The Daily NK did a series of articles on the General Association of Korean Residents in Japan (Chongryon or Chosen Soren). Below are links to all seven parts:
Part 1: Chongryon feels the pinch
Part 2: Debts, Mergers, Collapses and Foreclosures
Part 3: Homecoming Project Speeds Chongryon Demise
Part 4: South Korea Visits Weakened Chongryon
Part 5: Chongryon Remittances and Investments
Part 6: “Study Group,” the Core of Chongryon
Part 7: Study Group Money Laundering Machine
According to the Guardian:
It is the nerve centre of North Korea’s money-making operations, the department dedicated to raising hard currency for Kim Jong-il while his country teeters on the brink of collapse.
Room 39 is responsible for some legal ventures, such as the country’s limited exports of ginseng and other items. But according to defectors, most of its energy goes into drug-trafficking, sales of weapons and missile technology, and the production of counterfeit US dollar bills.
Today, it was reported the department’s head – Kim Jong-il’s personal finance manager – has been sacked, possibly in response to international action against the alleged illegal moneymaking. South Korea’s Yonhap news agency said Kim Dong-un was dismissed because he had been blacklisted by so many foreign governments, including the EU in December, leaving him unable to travel on behalf of Room 39’s legal companies. He has been replaced by his deputy, Jon Il-chun, Yonhap said, citing an unidentified source.
Housed in an unremarkable government compound in Pyongyang, Room 39 oversees 120 companies and mines, accounting for a quarter of all North Korean trade and employing 50,000 people, according to Lim Soo-ho, a research fellow at the Samsung Economic Research Institute. He said Kim’s dismissal may be part of attempts to get around international sanctions.
While its inner workings remain a mystery to all but its occupants and the family they serve, Room 39’s role in enabling the regime to survive even in times of widespread famine and international pressure, has come under greater scrutiny since the imposition last year of tough UN sanctions over its nuclear programme.
…
Some of the money generated by Room 39 is used to buy the loyalty of senior party officials, a role that may take on greater prominence as Kim Jong-il, who suffered a stroke in 2008, prepares to hand over power to his third son, Kim Jong-un. Analysts have estimated that illegal activities account for up to 40% of all North Korean trade and an even higher share of total cash earnings.
Additional information:
1. More on the EU travel ban is here.
2. Office 39 is reportedly located here. Kim Jong Il’s office is reportedly nearby here.
3. This week the KWP’s finance director, Pak Nam-gi, was also let go.
4. Mike Madden notes the new director’s appearance with KJI at an “On the Spot Guidance” visit this week. Mike also points to a possible appearance the Korea Taepung International Investment Group meeting.
According to the Choson Ilbo:
The North Korean regime apparently sacked the Workers’ Party’s Finance Director Pak Nam-gi, letting him take the fall for the failed currency reform late last year. Pak was appointed finance director in July 2007 to oversee North Korea’s economic policies and has spent the past few years trying to root out a nascent market economy.
“Right now, North Korean officials are busy blaming each other for the failed currency reform and Pak, who spearheaded the revaluation, is believed to have been sacked,” said a diplomatic source in Beijing. “Markets have come to a grinding halt following the currency revaluation and prices have soared,” the source said. It seems North Korea hoped to stabilize prices through the currency reform and then credit the achievement to Kim Jong-il’s third son and heir apparent Jong-un to consolidate his grip on power, but this flopped, the source added.
Some North Korea watchers in China predict that the regime may perform a U-turn back to timid market reforms now that Pak, who led the crusade against capitalism, has been fired. One North Korea expert in Beijing said, “There is a strong possibility that high-ranking North Korean officials who led the drive to crush market forces since 2004 will be removed from office, while policies will shift toward market reforms starting in the second half of this year.”
Meanwhile, the new North Korean won is still plummeting against the U.S. dollar. North Korea valued the new currency to 98 won per dollar after the old won weakened to 3,500. But the new won has plunged since last month and is now being traded at between 300 and 500 won per dollar, according to people who trade goods with North Koreans.
According to the Daily NK:
In the tradition of dictatorial regimes worldwide, scapegoats have apparently also been chosen. South Korea’s Chosun Ilbo today claimed that Park Nam Ki, Director of the Planning and Financial Department of the Central Committee, has taken responsibility for the failed redenomination, which initiated a period of hyper-inflation, and been dismissed.
According to the report, Park was appointed to the top economic position in the North Korean government in July, 2005, where he began to pull up the green shoots of spontaneous market economy.
If the news is confirmed, Park will be following in the undesirable footsteps of Ministry of Agriculture head Seo Gwan Hee and Premier Park Bong Ju.
Seo was executed for his role in the 1990s famine. According to defector testimony, Kim Jong Il shifted responsibility for the famine onto him and had him publicly executed in 1997.
Meanwhile, Park Bong Ju became the Premier of the North Korean Cabinet in 2003, the year after the adoption of the July 1st Economic Management Reform Measure, and was responsible for introducing revised market economic elements according to the July 1st Measure. However, results were not sufficient and he was sent to manage the Suncheon Vinylon Complex in South Pyongan Province.
Lets hope that the jangmadang come back with a vengeance.
Read the full articles here:
N.Korean Finance Chief Sacked Over Currency Debacle
Choson Ilbo
2/3/2010
Read the full story here:
Ban on Markets lifted
Daily NK
Jung Kwon Ho
2/3/2010
Daily NK
Park Sung Kook
2/2/2010
There has been an explosion in the number of casualties resulting from popular resentment at harsh regulation of market activities by the security apparatus across North Korea, according to various Daily NK sources.
For instance, in Pyongsung, North Pyongan Province, normally one of the key distribution centers in North Korea, there have been several incidents of agents from the People’s Safety Agency (PSA), the organization charged with cracking down on the smuggling of food and other officially “immoral” acts, being attacked by unidentified assailants.
A Daily NK source reported on Monday, “A group of agents who had just finished doing the rounds of the jangmadang and alley markets in Naengcheon-dong, Haksu-dong, and Cheongok-ri in Pyongsung were attacked by a number of people, who assaulted them and immediately ran away. As a result, PSA officials are feeling very tense these days.”
Commenting privately on these incidents, some people savor them as acts of revenge, but others are worried about the situation, according to The Daily NK’s sources.
There have been more examples unearthed in recent days, too. For instance, North Korea Intellectuals Solidarity (NKIS), a Seoul-based defector group, recently received news that “a fight broke out between agents of the PSA, who monitor the Hyesan jangmadang, and some residents. As the fight turned serious, one resident snatched an agent’s gun and fired randomly into the crowd. One agent, Choe, is in a critical condition.”
According to NKIS, the fight began after the PSA agents beat up a trader who was trying to avoid the crackdown, and that made other residents angry, so they attacked the agents in return. As the fight grew more serious, agents threatened residents, but this only added fuel to the flames.
Finally, a Daily NK source from North Hamkyung Province released one other incident: Cho, who used to work for the Prosecutions Department of the National Security Agency in the region, was apparently killed by a Chongjin Steel Mill worker called Jeung Hyun Deuk.
The source explained, “Jeung’s father, the chief of a foreign currency-generating company, was interrogated last July on suspicion of embezzling enormous amounts of property and foreign currency, and in January was sentenced to life in prison. However, a few days after being imprisoned, he died. Thereafter, Jeung held a grudge against his father’s interrogator, Cho, and eventually killed him.”
The source concluded, “Traders and residents have lost their property due to the redenomination and are pretty much being treated as criminals as a result of the NSA and PSA’s ‘50-Day Battle.’ Therefore, people are taking revenge on agents, since they feel so desperate that, regardless of their actions, they will die. As a result, social unrest is becoming more serious.”
On January 2, the National Defense Commission released an order entitled “On completely sweeping away hostile factions who attempt to demolish our Republic from the inside,” initiating the “50-Day Battle” crackdown by the PSA and NSA in every city, county, and province which was referred to by the North Hamkyung Province source.
Institute for Far Eastern Studies (IFES)
NK Brief No.10-01-29-1
2010-01-29
The director of the (North) Korea Institute of Social Sciences has publically stated that the shocking currency reforms announced last November were aimed at filling the state’s public finance coffers.
In an interview for the Choson Sinbo, a newspaper distributed by the pro-North ‘General Association of Korean Residents in Japan,’ director Kim Cheol Jun revealed, “[last year’s] currency exchange program in [North Korea] was effectively carried out…through the currency exchange, socialist economic management principles could be better realized and a public finance foundation was prepared on which leaping advancements in the lives of the people will be achieved.”
Many experts in South Korea and abroad had speculated that the North’s objective in revamping its currency was to boost public coffers, but this was the first time that anyone from North Korea had publicly alluded to such goal. Director Kim stated that last year was a year ‘carved into history’ as the year in which the nation was turned around toward the realization of the goals set for 2012, noting that new seeds had been developed to boost crop yields, and that double- and triple-cropping as well as improved potato and bean crops had been accomplished.
Director Kim also stated that a decisive turn-around had been made in resolving food shortage problems, noting the successful development of Lyosell as one example of improved production in North Korea. Lyosell is a silk-like material made from wood pulp transformed into cellulose, and is softer and more hygroscopic than cotton, yet almost as strong as polyester.
Director Kim added that last year also saw the completion of the Yeoungwon Powerplant, the Yeaseong River No. 1 Youth Powerplant, and the Keumya River Powerplant, as well as the installation of Computer Numerical Control (CNC) systems in the Taean Heavy Machinery Complex, the Cheollima Steel Complex, and the Hyecheong Construction Machinery Factory.
Following the currency reform, there was a total lack of policy to stabilize the lives of the North Korean people, and the ban on foreign currency, closing of markets and other control measures only pushed residents to the brink. On December 28, North Korean authorities released a memorandum completely banning the use of foreign currency, and since the beginning of the new year, markets throughout the country have been closed, causing people in the North to turn to barter in order to obtain food. However, the schedule for the closing of markets varies by region, and the state authorities have been unable to enforce state-set pricing as the government has been faced with more than a little resistance to the currency reforms.
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.
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
(H/T Josh) The price of rice has reportedly skyrocketed since the “anti-inflation” currency reforms. According to Good Freinds:
The “inflation fighting” reforms have also caused a devaluation of the new won realtive to foreign currencies:
You can read the full Good Friends report here.
The Daily NK keeps a running graph of price and exchange rate information. See it here.
As with all hyperinflation economies, North Koreans are reportedly turning to barter. According to the AFP:
Seoul-based Internet newspaper DailyNK also reported last week that bartering has made a comeback.
“For now, state-designated prices are still not public, so people think that selling goods for cash now would mean making a loss,” it quoted a defector who talked to his family in the North as saying.
“Therefore, bartering has become the main method of trading for the people.”
The defector said the barter value of products is decided according to their value in old money, with trade carried out privately to avoid detection.
Before the redenomination, one fish was worth 1,500 won and a kilogram of corn was 900 won, so people barter one fish for a little less than two kilograms of corn, DailyNK said.
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.
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
