 2007 on condition of repayment over a period of 20 years with a 10-year grace period at a 1 percent annual interest. The loans amount to US$720.04 million, with the interest reaching $155.28 million.

The South Korean government also spent W585.2 billion from the Inter-Korean Cooperation Fund to re-link cross-border railways and roads from 2002 to 2008. Of the total, W149.4 billion worth of materials and equipment for construction on the North Korean side are also loans to be repaid on the same conditions.

Besides, Seoul lent the North $80 million worth of raw materials for production of textile, footwear, and soap in 2007 and 2008. At the time, the North paid back 3 percent of the loan with 1,005 tons of zinc ingots worth $2.4 million, leaving a $77.6 million balance.

All told, the principal on these loans amounts to W1.02 trillion and the total debt including interest to over W1.2 trillion.

The first repayment of $5.83 million for the food loans provided between October 2000 and March 2001 is due on June 7 next year.

A ministry official said, “The amount has already been included in next year’s revenue plan, on the assumption that it will be paid back. If the North fails to pay, it will be deemed outstanding balance.”

Aside from the food and economic loans, the South also lent the North W1.37 trillion through the Korean Peninsula Energy Development Organization from 1998 to 2006 for the construction of a light-water nuclear reactor. The money was raised by issuing government bonds. The total amount of all loans adds up to W2.25 trillion, if the accrued interest of W877.2 billion is counted.

But since the KEDO project was scrapped in 2006, there is no way for the South to get the money back. It seems likely that the total amount will be handled as “irredeemable government bonds” that have to be made up for with tax money.

Read the full story here:
Pyongyang Owes Seoul Huge Amounts of Money
Choson Ilbo
2011-4-20

Share

DPRK allegedly executed two officials in 2010

Thursday, April 14th, 2011

UPDATE 1 (2011-4-15): Andrei Lankov reminds us of some historical lessons when it comes to Pyongyang-ology.  According to his article in the Asia Times:

Last week, world media reported that two key North Korean officials were executed a few months ago. One was Kim Yong-sam, the former minister for railways. Reportedly, he was held responsible for a mysterious explosion that in 2004 wiped out the entire railway station of Ryongchon a few hours after the armored train of Dear Leader Kim Jong-il had passed through – a suspected assassination attempt.

The other North Korean official was Mun Il-bong, the finance minister. His alleged crime was the inability to handle the currency reform that in late 2009 nearly brought the North Korean economy to a complete standstill.

This news was first broken by the major South Korean newspaper Chosun Ilbo, which cited its North Korean sources. The newspaper has good connections among the North Korean refugee community, whose members are in touch with officials in North Korea.

These reports were widely discussed in the media, and produced the usual wave of speculation about supposed factional disagreements in the North Korean leadership. However, such speculation might be premature. There is no way to verify with sufficient confidence whether the alleged executions actually took place. We do not know – and, in all probability, are not going to know anytime soon – whether the North Korean ex-ministers indeed met their ends.

Those who do not deal with North Korea seldom realize how little outside observers know about its high politics. North Korean media stretch the definition of state secret to an extent that would likely appear excessive even to Joseph Stalin. There have been numerous cases where North Korean media chose not to report some very important (and, interestingly, very public) events that had a profound impact on the lives of every North Korean.

For example, the 2009 currency reform which, if the above-mentioned reports are to be believed, led to the lethal downfall of Mun Il-bong, one of its major planners. Generally speaking, the reform emulated the Soviet currency reform of 1947 that for decades has served as a prototype of currency reforms in all communist countries. There was an important difference, though.

In 1947, all major Soviet newspapers ran lengthy front-page stories about the currency reform, extolling its timeliness and explaining the need to improve the lives of the good common Soviet citizen by wiping out the ill-gotten cash holdings of shameless profiteers.

In 2009, no North Korean media even mentioned the planned reform, which was by far the most important news of the time and had a dramatic impact on the lives of every North Korean. Information about the changes and their conditions was delivered via public notices pinned to the doors of banks, as well as through confidential messages to local authorities.

Foreign embassies were notified by a short official letter. Finally, the Pyongyang-sponsored Korean newspaper in Japan ran a couple of stories about the reform. But mainstream media within North Korea remained completely silent about the dramatic upheaval.

Those who keep a track of North Korean affairs might remember the so-called “July 1 reforms” of 2002. These were once heralded (wrongly, as it turned out) as a sign of Pyongyang’s willingness to emulate the Chinese reformist policy. Few people are aware, though, that North Korean media first mentioned the ongoing reform in September, a few months after its launch.

This is especially relevant in regard to promotions and demotions, as well as purges and persecution of the regime’s top officials. The North used to stage open show trials in the 1950s, but this Stalinist tradition was discarded. In subsequent decades, disgraced officials simply ceased to be mentioned in media and disappeared from the public view, so the general public – including the lower reaches of the elite – could only guess the reasons behind the sudden disappearance of some powerful minister or, say, a Central Committee secretary.

The disappearance of a dignitary is nearly always interpreted as a sure sign that he or she has been purged. The North Korean public inevitably starts to circulate a rumor that the hapless official was not just removed from office, but arrested or even executed.

After some time these rumors reach foreign media, often through the North Korean refugee organizations that have good networks inside the North. Consequently, the world’s media run another story about a North Korean minister who was allegedly executed for his wrongdoings or as a result of alleged factional strife.

Very often, impressive details are added – for example, it is frequently stated that the alleged execution was public or, at least, held in the presence of other top dignitaries (as a matter of fact, the present author has never seen any reliable evidence of a public or semi-public execution of a former dignitary – this type of brutal show seems to be reserved only for humble folks).

There have been a number of cases, to be sure, when these rumors were eventually confirmed. For example, we now know for certain that the state security minister Kim Pyong-ha, who disappeared in 1982, was either executed or committed suicide during his arrest (his downfall was followed by a large-scale purge of the North Korean secret police).

There is little reason to doubt that So Kwang-him, the party secretary for agriculture, was indeed executed in 1997. The aging bureaucrat was accused of espionage and subversion. The charge was that he had deliberately ruined the North Korean agriculture sector and provoked a disastrous famine, being on the payroll of the US Central Intelligence Agency and other foreign intelligence agencies.

However, things are not that simple. There have been numerous cases when prominent dignitaries first disappeared and were universally believed to be arrested and executed – but then made a comeback and re-entered North Korean politics. A good example of such political resurrection is the fate of Pak Chong-ae, a Soviet Korean who was dispatched to Korea for intelligence gathering and subversion in the early 1930s.

After 1945, she became a prominent member of the North Korean leadership. Unlike a majority of Soviet Koreans, Pak Chong-ae survived a mass purge of pro-Soviet elements in 1956-1961, but suddenly disappeared in 1985. At the time, everybody, including the Soviet diplomats, were certain that she had been shot or probably died in prison – and this is what the rumors confidently told. However, in 1986, Pak Chong-ae re-emerged in the Korean political scene, albeit in secondary roles.

Even more interesting is the case of Ch’oe Kwang, a former chief of staff. Ch’oe Kwang disappeared in 1969, and rumors held that he was shot soon afterwards. This was hardly the case, since in the late 1970s, Ch’oe Kwang first appeared in secondary positions, then re-launched his career and in 1988 was again appointed chief of general staff!

So how should one treat the reports about the execution of Kim Yong-sam and Mun ll-bong? With caution. There is no reason to reject the reports completely – they might indeed be true. There is no doubt that rumors about the execution of ex-ministers are now circulating widely among North Korean officials. The 2009 currency reform was indeed a disaster, arguably, the worst prepared currency reform in the entire history of communist countries.

The 2004 Ryongchon explosion also was an exceptional event, irrespective of whether it was an assassination attempt targeting the Dear Leader, or a result of bad luck and remarkable negligence. Therefore, one may well expect the severe punishment of people who were responsible for both disasters. However, the experiences of previous decades demonstrate that such rumors be taken with healthy skepticism.

Incidentally, about a year ago, rumors persisted that another high-ranking official, the head of the party finance department, Pak Nam-gi, had been executed for his alleged mishandling of the currency reform. This story was universally believed, but so far no definite evidence of his sorry fate has emerged.

To complicate things further, a few weeks ago a well-informed defectors’ group reported that Pak Nam-gi, alive and well, was spotted in Europe where he is managing the personal funds of the Kim family. So, is Pak Nam-gi dead, with all his family shipped to a prison camp? Or is he running a multi-billion dollar business from a North Korean embassy in Switzerland? We know not. But this is another reminder of the many uncertainties a North Korean watcher has to deal with.

So, the rumors (and rumor-based reports) about Kim and Mun’s execution may well be true, but at the moment it is virtually impossible to talk about this with certainty. Things will become clear eventually, but this will happen, probably, only after several years. Sooner or later some relevant documents will be leaked.

Even before that, some trustworthy witness of their execution will emerge. It is also possible, though, that one day the allegedly executed ex-ministers will reappear, alive and healthy for their advanced age. However, by that time this entire story will be of greater interest for historians, not journalists or policy analysts.

ORIGINAL POST (2011-4-4): According to the Choson Ilbo:

The North Korean regime in June last year executed the ex-minister of railways Kim Yong-sam on espionage charges and ex-finance minister Mun Il-bong over a botched currency reform in late 2009, it has belatedly emerged.

A South Korean government official confirmed Kim’s execution but was not clear about Mun’s, saying, “We have relevant intelligence, which we are checking.”

According to a North Korean source, Kim, who was minister of railways between 1998 and 2008, was executed for involvement in a massive explosion at Yongchon Station in North Pyongan Province in April 2004 that allegedly targeted a special train carrying leader Kim Jong-il.

Kim Yong-sam was accused of leaking information about the timetable of the train, which was returning from China. Kim Jong-il’s travel itineraries are known only to his personal guards and secretaries and the railways minister.

Mun, who was finance minister between 2000 and 2008, apparently took the fall for the botched currency reform alongside then director of the Workers Party’s Planning and Finance Department Pak Nam-gi.

The regime executed Pak by firing squad on the same charges in April last year. “It seems Mun was executed because public discontent got worse even though, unlike Pak, he had nothing to do with the actual preparations for the currency reform,” the source said.

About 20 senior officials in the munitions industry ministry and the second economic committee in charge of munitions were also purged for embezzlement late last year. They had reportedly been caught by the State Security Department attempting to siphon off money from arms exports.

Another source said, “Rumor has it that the purge targeted long-serving senior officials in the military who have the authority to export arms overseas.”

The purge has been raging in Pyongyang since early last year, when Kim’s son Jong-un was named as the successor to his father and the currency reform was sweeping the North, a third source said. “It seems Kim Jong-il is trying to remove obstacles to the transition of power with his own hands.”

Regarding the suspected fate of Kim Yong-sam, I find it odd that the DPRK would execute him six years after his alleged offense.  There are only a couple of reasons I can guess as to why the situation was handled this way: 1. If he was executed, he was executed for another reason, 2.  If he was executed too soon after the April 2004 explosion, it would cast doubt on the DPRK’s official claim that the Ryongchon explosion was caused by an accidental train collision rather than an internal conspiracy to eliminate the leader.

UPDATE: A reader (in the comments) reminds me that Kim Yong-sam’s demise was also reported in the media back in July 2010.  At the time, his punishment was due to his failure to maintain locomotive trains that had been in store for wartime.  So maybe his death has nothing to do with Ryongchon at all but a failure to carry out his duties.

Regarding the execution of Mun Il-bong:  The DPRK allegedly executed Pak Nam-gi over the currency reform in early March 2010.  If Mr. Mun shared the same fate three months later, then the number of public officials executed over the country’s disastrous currency reform now stands at two.

Additional Information:

1. Last I heard, Jon Kil-su is the DPRK’s Minister of Railways, being named just before the last SPA elections.

2. Here are satellite images of Ryongchon from before and after the explosion.  Most of these can now be seen on Google Earth.

3. The story above mentions a purge in the munitions industry, but Kim Jong-il recently praised their efforts.

4. The Daily NK and Yonhap also reported on this story.

Read the full story here:
2 Senior N.Korean Apparatchiks Executed
Choson Ilbo
4/4/2011

Share

12th SPA’s 4th session roundup

Thursday, April 7th, 2011

UPADTE 5 (2011-4-13): The Daily NK reports that the NorthKorean people have yet to be informed of any decisions made at the SPA:

Even though six days have passed since the end of the Supreme People’s Assembly (SPA), decisions and instruments taken there have yet to be handed down to the people in local meetings.

Although the North Korean media did release the agenda of the SPA, there has been no comment on the implementation of decisions. Diverse sources also reported on the 13th that people’s unit meetings have not contained anything about the SPA.

SPA decisions are conventionally discussed in people’s unit meetings two or three days after the event and the people’s unit allocates assignments to residents according to its decisions. Of course, propaganda urging residents to carry out their assigned tasks then follows.

Whereas this year, there has been nothing. Not that people have any interest in the SPA, anyway. As one source from Yangkang Province said, “There have been no decrees on the SPA, and anyway we don’t have enough time to pay attention to it since even living is tough. We don’t have any interest in it. Can the SPA keep us alive?”

“If the SPA gave us as little as one kilogram of potatoes or corn, we would pay attention to it, but for us who must prepare meals every day we don’t pay it any attention. If something like changing of the president happened we would pay attention to it,” another source from North Hamkyung Province agreed,

Nevertheless, the SPA agenda items Chosun Central News Agency (KCNA) reported were as follows: the business of the Cabinet in 2010; the settlement of national accounts in 2010 and budget for 2011; and organizational issues.

The North Korean media also reported some personnel changes, notably the movement of Lee Myung Su from Administrative Director of the National Defense Commission to head of the People’s Safety Ministry.

UPDATE 4 (2011-4-12): Institute for Far Eastern Studies:

On April 7, 2011, the fourth session of the 12th Supreme People’s Assembly of the DPRK was held at the Mansudae Assembly Hall. At the session, Deputy Choe Yong Rim, premier of the DPRK, reported on the “Work of the DPRK Cabinet in 2010 and its tasks for 2011.”

The main tasks for this year stated by Premier Choe included increasing the production of consumer goods and realizing the goal of grain production in order to improve the standard of living for the people of North Korea. He also advised that production should be increased in all sectors of the economy while steadily pushing towards modernization of the national economy.

The Cabinet placed emphasis on last year’s achievements in the light industry and agricultural production while stressing the importance of modernizing consumer goods production and the development of science and technology as the goal of this year.

In addition, Choe highlighted, “production in all sectors of the national economy including the four pilot sectors must be increased to support the ongoing march to improve the standard of people’s living.”

Specific improvements in the four pilot sectors were mentioned, with plans to “operate all generating power equipment in full capacity while forming a system of transmission and distribution to make the most effective use of the electricity produced.” Additional focus was placed on calling for national efforts to reach the goal of electricity production through the construction of the Huichon Power Station and building other large-scale hydro and thermal power plants.

The Cabinet also stressed on diversifying trade and promised to “work towards the improvement of the DPRK’s socialist self-supporting economy by actively seeking out projects that effectively incorporate economic and technological cooperation.”

In evaluating the previous year’s accomplishments, Choe declared, “The most significant achievement in economic development was the progress made in placing national economy in line with Juche ideology.”

Other achievements mentioned were: 1) the inter-departmental structure of the metal industry was revamped and the Juche iron production system was successfully established at major metal plants as well as new alloy steel production bases; 2) large chemical industrial centers were updated to the latest technology to bring about the mass production of Juche fiber and fertilizers; 3) the coal production capacity increased and the construction of hydropower stations was completed to add to the power generating capacity. The construction of Huichon Power Station is making rapid progress for completion by 2012; and lastly 4) strong foundation was laid to bring about a huge development in the light industry and agriculture production.

Lastly, Choe praised the development in the science and technology sector for adopting CNC (computer numerical control) system in all sectors of the national economy and scientific research in IT and biotechnology.

Deputy Pak Su Gil, vice-premier and Minster of Finance presented the state budget for 2010 and 2011. He expected the state budgetary revenue to grow 7.5 percent and the expenditure is expected to grow 8.9 percent against the previous year. The state budget allocation is focused on strengthening the light and agriculture industries and improving the national economy by bringing state-of-art technologies in all sectors.

The expected state budgetary revenue is 83.9 percent of the total state budgetary revenue and local budgetary revenue is at 16.1 percent. The revenue from transaction and the profits of state-run enterprises are expected to hold 78.5 percent of the total state budgetary revenue this year and the profits of cooperative organizations, the fixed asset depreciation, the income from real estate rent and social insurance are expected to rise 3.8 percent, 1.4 percent, 0.7 percent and 0.4 percent respectively as compared with those of last year.

The current year’s plan for state budgetary expenditure is expected to show an 8.9 percent increase over last year. The budgetary allocation for the light industry is expected to climb 12.9 percent and a large amount is also expected to be distributed to the local industry.

The budgetary expenditure by category compared to the previous year is as follows: 1) 9 percent more funds will go into agriculture; 2) funds needed for farming will be provided on a priority basis and the expenditure for the basic industries of the national economy is expected to go up 13.5 percent; 3) the financial allocation for the capital construction will go up 15.1 percent; 4) 10.1 percent increase will be made for scientific and technological development.

Especially in the science and technology sector, emphasis is being placed on fulfilling the five-year plan of modernizing and building an economic power and successful implementation of CNC system.

Lastly, 15.8 percent of the total expenditure is expected to be spent on national defense.

UPDATE 3 (2011-4-10): News is trickling out about the 12th SPA’s 4th session.  I will keep adding stories below as they roll in:

Yonhap: N. Korea ups budget for construction projects this year

North Korea’s parliament dramatically increased a budget for major construction projects as Pyongyang prepares to throw a massive celebration next year, Seoul said Friday.

North Korea has vowed to achieve its goal of becoming a “great, prosperous and powerful country” by 2012, the centennial of the birth of its late founder Kim Il-sung, father of current leader Kim Jong-il.

The legislature endorsed 567 billion (North Korean) won (US$5.73 billion) for this year’s total budget in a session on Thursday, according to the Unification Ministry, which handles inter-Korean affairs in Seoul.

The budget for construction projects jumped by 15.1 percent from last year as the North plans to build 100,000 houses in Pyongyang and a massive power plant in the country’s northwest region, said the ministry.

The North also earmarked 15.8 percent of the total state budget for national defense this year as it did last year, said the ministry.

North Korean Premier Choe Yong-rim vowed to strengthen military capabilities, improve economy and increase grain production amid the country’s chronic food shortages.

The cabinet “will make sustained great efforts for the provision of materials needed for boosting the combat capability of the People’s Army and the defense capability of the country in every way,” Choe said at the session.

Last year, the North recorded a fiscal surplus of 7.3 billion (North Korean) won, said the ministry.

North Korea’s official Korean Central News Agency also reported on the country’s spending and budget, though it didn’t give any monetary figures.

Daily NK: North Korea’s Rubber Stamp Parliament Explained

The 4th meeting of the 12th session of North Korea’s Supreme People’s Assembly (SPA) will convene at Mansudae Assembly Hall in Pyongyang today.

The official North Korean translation of Article 87 of the Socialist Constitution of the Democratic People’s Republic of Korea proclaims, “The Supreme People’s Assembly is the highest organ of State power in the Democratic People’s Republic of Korea.”

SPA delegates are elected every five years (every four years until 1992), while meetings are normally convened once a year; however, there were two meetings during 2010, which is why today’s gathering will actually be the 4th of the 12th session, which began in 2009.

However, the SPA is by no means as important as the constitution claims; instead, it is a political show. As soon as one takes a look at the delegates, their selection method and the SPA’s practical role, it becomes clear that it is a symbolic organ with no practical function.

Let’s look in more detail at the SPA via a brief Q&A.

– What are the principle tasks of the Supreme People’s Assembly?

The role of the Supreme People’s Assembly prescribed in North Korea’s constitution is no different from that of South Korea’s National Assembly. The Supreme People’s Assembly is the highest sovereign organization and legislative organ which has the authority to adopt and revise the constitution and laws of the land. In addition, it establishes the basic principles of internal and external policy and manages the personnel matters of state apparatus. During annual meetings, the results of the previous year’s budget and the budget for the coming year are at the top of the agenda.

However, general matters of government administration are decided by the Chosun Workers’ Party; the SPA is a propaganda organization aimed at the people. The SPA simply approves the policy of the Chosun Workers’ Party as the representative of the North Korean people.

– Who are the SPA delegates?

A delegate is not a full time politician, unlike a member of the South Korean National Assembly, and they come from every region and sector of society, including a small number of workers, farmers and soldiers. They are selected to justify calling the SPA the representative of the people, but are expected to nod through Party decisions without meaningful debate.

Candidates become delegates after being recommended by their local Party, which is led by the Central Committee in Pyongyang. There is a screening committee for delegates but it does not reject them. Delegates are always elected with implausible majorities.

The period of a delegate is five years, but since the 687 delegates tend to stay in post, the term does not have much meaning. North Korea held a delegates’ election for the 12th session of the SPA on March 8th, 2009, electing a total of 687 members. Kim Jong Il is a delegate, as reflected in his official title, ‘Kim Jong Il, 333rd Election Precinct and General Secretary of the Chosun Workers’ Party, Chairman of the National Defense Commission’, although he doesn’t always attend meetings. Rumor has it that Kim Jong Eun is a delegate under an assumed name, but that has not been proven.

– In that case, what kind of organ is the Standing Committee of the Supreme People’s Assembly?

The Standing Committee and departmental committees are branches of the SPA. When the SPA is not in session (meaning most of the time), the Standing Committee operates as the state’s highest sovereign organization. The chair of the Standing Committee is also the head of state according to the constitution, but the chairman of the National Defense Commission, currently Kim Jong Il, leads all government administration in practice. The chair of the Standing Committee is Kim Young Nam, who frequently receives foreign visitors and operates as one of the regime’s more prominent public faces.

– What privileges accrue to SPA delegates?

The practical role of a delegate is almost non-existent, but there are some perks. Delegates get priority use of transportation and are immune from prosecution unless expressly stripped of that right by the Party Central Committee. National Assembly lawmakers in South Korea have similar privileges, of course. Notably, SPA delegates do not receive priority food distribution.

Even though the SPA is North Korea’s highest sovereign organization, delegates are not envied by ordinary North Koreans. Since the Supreme People’s Assembly does not have the authority to influence people’s lives, those people accord them little interest.

One North Korean defector commented, “Delegates are usually factory managers or similar, so people are only really envious of his job, in which he can make a lot of money, than in his work as a delegate.” Being a delegate does not directly improve a person’s economic status.

And more here from the Pyongyang Times.

UPDATE 2 (2011-4-7): Below is the first round of media stories about the SPA’s 4th session.

KCNA: DPRK Supreme People’s Assembly Meets

The Fourth Session of the 12th Supreme People′s Assembly of the DPRK was held at the Mansudae Assembly Hall Thursday.

Present there were deputies to the SPA.

Also attending it as observers were officials of party, armed forces and power organs, public organizations, ministries and national institutions and those in the fields of science, education, culture and arts, public health and media.

The Session discussed the following agenda items:

On the work of the DPRK Cabinet in Juche 99 (2010) and its tasks for Juche 100 (2011)

On the results of the implementation of the DPRK state budget for Juche 99 (2010) and its state budget for Juche 100 (2011)

Organizational matter

Deputy Choe Yong Rim, premier of the DPRK, made a report on the first agenda item.

He said that last year witnessed the signal advance in making the national economy Juche-oriented and the solid foundation for a drastic turn in developing the light industry and agricultural production. Big successes were made in development of science and technology, cultural construction and other fields, he noted.

He referred to the concrete tasks for this year, stressing the need to remarkably increase the production of consumer goods and attain the goal of grain production without fail to bring about decisive turn in improving the standard of people′s living. Production should be increased in the economic field as a whole while steadily pushing ahead with the drive to put the national economy on a modern basis, he added.

Deputy Pak Su Gil, vice-premier and minister of Finance, made a report on the second agenda item.

He noted that last year′s state budget revenue was overfulfilled 1.3 percent and the state budgetary expenditure was implemented at 99.9 percent. The revenue increased 7.7 percent while the expenditure swelled 8.2 percent over the previous year, he said, adding:

The state budgetary allocations for light industry and agriculture last year showed 10.9 percent and 9.4 percent increase respectively as compared with that in the previous year. The state budgetary expenditure for the pilot domains of the national economy, basic industrial domains and capital construction last year went up 8 percent and 12.9 percent respectively over the previous year.

8.1 percent greater financial disbursement than the previous year was made for the field of science and technology and 6 percent bigger fund than that in the previous year was spent for the implementation of the popular policies.

15.8 percent of the total state budgetary expenditure was spent for national defence last year.

He further said:

This year the state budgetary revenue is expected to grow 7.5 percent over last year′s and the state budgetary expenditure is expected to show an 8.9 percent increase over last year. Huge funds will go to the light industry, agriculture, etc. and 15.8 percent of the total state budgetary expenditure will be spent for national defence.

Speakers at the Session pointed out that the Cabinet′s work last year and the implementation of the state budget were properly reviewed and summed up. This year′s tasks have been clearly laid down and the state budget correctly shaped in such a way as to give full play to the advantages of the socialist system in the DPRK, they said, expressing full support and approval of them.

They also manifested their will to push ahead with the general offensive for bringing about a decisive turn in building a thriving nation by increasing the political and military power of the country in every way and intensifying the drive for great surge for improving the standard of people′s living.

The Session adopted with the unanimous approval of deputies the SPA decision “On approving the report on the work of the DPRK Cabinet and the results of the implementation of the DPRK state budget for Juche 99 (2010)” and the DPRK SPA ordinance “On the DPRK state budget for Juche 100 (2011) “.

Then the Session discussed the organizational matter.

Deputy Jon Pyong Ho was recalled from member of the DPRK National Defence Commission due to the transfer to other post and Deputy Pak To Chun was elected to fill the vacancy.

Deputy Ri Myong Su was appointed as minister of People′s Security of the DPRK NDC.

Deputy Jang Pyong Gyu was elected chairman of the SPA Legislation Committee to fill the vacancy.

Deputy Ri Thae Nam was relieved of vice-premier of the Cabinet for his health reason.

KCNA: Report on the work of the DPRK Cabinet last year and for this year:

Deputy Choe Yong Rim, premier of the DPRK Cabinet, made a report on its work last year and its tasks for this year at the Fourth Session of the 12th Supreme People′s Assembly of the DPRK held Thursday.

He said that the most important achievement gained in the nation′s economic development last year was that signal progress was made in putting the national economy on a Juche-basis.

The inter-departmental structure of the metal industry was refurbished with the new one. The Juche iron production system was successfully established at major metal plants and new alloy steel production bases sprang up.

Large chemical industrial centres were updated on the basis of the latest science and technology to bring about the mass-production of Juche fiber and Juche fertilizers, signal events.

The coal production capacity increased in the field of coal industry. The construction of hydropower stations was completed to create huge additional generating capacity in the field of power industry. The construction of the Huichon Power Station made unprecedentedly rapid progress, opening a bright prospect for completing it by 2012.

It was another signal success made in the development of the national economy last year that a solid foundation was laid to bring about a radical turn in the development of light industry and the agricultural production.

Spectacular successes were made in the development of science and technology last year and the work to put all sectors of the national economy on a CNC basis made dynamic progress.

Scientists and technicians succeeded in the nuclear fusion, stunning the world. Products based on cutting-edge technology were developed and big progress was made in the development of bio-engineering.

The reporter said that this year the DPRK Cabinet would significantly boost the production of consumer goods and attain the target of grain production without fail and thus bring about a decisive turn in improving the standard of people′s living and continue energetically pushing forward the updating of the national economy while forcefully waging the drive for increased production in all economic sectors.

He went on:

The Cabinet will make this year a year in which light industry will advance in full gear and the people will benefit from it and, at the same time, dynamically push ahead with the work to put the production of consumer goods on a modern and scientific basis.

It will focus all efforts on attaining the target of grain production by bringing about signal innovations in farming with the whole party, country and army and all the people involved.

It will thoroughly establish a food production system of agricultural production and stock breeding and that of fruit farming and stock breeding and reenergize the production at the modern stock breeding and fruit production centers in a bid to simultaneously boost the production of livestock products, fruits and grain. It will make sure that a turn is effected in the development of fruit farming, in particular, this year.

The Cabinet will see to it that the material and technical foundation will be consolidated in the fishery domain to conduct deep-sea fishing, small-scale fishing and shallow-sea culture in a big way and put fish farming on a scientific and intensive basis to produce and supply greater quantities of aquatic products and processed fishes and seafood to the people.

It will improve and strengthen the service to the people to fully meet their need and provide better convenience in their lives.

It will decisively increase the production in all sectors of the national economy including the four pilot sectors in an effort to give strong spurs to the ongoing march for a signal improvement in the standard of people′s living.

The Cabinet will make sure that the coal production will be radically boosted in the field of coal industry while the coal production capacity will be increased under a long-term plan.

It will see to it that the field of power industry will operate all generating equipment in full capacity while rationally forming a system of transmission and distribution to make the most effective use of the electricity produced.

It will accelerate the building of large-scale hydro and thermal power plants while focusing sustained state efforts on the construction of the Huichon Power Station in a bid to provide a sure guarantee for hitting the target of electricity production.

The Cabinet will make sure that the field of metal industry will consolidate and develop the Juche-oriented iron production system and method. It will see to it that the introduction of heavy duty rails and the modernization of railways will be accelerated and transport capacity boosted in the field of railway transport to satisfactorily ease the strain on transport.

It will make sure that the field of mining industry will keep production going at a high rate and dynamically push forward updating while laying a foundation for ensuring a more satisfactory production and supply of nonferrous metal products under a long-term plan.

The field of machine-building industry will energetically step up the work to put machine plants on a CNC basis, ensure a satisfactory production and supply of generating equipment and machines and equipment necessary for the modernization of the national economy. The field of electronics industry will boost the production of varieties of electronic elements and products and the IT field would contribute to putting the national economy on an IT basis.

The field of construction will dynamically push forward the construction of important projects including the Hungnam gasification project, Tanchon Port, the sacred site of Thaekwon-Do and the building of 100 000 flats in Pyongyang so as to complete them at the earliest possible date.

The fields of land administration and urban management will radically change the appearance of the country as befitting a thriving nation and provide better living conditions and environment to the people.

The field of scientific research will radically develop such core basic technologies and cutting-edge science and technology including IT and bio-engineering and satisfactorily settle scientific and technological issues arising in building an economic power.

The Cabinet will see to it that foreign trade will be diverse and multi-faceted to decisively increase the volume of export.

The Cabinet will conduct a positive work for making an effective use of levers for economic and technological cooperation in the direction of consolidating the foundation of the DPRK′s socialist self-supporting economy.

It will make sustained great efforts for the provision of materials needed for boosting the combat capability of the People′s Army and the defence capability of the country in every way and the development of the field of socialist cultural construction.

The reporter called on everybody to work hard to emerge honorable victors in the general offensive this year to significantly greet the centenary of birth of President Kim Il Sung, united close around the Central Committee of the Workers′ Party of Korea headed by leader Kim Jong Il.

KCNA: Report on the implementation of state budget for 2010 and state budget for 2011

Deputy Pak Su Gil, vice-premier and minister of Finance, delivered a report on the results of the implementation of the DPRK state budget for last year and its state budget for this year at the Fourth Session of the 12th Supreme People′s Assembly held on Thursday.

According to the report, last year′s state budgetary revenue was overfulfilled 1.3 percent and its plan for state budgetary expenditure was carried out at 99.9 percent.

The state budgetary allocations for light industry and agriculture last year showed a 10.9 percent and 9.4 percent increase respectively as compared with that in the previous year. The state budgetary expenditure for the pilot domains of national economy, basic industrial domains and capital construction last year went up 8 percent and 12.9 percent respectively over the previous year.

8.1 percent greater financial disbursement than the previous year was made for the field of science and technology and 6 percent bigger fund than that in the previous year was spent for the implementation of the popular policies.

15.8 percent of the total state budgetary expenditure was spent for national defence last year.

The state budget for this year has been shaped in such a way as to radically boost the light industry and agricultural production, revitalize the overall economic construction and conduct a dynamic drive to break through the latest science and technology in all fields to lay a solid foundation for an economic power.

This year′s plan for state budgetary revenue is expected to grow 7.5 percent over last year′s.

The national budgetary revenue is expected to hold 83.9 percent of the total state budgetary revenue and local budgetary revenue 16.1 percent.

The revenue from transaction and the profits of state-run enterprises are expected to hold 78.5 percent of the total state budgetary revenue this year and the profits of cooperative organizations, the fixed asset depreciation, the income from real estate rent and social insurance are expected to swell 3.8 percent, 1.4 percent, 0.7 percent and 0.4 percent respectively as compared with those last year.

This year′s plan for state budgetary expenditure is expected to show an 8.9 percent increase over last year. The budgetary allocation for the light industry is expected to go up 12.9 percent and a huge budgetary disbursement will be made for local industry, too.

9 percent more funds than last year will go to agriculture, funds needed for farming will be provided on a priority basis and the expenditure for the pilot domains and basic industries of the national economy is expected to go up 13.5 percent over last year.

The financial allocation for the capital construction will go up 15.1 percent over last year to hasten the construction of important objects and complete them at the earliest possible date. 10.1 percent bigger financial allocation than last year will be made for scientific and technological development in order to fulfill the five-year plan for state scientific and technological development, positively push forward the work for putting industrial domains on a modern and CNC basis and successfully solve scientific and technical issues arising in the building of an economic power.

Huge funds will go to the cultural construction and land improvement and city management.

15.8 percent of the total state budgetary expenditure is expected to be spent for national defence for this year.

A large amount of educational aid fund and stipends will be sent for the children of Koreans in Japan this year, too.

For the successful fulfillment of the state budget for this year it is necessary for all domains and units of the national economy to give full play to the mental power of the producer masses, economize manpower, materials and funds and cut down as much as possible nonproductive expenditure and thus carry out the monthly and quarterly plans for budgetary revenue without fail, the reporter stressed.

The absense of Kim Jong-un is fomenting speculation.  See here, here, herehere, and here.

Michael Madden offers information on the individuals mentioned above.

UPDATE 1 (4/1/2011): The Institute for Far Eastern Studies (IFES) issues the following information (NK Brief No 11-03-30):

On March 15, the Standing Committee of the Supreme People’s Assembly (SPA) announced that the 4th Session of North Korea’s 12th SPA will convene on April 7 in Pyongyang, ordering all the SPA members to pre-register from April 5 to 6.

The SPA is the highest organ of state power according to the Constitution of the DPRK. The Assembly is convened once or twice a year in regular sessions and called to meet in two to three weeks in advance. Its functions include adopting, amending or supplementing enactments to the constitution, determining state policy and budgets, and organizing elections of National Defence Commission (NDC) and other state organs.

Although the KCNA did not report on the specific agenda for the session, it is most likely to resemble the other regular sessions of the SPA, consisting of discussions of the final budget from last year as well as the budget for this year; organizational and personnel issues; and the direction of economic policy. In addition, organizational and personnel changes within the Cabinet and the NDC will likely be on the top agenda.

Particular attention is drawn to whether the heir-apparent Kim Jong Un will be appointed as the vice chairman of the NDC at this session to add to his new title of vice chairman of the Party’s Central Military Commission, which he received earned last year. Another point of interest is on who will replace Ju Sang Sung, who was suddenly dismissed from his post as the Minister of People’s Security. The personnel changes made at the session will play an important role in cementing the succession process of Kim Jong Un.

At the first session of the 12th Presidium of the Supreme People’s Assembly held in April 2009, the Constitution was amended to name the NDC chairman as the “highest leader”, further strengthening the power of the Commission and Kim Jong Il.

Additionally, the second session of the 12th SPA was held on April 9, 2010 followed by the third session which was held on June 7, 2010.

ORIGINAL POST (3/22/2011): According to KCNA:

The fourth session of the 12th SPA of the DPRK will be held in Pyongyang on April 7, Juche 100 (2011).

The Presidium of the Supreme People’s Assembly of the DPRK made public a decision on it on Tuesday.

According to the AFP:

Pyongyang usually convenes its rubber-stamp parliament twice a year for a day or two to pass government budgets and approve personnel changes.

Attention is focused on whether Kim Jong-Un, leader Kim Jong-Il’s youngest son and heir apparent, will be promoted to become one of the vice-chairmen of the powerful National Defence Commission (NDC).

Jong-Un, believed aged 27, was made a four-star general in September and appointed as one of vice-chairmen of the party Central Military Commission, which oversees the 1.2 million-strong armed forces headed by his father.

“It is interesting to see whether the son becomes an NDC vice-chairman or even the first NDC vice-chairman,” Professor Yang Moo-Jin, of the University of North Korean Studies, told AFP.

“It will give us an indication as to where the North stands in its efforts to endow him with power and authority needed to become an eventual successor,” Yang said.

If Jong-Un emerges as the NDC first vice-chairman, he is likely to be given the same title in the Central Military Commission sooner or later, Yang added.

“This will pave the way for the son’s eventual ascension to the throne,” he said.

North Korea’s 2009 constitution says the NDC chairman, currently the senior Kim, is “the highest leader” of the communist state.

The need for new appointments has become acute after the death of the first NDC vice-chairman, Vice Marshall Jo Myong-Rok, in November last year, and the sudden dismissal of the North’s police chief, Ju Sang Song.

According to the Choson Ilbo:

The rubberstamp parliament […] approves senior members of the National Defense Commission, the top decision-making body, and the Cabinet.

Kim Jong-un has already been appointed vice chairman of the commission, and the SPA is expected to approve the appointment.

“Kim Jong-un will need the title if he is to visit China as his father’s heir and meet Xi Jinping,” who is widely tipped as the next Chinese president, a Unification Ministry official speculated.

Below is past information on the 12th Supreme People’s Assembly:

Elections were held in March 2009.  See here, here, here.

12th SPA’s First Session (April 9th, 2009):  KCNA and here.

12th SPA’s Second Session (April 9th, 2010): KCNA 1,KCNA 2,  here, and here.

12th SPA’s Third Session (June 7th, 2010): KCNA 1KCNA 2KCNA 3KCNA 4KCNA 5KCNA 6KCNA 7KCNA 8, here, here, and here.

Share

Exchange rate data

Wednesday, April 6th, 2011

The The UN World Food Prgram’s Rapid Food Security Assessment Mission (RFSA) offered some exchange rate data that I thought was worth pointing out:

Currently the official exchange rate is about USD1=KPW100 yet the market rate is closer to USD1=KPW3000. In other words, the redenomination of the national currency that occurred in November 2009 is all but neutralized. The effects of this policy on ordinary citizens appear to be mixed where people with over KPW 100,000 lost their savings. The purpose of such a policy was to control inflation by reducing money supply and to curb the growth in private enterprise. Worker salaries remained the same, but prices were reduced significantly.

The PDS prices were revised downwards in the wake of the currency revaluation making it even more affordable, at least in principle. For example, PDS prices of rice declined from KPW 44 to KPW 24 per kg and maize declined from KPW 24 to KPW 14. At these low prices the issue is the lack of commodities in the market, rather than consumers lacking money to purchase them.

An average worker makes around KPW 3,000 to KPW 4,000 per month. This translates into a dollar per month which only works in DPRK because everything is heavily subsidized and ordinary citizens do not rely on direct purchases of imported commodities. If PDS were to run out of cereals at the end April, people would not have the means to purchase cereals on the black market, where prices are KPW2000 per kilogram of rice and about KPW 1000 for maize. It is highly doubtful that the barter system which is the backbone of this informal economy will be able to withstand a shock of this magnitude over more than a couple of weeks. A humanitarian crisis is the likely outcome of such a series of events.

Share

DPRK on high alert for radioactive damage from Japan

Wednesday, April 6th, 2011

UPDATE (4/6/2011): According to Yonahp:

North Korea’s official media reported on Tuesday that the country detected traces of radioactive materials in major cities following Japan’s nuclear crisis triggered by the March 11 earthquake and tsunami.

The North said in a report carried by the official Korean Central Broadcasting Station that traces of radioactive iodine and cesium were found in the cities of Pyongyang, Wonsan and Cheongjin, but the report did not disclose detection levels of such materials.

“Radioactivity monitoring stations in Pyongyang, Wonsan and Cheongjin have detected radioactive materials like iodine and cesium, which have not been seen in the past,” an official for North Korea’s meteorological research agency said in the TV report.

The traces were so small that they will not affect public health, the official said, adding that “close attention should be paid to monitoring and forecasting of weather changes.”

The news came as South Korea also reported air detection of radioactive materials after the massive earthquake and tsunami crippled nuclear reactors in Fukushima, sparking concerns of radioactive leaks.

ORIGINAL POST (2011-3-29): According to Yonhap:

North Korea is on high alert for any possible radioactive damage from an unfolding nuclear crisis in neighboring Japan, a senior North Korean scholar said Tuesday during talks with South Korea on a possible volcano in the communist state.

The comment was made by Yoo Yong-geun, head of a North Korean delegation who traveled earlier in the day to this South Korean border town of Munsan to discuss joint ways to respond if Mount Paekdu in the North is found to have an active volcanic core.

“We are actively watching, worrying that radioactive contamination may reach us” from Japan, where firefighters are struggling to contain radioactive leaks from a northeastern nuclear plant hit by a major earthquake and ensuing tsunami.

Yoon did not elaborate on what measures his government was taking to protect its population. Despite the direction of winds that normally blow from west to east, traces of radioactive material have been detected in South Korea, raising alarm here, according to a state nuclear safety agency on Tuesday.

“Due to the proximity, (events in Japan) seem to affect us,” Yoon told four South Korean scholars attending the first-ever inter-Korean volcano talks. Yoon, deputy head of a volcano research institute, added underground water fluctuated and mud seeped from spring water following the 9.0-magnitude earthquake off Japan’s east coast.

Read the full story here:
N. Korea on high alert for radioactive damage from Japan: scholar
Yonhap
Sam Kim
3/29/2011

Share

On the Narae debit card

Thursday, March 24th, 2011

UPDATE 5 (2012-7-3): Some time has passed since Narae’s launch, and Dr. Seliger reports that use of the debit card in Pyongyang is growing. As evidence he sends along a list of Pyongyang establishments that are accepting the card.

 

You can see a rough English translation of the names of these shops and hotels here (doc).

It is worth pointing out, again, that the Narae card stores balances in hard currency.

UPDATE 4 (2011-9-22): A recent visitor to the DPRK has posted a picture of the front and back of a Narae card:

UPDATE (2011-3-24): Bernama (Malaysia) offers some more information on the DPRK’s electronic payment system:

An electronic system for settlement with the use of debit cards has been for the first time introduced at the international communications center, in major department stores, hotels, and restaurants of North Korea.

The debit card dubbed Narae (wing), can be used both by the citizens of North Korea and by foreign diplomats and representatives of humanitarian organizations working here, according to Russian news agency Itar-Tass on Tursday.

It takes only several minutes to issue the cards to foreigners. The card’s cost is $3. Not more than $1,000 may be placed in an account.

In case of settlement, the money is automatically converted in to the North Korean won in accordance with the official rate of exchange.

The card bears an inscription indicating a date of issue, a card number, and a bank code.

In the interest of financial safety, a user enters a personal four-digit code of his own.

Most foreigners have acquired such cards, pointing out the convenience of using them, first of all because cash register operators in local shops quite often lack small denomination coins to give change to customers who pay cash in US dollars or Euros.

This story confused me because there are a couple of notable differences between the official information posted in Pyongyang last January (see ORIGINAL POST below) and the facts laid out in the above article.

First, Bernama claims that there is a $1,000 limit to the value that can be prepaid to the Narae card, yet according to the informational flyer posted in the Potonggang Hotel, there is no limit to the balances that can be prepaid. From the Narae issuer’s financial perspective, it does not make sense to apply a limit.  Placing a legal limit to prepaid quantities limits the issuers own income. This is because issuers of prepay cards earn interest income (float) on the deposited funds as long as the balances remain on the card (before the ultimate consumer spends the funds).  The larger the amount of funds prepaid and the slower they are spent, the more float the issuer earns (we are assuming a monopoly issuer here–competition would reduce these profits if allowed).

It could be, however, that the issuers are not profiting from interest income earned by floating deposits since Pyongyang does not have a legitimate money market (Though it would not be too difficult to move most of these funds to Singapore or Hong Kong where they could earn interest while keeping a small % in Pyongyang to clear payments each month). This would imply that the electronic payment system is valuable to the regime for control purposes—because it mops up hard currency from the individuals who regularly come into contact with foreign exchange and prevents dollars, yuan, yen, and euros from trickling into the black markets.  In this sense, the prepay cards works much in the same way as the old foreign exchange certificates (FECs) did.  Remember when the DPRK had three different colored currencies depending on where you were from (Capitalist country, socialist country, or local)?  Theoretically, with the new prepay card North Koreans and foreigners could deposit their hard currency when they arrive at a North Korean customs office (airport) and spend the balances in approved locations.  The government gets the hard currency, the customer gets the goods, and low-level employees and managers are never tempted to accumulate forex.

ORIGINAL POST (2011-1-27): Dr. Bernhard Seliger of the Hanns Seidel Foundation writes in with information on the DPRK’s new “Narae” (나래) debit card system:

Pictured above: “Narae” flyer at the Potonggang Hotel

Dr. Seliger provided an English translation of the flyer:

1. Debit card “Narae” is an electronic payment system used to pay for goods and service in service units where foreign currencies are used. It makes payment process fast and accurate without cash. “Narae” means “wings” and spirits of Songun Cheollima flying fast and high into the homeland’s sky.

2. A card is issued at exchange office of foreign banks and an issued card can be used in service units using foreign currencies without limit.

3. Exchange offices receive foreign cash from guests (including foreigners) and deposit cash into a card according to the exchange rate on that day. Fee for a card itself is paid separately or deducted from money in a card.

4. There are 4 numbers in 4 bundles on the front of card. The first bundle means the bank of issue, the second is the date of issue and the third and fourth bundles means card numbers of the card owner.

5. For security a guest should enter his own pin number under the instruction of clerks.
You approve payments using numbers you already entered so you should remember your own pin numbers.
*If you enter wrong numbers 3 times consecutively payment process is stopped.

6. You can pay only within your balance in a card.

7. If you want to supplement balance you have to pay cash and it will be exchanged into Korean won at the exchange rate on that day and deposited to your card.

8. If you want to take your cash back you can get this service at bank of issue. The exchange rate on that day is applied.
Foreigners can get this service at hotels and airports.
*Fee for cards is not returned.

9. You have to follow those things regarding using a card.
-You should keep a card well not to be broken or damaged. Especially be careful not to damage electronic factor on the card.
-If a card is damaged or missing you should report it to exchange office.

10. Your confidentiality regarding a card is completely assured and money in your card is protected legally.

A PDF of the flyer in English and Korean is here.

By chance, the Russian blog “Show and Tell Pyongyang” (Translated to English here) also posted some information about Narae.  Below is a picture of a Narare card and a list of locations where it is accepted. Click images for larger version.

In the chart above, the first column is apparently bank names. The second column is where people can go to buy the card and deposit money. The third and fourth columns are “Current volunteers/volunteered places that have started card service”.

Thanks to a friend for the translation.  If you recognize any specific institutions on the list, please let me know.

Share

Narco-capitalism grips North Korea

Friday, March 18th, 2011

Lankov writes in the Asia Times:

In early March, the United States State Department made a statement that attracted surprisingly little attention worldwide, estimating that government-sponsored narcotic production in North Korea seemed to have decreased considerably. At the same time, the statement made clear that the private production of drugs was on the rise.

This fits with what the present author has heard recently – often from sources inside North Korea; it seems that North Korea’s drug industry is changing, and this change might have important consequences for the outside world.

The story of North Korea’s involvement with the international narcotics trade began 35 years ago. In 1976, Norwegian police intercepted a large shipment of hashish in the luggage of North Korean diplomats. The same year, another group of North Korean officials was found in possession of the same drug by Egyptian customs; they had 400 kilograms of hashish in their luggage.

In both cases, diplomatic passports saved them from any formal investigation. Next year, North Korean diplomats were caught trying to smuggle drugs into Venezuela and India. In India, quite friendly to North Korea in those days, the 15 kgs of hashish was transported by the ambassador’s secretary. After that, such seizures became regular occurrences, usually once every year or two, and usually involving North Korean diplomats.

North Korea’s narcotics program has always appeared strange to outside observers – “strange” even if judged by the standards of Pyongyang, whose leaders do not care much about legal niceties and international reputation, and perceive international politics as a cut-throat, zero-sum game. On balance, state-sponsored drug production has done much more harm than good to Pyongyang.

Available estimates agree that the North Korean government didn’t earn much from pedaling illicit drugs. It is even possible that these risky operations were largely waged to sustain North Korean missions overseas – from the mid-1970s such missions were required to pay for their own expenses.

At the same time, the existence of this program inflicted serious damage on Pyongyang’s international standing, which was at rock-bottom anyway. Despite all denials of official involvement, the program could not really be hidden because seizures of narcotics carried by North Korean diplomats and officials happened far too often and sometimes in countries that were relatively sympathetic to the North.

So, if analysts at the State Department are to be believed, North Korea seems to have come to its senses and stopped or, more likely, significantly reduced its narcotics production. Indeed, this program seems to belong to the strange and slightly bizarre world of the foreign policy of North Korea in the 1970s. After all, those were the times when North Korean agents were busy kidnapping Japanese teenagers to become living tools for the training of agents (and when US$200 million was spent propagating the juche(self-reliance) ideology in the Third World).

However, this doesn’t mean the world should heave a collective sigh of relief and write off North Korea as a potential source of dangerous narcotics. If anything, the situation has become worse over the past five to six years. But this time, the North Korean regime seems to have little or no responsibility for the new boom in drug production.

The change in the North Korean drug industry essentially mirrors the wider changes that in the past two decades have occurred in the North Korean economy and society at large. The state-run Stalinist economy essentially collapsed whilst private business took over – usually unrecognized by the state, technically illegal in most cases, completely absent from official statistics, but powerful nonetheless. This happened in all industries, and drugs production was not an exception.

The author interacts with North Koreans quite frequently and most of my contacts are people from the northernmost part of the country, from areas adjacent to the Chinese border. They are unanimous: around 2005 to 2006, these areas experienced a sudden and dramatic upsurge in drug usage, hitherto almost unknown to the common public.

It’s true that some opium productive capacity existed in the northeastern parts of Korea since the early 1900s. This is also the region where secret state-run plantations were rumored to be located in the 1980s or early 1990s. However, in the North Korea of the Kim Il-sung era, surveillance was tight and exceptionally efficient, so drug problems were for all practical purposes non-existent within the country. The drugs were produced for export and medical purposes only.

Things began to change around 2005; by that time North Korea had undergone what is usually described as “grassroots capitalism” or “marketization from below”. The old state-run economy had come to a complete standstill, so most North Koreans started to make a living through all sorts of private economic activities – from cultivating private fields and working at private workshops to smuggling.

Official corruption became endemic, so officials became more than willing to turn a blind eye to all sorts of illegal activities as long as they received their cut. Arguably, North Korea nowadays might be described as the most corrupt country of East Asia: every interaction with authorities requires payment, and if the payment is sufficient, almost everything is possible.

This social and economic situation has made the large-scale private production of drugs possible. The new North Korean drug scene is dominated by “Ice” (crystal meth), a synthetic substance produced in numerous small workshops. It is frequently mentioned by defectors, while references to other drugs are quite rare.

Most of my North Korean interlocutors, some former Korean People’s Army officers, believe that methamphetamines were initially produced officially, but not so much as a drug in the strict sense, rather as a stimulant for elite military units. This seems to be plausible – after all, it was used as such during World War II by both the Axis and the Allies.

However, after around 2005 private production of Ice began and soon became large-scale. There are rumors about occasional state involvement with illicit production of drugs for export, but even if those rumors are true, the state-sponsored labs clearly produce only a small fraction of the total. Most of the labs are private nowadays.

Raw materials are often imported from China, and China has also become a major market for North Korean drug manufacturers. Since law-enforcement in North Korea is so lax (at least when no political issues are involved), it is easier and safer to run a drug workshop there, on the southern banks of the Tumen River.

The Ice-producing labs are difficult to hide since the production is smelly. Usually, such labs operate at some distance from living quarters, somewhere in the mountains or at a non-operational factory. (Admittedly, such factories are not in short supply in post-crisis North Korea).

In many cases, there are joint operations of Chinese and North Korean criminal groups: the Chinese provide the necessary supplies while the North Koreans use their territory as a safe haven to process drugs that are later shipped to China.

However, some narcotics remain in North Korea, where drug usage has increased dramatically. My interviewees say that at least in the cities of the borderlands a significant proportion of younger people have had some experience with Ice. A schoolteacher from a borderland city of Musan recently told me that in 2008-09 most of the students in their final years of high school tried Ice.

But the problem is not limited to the borderlands. A few months ago, a colleague of mine whilst visiting a prestigious college in Pyongyang spotted a poster that warned Pyongyang students about the dangers of drug use. Merely a few years ago, such a poster would be both unthinkable and unnecessary.

It seems this development has begun to worry the Chinese. In the past few years, Chinese media occasionally write about crackdowns on drug dealers in China’s northeast, often explicitly mentioning their Korean connection. Last summer, Chinese media reported that a fleet of high-speed boats, operated by the Chinese police, had begun to patrol the rivers on the border with North Korea. The task of this squad is specifically to fight drug smuggling.

The “new” North Korean drug problem is relatively local and small in scale, although it might have sufficiently grave consequences for North Korea itself, as well as for some adjacent areas of China and Russia. It also might be seen as an indication of a new type of problem that North Korea might create.

In the past, most troubles related to North Korea were caused by the North Korean government that demonstrated an inclination to flout international laws and conventions (sometimes this inclination was strengthened by remarkable adventurism). Nowadays, problems are increasingly caused by the inability of this government to control what is happening in the country – at least outside of Pyongyang and some major cities. In the long run, the lawlessness of uncontrolled private profiteers might prove more dangerous than the Machiavellian adventurism of dictators.

Read the full story here:
Narco-capitalism grips North Korea
Asia Times
Andrei Lankov
3/18/2011

Share