North Korean Economy Watch

According to Slate:

North Korean government-run restaurants have existed for years in the regions of China adjacent to the DPRK’s northern border, but the 21st century has seen an expansion of the business into other parts of Asia. In 2002, the first Southeast Asian branch of Pyongyang opened in the Cambodian tourist hub of Siem Reap, and it became an immediate hit with South Korean tour groups visiting the nearby temples of Angkor. The success of the restaurant, reportedly opened by Ho Dae-sik, the local representative of the DPRK-aligned International Taekwondo Federation, led to the opening of the Phnom Penh branch in 2003. This was followed by more elaborate establishments in Bangkok and the popular Thai beach resort of Pattaya, as well as a small branch in the Laotian capital, Vientiane.

Little is known of how the restaurants operate, but experts say they are closely linked with other overseas operations run by the reclusive regime in Pyongyang. Bertil Lintner, author of Great Leader, Dear Leader: Demystifying North Korean Under the Kim Clan, says that in the early 1990s, North Korea was hit by a severe economic crisis caused by the disruption in trading ties with its former Communist allies. At that time, both the Soviet Union and China began to demand that Pyongyang pay for imports in hard currency rather than barter goods, forcing it to open “capitalist” foreign ventures to make up funding shortfalls. He says the restaurants are part of this chain of trading companies controlled by Bureau 39, the “money making” (and money-laundering) arm of the Korean Workers’ Party.

“The restaurants are used to earn additional money for the government in Pyongyang—at the same time as they were suspected of laundering proceeds from North Korea’s more unsavory commercial activities,” he says. “Restaurants and other cash-intensive enterprises are commonly used as conduits for wads of bills, which banks otherwise would not accept as deposits.”

According to reports from defectors, the eateries are operated through a network of local middlemen who are required to remit a certain amount every year to the coffers in Pyongyang. Kim Myung Ho, a North Korean defector who ran a restaurant in northern China, reported in 2007 that each establishment, affiliated with “trading companies” operated by the government, was forced to make annual fixed payments of between $10,000 and $30,000 back to the North Korean capital. “Every year, the sum total is counted at the business headquarters in Pyongyang, but if there’s even a small default or lack of results, then the threat of evacuation is given,” Kim told reporters from the Daily NK, a North Korean news service run by exiles and human rights activists.

A year ago, the Pyongyang restaurants in Cambodia and Thailand suddenly closed their doors, only to reopen again after a six-month hiatus. Lintner cited an Asian diplomat in Bangkok saying the restaurants, like all “capitalist” enterprises, were hit hard by the global economic crisis, but locals familiar with the establishment in Phnom Penh offered another explanation. One worker at a nearby business said Pyongyang closed after a dispute with a Cambodian customer who tried to take one of its North Korean waitresses out for “drinks” after dinner.

If true, it would not be the first time. In 2006 and 2007, Daily NK reported several incidents in which waitresses from North Korean restaurants in China’s Shandong and Jilin provinces tried to defect, forcing the closure of the operations. Kim Myung Ho added that two or three DPRK security agents live onsite at each restaurant to “regulate” the workers and that any attempts at flight result in the immediate repatriation of the entire staff.

Read the full story here:
Kingdom Kim’s Culinary Outposts
Slate
Sebastian Strangio
3/27/2010