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(Updated) Committee clears UNDP

Tuesday, June 3rd, 2008

UPDATE 2:

The U.N.’s North Korea Chutzpah
Wall Street Journal, Page A17
Melanie Kirkpatrick
6/12/2008

UPDATE 1:
Cash for Kim
Wall Street Journal, page A20
6/3/2008

(Excerpt) You have to read to page 347 of yesterday’s report on the United Nations Development Program’s antics in North Korea before reaching the recommendation that is likely to cause a panic in Turtle Bay: Give member states access to the internal audits, now secret, of UNDP programs.

That simple principle – let the funders see how their money is spent – is anathema in the international aid community and was at the heart of the U.S. exposé last year of the UNDP’s slipshod operations in North Korea. If the U.S. hadn’t blown the whistle, it would be business as usual. This latest report – by three experts appointed by the UNDP – is a wake-up call for more accountability throughout the U.N.

In yesterday’s report, the auditors write that they “are unable to confirm the total size” of the UNDP program in North Korea between 1997 and 2007 – an amazing indictment of UNDP financial practices. They calculate total expenditures between $57.1 million and $72.3 million, which roughly accords with what the U.S. had estimated and far exceeds the UNDP’s guess.

Where did all this money go? The auditors conclude that 38% of disbursements were to “government agencies.” Its review of “selected” projects finds that the documentation for 77 projects – or 74% – was so poor that they could not determine “whether the ultimate beneficiary is consistent with the payee name indicated in the financial system.” That is, nobody knows where the money went – except perhaps Kim Jong Il.

Also notable is the report’s findings on dual-use technology. Of the 151 pieces of equipment reviewed by the auditors, 95 were on the U.S. Commerce Department’s control list and required an export license. Many were “controlled by the U.S. for national security and anti-terrorism reasons . . . and were of heightened concern.” The UNDP hadn’t obtained the required licenses. The auditors add that when the UNDP pulled out of North Korea in March 2007, it left this equipment behind. The UNDP failed to obtain the required “retransfer authorization,” the report dryly notes. Translation: Retrieval was impossible because the North already had the stuff.

ORIGINAL POST: A three-member UN investigative committee, led by Miklos Nemeth, a former Hungarian prime minister, issued a report claiming allegations that North Korea diverted aid money from the United Nations Development Program are not supported by the evidence.

From the New York Times:

There was no sign that millions of dollars were mismanaged, diverted elsewhere or unaccounted for, the report said, countering accusations made in early 2007 by the United States Mission to the United Nations. Although the report acknowledged that some information the panel had sought was unavailable, the review’s conclusion was that the money had been “used for the purposes of the projects.”

The controversy surrounding the accusations led the development program to suspend its operations in North Korea in March 2007. They have remained suspended because of differences over whether the government should choose local employees who work for the agency.

The report, which surveyed the disbursement of more than $23 million between 1999 and 2007, recommended that the development program pay closer attention when it adapts its general guidelines to “a challenging environment” like North Korea. The dense 353-page report appeared to concur with what the program had maintained all along, that the American allegations were baseless. But it recognized some sloppy practices, like tossing $3,500 in defaced counterfeit $100 bills into the bottom of its safe in Pyongyang and forgetting about them for more than a decade.

Here is the report (hat tip DPRK Studies)

Here is some background information from the UNDP.

Here is the Washington Post coverage.

Here are the initial findings from a US Senate report (detailing the accusations). Here is the initial UNDP response (preceding the above report).

Read the full NY Times article here:
North Korea Didn’t Dupe U.N. Office, Report Says
New York Times
Neil MacFarquhar
6/3/2008

Posted in Fiscal & monetary policy, International Aid, UN, UNDP, USA | 1 Comment »

Update: Jang Song Taek’s anti-corruption campaign

Tuesday, May 20th, 2008

UPDATE:
The Daily NK brings us up-to-date on the DPRK’s anti-corruption drive. The Daily NK analysis, however, gives the impression that Kim Jong Il is clamping down on the military, which again raises speculation that this policy is driven by concerns greater than financial leakage:

A source from Shinuiju reported in a telephone interview with Daily NK on May 14th that, “Director Jang Sung Taek has been staying at the Yalu River Hotel in Shinuiju since March, and has been directing inspections at Shinuiju Customs covering imports and exports made by rail, foreign currency-making activity organizations, and trade companies belonging to the army.”

“This inspection is decidedly different in scale and scope from previous inspections which are usually carried out every spring at Shinuiju Customs and various trading companies. The inspection usually targets simple private corruption as well as all fields related to business with China,” said the source.

The inspection group reportedly consists of some 100 agents dispatched from the Ministry of Administration, the Central Prosecutor’s Office, the National Security Agency, the People’s Safety Agency, and the Imports & Exports Guidance Bureau of the State External Economic Affairs Commission. Some 50 other agents were sent as reinforcements in late April.

…

The inspection group withdrew all trade certificates with exception of those certificates belonging to the families of anti-Japanese guerilla fighters, and those certificates issued by the Ministry of Finance or the Shinuiju Municipal Administrative Committee. Therefore, presently at Shinuiju Customs, all import items without trade certificates issued by the above mentioned three groups have to be sent back to China.

The whole article is worth reading here. If any readers have a thoughtful take on these events, please share them.

ORIGINAL POST:
North Korean Economy Watch has thoroughly covered news of the DPRK’s anti-corruption drive (here, here, here, here, and here). We have speculated as to whether this campaign is motivated by primarily fiscal concerns or whether it is a broader realignment of state, party, and military portfolios necessary for a policy/personnel change within North Korea’s socialist system.

Hideko Takayama at Bloomberg highlights the fiscal aspect of the anti-corruption campaign and is the first to announce the Kim Jong Il’s brother-in-law is leading it:

Jang, 62, was sent to Beijing and the Chinese city of Dandong near the border with North Korea in February to root out corruption at North Korean corporations operating in China, the businessmen and officials said.

Jang, who was dismissed from Kim Jong Il’s power circle in 2004, was rehabilitated in December 2005 and appointed to be Director of Administration of the Workers’ party last October, an official at Chosensoren, a North Korean organization in Japan which acts as a de facto embassy, said, requesting anonymity.

The leader’s brother-in-law is also responsible for the State Security Department, the People’s Security Ministry and the Central Prosecutor’s Office, according to the Chosensoren official. In addition, Jang runs a campaign against what the government calls anti-socialist activities.

Jang’s mission was to find and punish people who were diverting profits that were supposed to be repatriated to the North Korean capital, Pyongyang.

“Jang is familiar with how the business is done outside the country and knows all about money and corrupt ways of making money,” Lee Young Hwa, professor of developing economies at Osaka’s Kansai University, said. “His assignment is like sending a thief to catch a thief.”

Read the full stories here:
Kim’s Brother-in-Law Heads North Korea Anti-Corruption Campaign
Bloomberg
Hideko Takayama
5/2/2008

Shinuiju Inspectors Investigate Corruption
Daily NK
Jung Kwon Ho, Park In Ho
5/16/2008

Posted in Banking, China, Chongryun, Finance, Fiscal & monetary policy, International trade, Japan, Political economy | 3 Comments »

$USD in North Korea

Sunday, April 20th, 2008

The Daily NK, reports on a interesting claim by Kim Kwang Jin, senior fellow at the Institute for National Security Strategy:

In his article “The Dollarization of North Korean Economy and Dependence on Foreign Currency by the Residents,” [Kim Kwang Jin] analyzed “dollarization of North Korean economy is a result of the disintegration of the official economy and the subsequent spread of foreign currency rather than the government’s foreign currency policy.”

The total amount of U.S. dollars circulated and amassed by North Korean people was estimated 500 to 600 million dollars (100 per each household), [Kim Kwang Jin] suggested.

Kim’s further specification is as follows: “In the China-Korean border region, the Yuan is particularly popular, while in Wonsan (a seaport on the East Sea)[where the Mangyongbong 92 docks], the Japanese yen is attractive.”

According to Kim’s article, the North Korean people fully realize impossibility of withdrawing North Korean won from their bank accounts and the depreciation rate is too fast. Kim’s estimate was that “each North Korean household is secretly holding 100 dollars in average.”

Methodologically, I am not sure how valuable we should find the claim that the North Korean economy is dollarized to the tune of $100 per household (max of 6,000,000 households). Averages do not tell us much in large populations because they do not address distribution questions (which are fairly significant). For instance, a few individuals might have lots of cash, while most have relatively little. What is the median distribution of dollars, and what is the mode? This data would tell us much more about grass-roots financial conditions in the DPRK, but this information is not available.

Also, Mr. Kim claims that North Korea has “foreign currency areas” along the Chinese border (Yuan) and around Wonsan (Yen). This claim at least seems plausible for obvious reasons: These are areas where lots of trade and exchange take place. So where is the dollar currency area? With no major trading relations, why would there be one (outside of Pyongyang)? Where would all these $USD come from?

Finally, it seems that in the last couple of decades the Yuan and the Yen would be a superior mechanism than the dollar for protecting one’s savings in North Korea. These currencies are used by the DPRK’s major (current and former) trading partners; these currencies have experienced low inflation in the last couple of decades (the Yen obviously doing a better job); and North Koreans could probably better explain to any curious officials why they have them if they were under scrutiny.

All of these topics might have been addressed in the paper, but I have been unable to find a copy in English.

Posted in Banking, Black markets, Civil society, Finance, Fiscal & monetary policy | Comments Closed

DPRK budget expenditures grow 2.5% this year

Wednesday, April 16th, 2008

UPDATE: Yonhap reports that the food shortage was also discussed at the cabinet meeting:

North Korea has recently convened a Cabinet meeting to discuss food shortages, China’s Xinhua News Agency said Sunday, as international concerns grow over the North’s economic woes.

The North’s Cabinet recently held an enlarged session and decided to address the chronic shortages of food and consumer goods, the news agency said, citing a recent edition of the cabinet daily Minju Joson.

DPRK budget expenditures grow 2.5% this year
Institute for Far Eastern Studies (IFES)
NK Brief No. 08-4-16-1
4/16/2008

On May 9, the sixth round of North Korea’s 11th Supreme People’s Assembly opened, at which this year’s budget expenditures were announced to be 2.5% greater than last year. It was also reported at the assembly that the Cabinet would pursue a new 5-year plan to develop the nation’s science and technology sector by 2012.

Despite officially holding a seat on the Assembly, General Secretary Kim Jong Il did not attend this year’s assembly meeting. In addition, there was no mention during the assembly of inter-Korean, U.S.-DPRK or other foreign relations.

Cabinet Deputy Prime Minister Roh Doo-chul announced this year’s budget, stating that “this year, in order to strengthen national defense, and while building strength, to decisively advance the people’s economy and existing industry as well as improve the lives of the people, the national budget expenditure plan will be expanded to 102.5% of last year.”

According to this statement, this year’s budget is estimated to be 451.5 trillion won (3.2 billion USD). An estimated 15.8%, or 71.3 billion won (510 million USD), is slated for national defense. Last year’s national defense budget was 15.7%, or 69.2 billion won (490 million USD), of the national budget.

North Korea has also decided to increase budget allocations for energy, coal, and metal industries as well as the railway sector by 49.8% as compared to 2007, and will focus investments on staple industries. In the past, the North had stressed the importance of the ‘four main sectors’ of improvement in the people’s economy, including energy, but this year the government will actually focus investment on these sectors.

Cabinet Prime Minister Kim Young-il stated, “From this year until 2012, we will proceed forward with a new 5-year plan for the development of national science and technology…As we systematically increase national investment in this sector, we will raise the sense of responsibility and the role of technicians and raise the level of science and technology development as quickly as possible.”

In 2012, North Korea will celebrate the 100th anniversary of the birth of national founder Kim Il-sung, and has set a goal of constructing an economically powerful nation by that year.

Read the Yonhap story here:
N.K. discusses food shortage in Cabinet meeting
Yonhap
4/20/2008

Posted in 2012 Strong and Prosperous Nation (Kangsong Taeguk), Cabinet, Coal, Energy, Fiscal & monetary policy, Military, Railways, Supreme Peoples Assembly | Comments Closed

North Korea launching massive anti-corruption drive

Monday, February 11th, 2008

Last Friday, Yonhap reported that Kim Jong Il has ordered an anti-corruption investigation of two key agencies, both of which manage South Korean investments in the DPRK: the United Front Department (which Lankov claims is involved in clandestine operations) and the National Economic Cooperation Council.

North Korea is in the midst of a massive anti-corruption drive which has already resulted in the arrest of one of its top officials handling business with South Korea, informed sources in Seoul said Saturday.

The campaign, ordered by leader Kim Jong-il, was prompted by widespread allegations that some top party and administration officials took bribes as they pushed business projects with South Korean industrialists, said the sources well versed in North Korean affairs.

“The probe was launched as National Defense Commission Chairman Kim Jong-il said there was a lack of supervision over the United Front Department [a key party organization that supervises inter-Korean affairs], although lots of suspicions were raised over the department’s corruption,” one source told Yonhap News Agency.

According to the sources in Seoul, the North Korean leader was enraged after getting a report that some party and government officials allegedly pocketed bribes and diverted food and other aid from South Korea to black markets.

Also under investigation is the National Economic Cooperation Council, a government body that handles business with South Korean entrepreneurs, the sources said.

The Council’s chief, Jeong Woon-eop, remains under arrest pending investigation into allegations that he took “huge amounts” of bribes, said the sources, who wanted to remain anonymous. (Yonhap excerpted)

Frequently “anti-corruption campaigns” in developing countries have nothing to do with making the bureaucracy more accountable or responsive to public demands, but rather are political maneuvers to prevent “rents” or funds from being channeled to uses that lie outside the leadership’s control (or some faction of the leadership). In other words, they are regime enhancing. The announcement of this campaign demonstrates two important principles that deserve explicit mention:

1. Not all profits earned by North Korean joint ventures are channeled to the leadership, and in fact many of them are siphoned off by middlemen who actually control the financial machinery. Once skimmed off the top, it is likely that these funds are used in illicit private commercial operations since they cannot be legally declared by the owner (unless there are domestic channels for laundering money in North Korea).

2. If funds are being siphoned off of high-profile official joint venture operations, then the leadership is not in control of its internal fiscal affairs. Indeed it is likely that, as in the Soviet Union, the people who keep the private economy running are the trusted mid- to senior-level officials who can skirt the rules and know how to actually get things done within the system.

Update 2/24/2008:

North Korean authorities have been investigating the chief of a North Korean committee in charge of inter-Korean economic cooperation for months after seizing $20 million from his house, a report said Friday.

The full article can be found here:
NK Official Suspected of Embezzling Funds From Seoul
Korea Times
Jung Sung-ki

Update 2/12/2008:

The chief of Daesung General Bureau, a division of the 39th Department which manages foreign transactions, was fired on suspicion of embezzling US$1.4 million last fall.” (Daily NK)

The full article can be found here:
North Korea launching massive anti-corruption drive
Yonhap
2/9/2008

Posted in Banking, Black markets, Daesung General Bureau, Economic reform, Finance, Fiscal & monetary policy, Foreign direct investment, Joint Ventures, Kaesong Industrial Complex (KIC), National Economic Cooperation Federation (DPRK), Political economy, United Front Department | 3 Comments »

North Korean run restaurants diversify product lines

Thursday, February 7th, 2008

Writing today for the Asia Times, Sunny Lee gives an update on the North Korean-run restaurants in China and South East Asia. Much has already been published on these restaurants: how they channel money back to North Korea and how the waitresses tend to defect. (As mentioned in the Kaesong post yesterday, they probably also pay hefty bribes for their overseas posts and have well-connected relatives.)

Sunny Lee points out that these restaurants (see YouTube video here) are now diversifying their product lines to boost profits, and like other successful capitalists across Asia, they are doing it by leveraging their most unique asset–attractive North Korean women. How? By transforming into karaoke bars after dinner hours.

North Korea has some 100 restaurants overseas, mostly in China and Southeast Asia, including Laos, Vietnam and Cambodia. These restaurants serve as an important revenue pipeline for earning foreign currencies for Pyongyang. Each overseas North Korean restaurant is said to be allotted a revenue quota to fill, ranging from US$100,000 to $300,000 a year to send to Pyongyang, which makes the total revenue estimation some tens of millions of dollars.

The business formula – restaurant by day and karaoke bar by night – is also seen as an effort for these restaurants to meet the assigned financial quota. Currently, there are scores of North Korean restaurants in China, including in cities such as Beijing, Tianjin, Tsingdao, Dandong and Yanji. Beijing has 11 North Korean restaurants. All of these employ North Koreans whose total employment number in China is estimated to be several hundred. (Asia Times)

Despite the higher cost, business is brisk…

The reason that North Korean restaurants are expensive yet remain popular among customers is their immaculate service from beautiful employees. In China, where service quality at restaurants is often unsatisfactory, North Korean restaurants are becoming a favorite alternative among members of the businesses community. (Asia Times)

However, if you want to enjoy an authentic North Korean dining experience but have moral qualms about supporting the regime, then you can patronize similar resturants managed by North Korean defectors in South Korea–though the experience is quite different. Whereas the Chinese pay extra for premium restaurant service in Beijing, the South Koreans pay for the genuine socialist restaurant experience. In other words, they pay to be treated like an annoyance to the staff.

[At the Pyongyang Moran Bar (located in South Korea), the] North Korean waitresses wore traditional dresses in the bright colors that were fashionable in the South some years back. The singer’s interpretation of “Whistle,” a North Korean standard of the 1980’s, was shaky and off-key. Service was bad and included at least one mild threat. Drinks were spilled, beer bottles left unopened and unpoured.

But the South Korean customers could not get enough of the Pyongyang Moran Bar. (New York Times)

So you have your choice of North Korean themed restaurants: The propaganda ideal or the socialist reality.

The full articles can be found here:
Chillin’ at a North Korean karaoke bar
Asia Times
Sunny Lee
2/8/2008

In Deep South, North Koreans Find a Hot Market
New York Times
Norimitsu Onishi
5/25/2006

Posted in China, Economic reform, Education, Finance, Fiscal & monetary policy, Foreign direct investment, Joint Ventures, Restaurants, South Korea | Comments Closed

Bribery Required to Work at the Kaesong Complex

Tuesday, February 5th, 2008

This should not be a surprise to anyone who is familiar with how socialist and highly regulated economies actually function. If there is a profit opportunity to be had by breaking a regulation, there will generally be a bureaucrat there willing to pocket some of the earnings to look the other way.

The fact that ordinary North Koreans are willing to pay to get access to Kaesong jobs should send a powerful signal to those who call for the zone’s abolition. Wages and working conditions at the complex, though not popular with Western activists, are relatively better than those on the local collective farm. When the average Kaesong resident figures out that working there will lead to a better life, baksheesh is inevitable.

Claudia Rosette covered a similar phenomenon with North Korean loggers in Russia.

The Daily NK covers the Kaesong phenomenon specifically:

Known as a “dream place of employment” among North Koreans, citizens of the North are paying hundreds of thousands of won in the form of bribes to gain employment in the facility.

“They say that one can find a job in the Kaesong Industrial Complex by giving 700,000 North Korean won in bribes for males and 200,000 won for females. If I had used the 200 USD (approximately 700,000 won) spent in obtaining a passport as a bribe, I could have entered the Complex.”

As for the why the Kaesong Complex is so popular, Kim explained, “Commodity provision tickets, equivalent to a worker’s salary, are given to laborers in Kaesong and if one uses these tickets well, he or she can make a huge profit.”

Currently, the official salary for laborers at the Kaesong Industrial Complex is around 60 USD, a small amount of which is distributed as cash and the rest in the form of “commodity provision tickets.”

In the Kaesong Industrial Complex, there are several shops that can only be frequented by Kaesong laborers and the prices at these stores are at inexpensive compared to prices in the jangmadang.

Laborers at the Kaesong Industrial Complex use their “commodity tickets” to purchase products at a cheap price and can make a huge profit by selling the goods, giving the difference to middlemen (currency traders who mediate deals).

Recently, there have even been cases where the middlemen had specific orders for certain items from the Kaesong laborers, asking them to procure a certain amount of rice, oil, and so on. The middlemen can easily make an exorbitant amount of money by selling these goods at the jangmadang.

ADDENDUM REVISITED (The Daily NK is transalted into English and as a result is even less clear than my writing somethimes, so I have revised this post several times to clarify the text):

Opinions of the complex seemingly hinge on one’s policy goals. If the primary goal is to raise living standards in the North and open the people up to outside influences, then Kaesong seems like progress (although maybe not the most cost effective). If the primary goal is to minimize the income of the DPRK government, then the Kaesong zone probably is not a good idea….

Taking the latter point of view, Joshua at OneFree Korea emphasises the point that the North Korean government keeps most of the cash wages paid to the workers, and that zone employees survive on the supplemental “commodity tickets”–either consuming the goods they purchase in the company store or selling them to local markets for cash.

Theoretically, though, if the thousands of workers employed in Kaesong were re-selling subsidized goods to the Kaesong public markets, this would have the (short run) effect of lowering or stabilizing food prices for the general public (since Zone employees do not need to purchase food at local markets and their clandestine re-selling of commodities to the markets increases the supply of cheaper goods). This also means that in general re-selling to the market is not terribly profitable to any zone employee, except when there is a temporary mismatch beteen supply and demand (which might be common depending on the reliability of the DPRK’s market supply chains). How the price decrease would affect domestic food producers (and the long term price) is probably a bit more complicated since we are not sure how much North Korean farmers respond to price changes.

Additionally, even though the North Korean government keeps most of the cash wages, the commodity coupons still give the worker approximately $60 in purchasing power –a decent income in North Korea.

However, given that the South Koreans pay all cash wages go to the North Korean government and the workers themselves receive an additional $60 in script to use at the company stores, means that the average economic cost of a North Korean worker in Kaesong is closer to $120/month!

The whole article can be found here:
Bribery Required to Work at the Kaesong Complex
Daily NK
Jung Kwon Ho
2/4/2008

Posted in Fiscal & monetary policy, Foreign direct investment, General markets (FMR: Farmers Market), Kaesong Industrial Complex (KIC), Labor conditions/wages, Special Economic Zones (Established before 2013), Uncategorized | 2 Comments »

2008 Index of Economic Freedom

Thursday, January 31st, 2008

The 2008 Index of Economic Freedom published by the Heritage Foundation and the Wall Street Journal covers 162 countries across 10 specific freedoms such as trade freedom, business freedom, investment freedom, and property rights. Unlike the Freedom House rankings, this is an index, meaning there is a first place winner (who should be rewarded with lots of investment and business creation) and a last place “winner” (who should be shamed into moving up the list for the same prizes)

The bottom ten countries:
148. Venezuela
149. Bangladesh
150. Belarus
151. Iran
152. Turkmenistan
153. Burma (Myanmar)
154. Libya
155. Zimbabwe
156. Cuba
157. North Korea (unchanged)

Posted in Banking, Economic reform, Finance, Fiscal & monetary policy, Foreign direct investment, Insurance, Joint Ventures, Political economy | Comments Closed

N. Korea repays Seoul aid with minerals

Friday, January 4th, 2008

In the 1980s Pepsi went on sale in the Soviet Union [as did eventually Coke]. Since the hard currency needed to buy the syrup was scarce, the Soviets traded it for Vodka (which they presumably had plenty of)–At least this is what I was able to piece together when I visited the USSR as a teenager.

Yonhap (January 4, 2008) reports that North Korea has adopted the same basic strategy to repay its external debts. This is a positive move on the part of the North because it is the first time the North has made an effort at repaying its external bills.

(excerpt from Yonhap) The South-North Korea Exchanges and Cooperation Support Association said 500 tons of North Korean-produced zinc, worth about US$1.2 million, arrived in the port of Incheon on Thursday and was unloaded on Friday. It was the second repayment by the communist country for economic assistance provided by Seoul.

Although the amount agreed upon by both countries for 2007 has been paid in full, the installment represents only 3 percent of the North’s total debt to South Korea [appx. USD$80 million]. Pyongyang had agreed to pay Seoul with $2.4 million worth of mineral ore to reimburse it for aid.

[…]reportedly mark[ing] the first time the North has redeemed any of its debt.

Posted in Finance, Fiscal & monetary policy, Foreign aid statistics, Mining/Minerals, Political economy, Trade Statistics | Comments Closed

DPRK Holds Annual Lottery for Government Bond Repayments

Thursday, January 3rd, 2008

Institute for Far Eastern Studies (IFES)
Nk Brief No. 08-1-3-2
1/3/2008

North Korea has announced the winners of its sixth drawing for payouts of ‘People’s Life Bonds’, through which it provides ticket buyers with not only payment of principal, but also additional lottery winnings. From July to November of 2003, North Korea sold 10-year bonds worth 500, 1000, and 5000 won, and since then has held drawings once or twice per year repaying the bonds and lottery winnings as a way to pull in idle cash from the people.

(North) Korean Central TV reported that the 6th People’s Life Bond drawing had taken place and provided some numbers regarding the payments. In the latest drawing, thirteen 5000 won, eight 1000 won, and ten 500 won tickets were drawn. The television announcement explained that winners could report to the appropriate bank during the first quarter of 2008 to collect their winnings. It was also reported that during the latest fourth-quarter drawing, one first-prize, ten second-prizes, and fifteen third-prizes had been chosen, but provided no concrete details regarding the amount of the prize winnings. North Korean bonds do not pay interest to the investors, but rather, provide prize winnings greater than the amount of interest that would have been paid to winners each quarter.

The fifth round of drawings took place in January 2006 in Sariwon, North Hwanghae Province, when thirty tickets were drawn. North Korea’s savings and bond lottery system appears to be an attempt at improving financial difficulties faced due to the government’s collection of idle hard currency from each family.

Posted in Banking, Civil society, Finance, Fiscal & monetary policy | 1 Comment »

North Korean Economy Watch