North Korean Economy Watch

The Institute for Far Eastern Studies (IFES) published an interesting paper (with the above title) on legal reform in the DPRK.  Below are some highlights.  Links to the entire paper at the bottom.

As citizens have been left without state provisions for subsistence since the state did not have the material resources to supply the people through its central rationing system, the vast majority of individuals and organizations had to support themselves. Legitimizing commercial and market activity and expanding the scope of private ownership were a part of this effort. One of the most important laws reflecting this transformation is the Damage Compensation Law (sonhae bosang-beop), which is the North Korean version of a general torts law. This law holds an individual or any legal entity liable for its tort when damage is inflicted. Monetary compensation is the rule, while restoration is allowed when possible.

Under the socialist system, where the state is responsible for the provision of a citizen’s livelihood, tort law was of little use. Even in the case of death, one’s family would not suffer economically since the state provided sustenance rations. However, with the collapse of the public distribution system, the North Korean authorities could no longer maintain their socialist system. Since an individual now has to rely on his or her own devices, the loss of the employment, for example, directly inflicts a financial burden on the individual or family. Therefore, damage to property or person should be compensated for by the responsible party. Therefore, the new damage compensation law acts as a new mechanism for the protection of private property, and strengthens individual responsibility for negligent acts that inflict damage on others.

and…

Relaxation of law and order, along with the laxity of organizational control due to economic difficulties, changed individual attitudes toward government authorities and organizations in which these individuals were members. Individuals became more independent from the state and its organizations, since both the state and more directly engaged organizations lost important means of control over individuals in society due to the lack of resources and the inability to provide basic necessities to the people.

Under these circumstances, individual victims had no appropriate method to seek compensation for damage through an official dispute resolution process. This has led to an environment in which self-remedy has become the rule, rather than the exception. Although new criminal law punishes those who have used force in asserting their rights, there is no effective means of dispute resolution outside of taking advantage of officials willing to look the other way in exchange for favors, or hiring thugs to more directly resolve disagreements. Citizens can buy justice through bribes, and law enforcement officials are especially helpful in these endeavors when their palms are greased. This is much more economical as well as effective than bringing a case to the relevant official agency, which is generally incapable of resolving problems and instead further exploits the situation.

On courts and lawyers…

For example, the most prominent role of the court in North Korea, where other types of lawsuit are very unusual, was to handle divorce settlements, since divorce through simple agreement of the two parties was not allowed. Ordinary citizens went so far as to perceive settlement of divorce to be the most important role of the court. Criminal cases were also unusual. Political crime is handled through a non-judicial process, while many deviances are resolved through unofficial processes within more local organizations. The role of the court in resolving disputes was negligible, aside from divorce. Since the role of law enforcement agencies is to protect the state and secure the socialist system, the most important qualification for them is not legal expertise, but rather, loyalty and devotion to the North Korean ideology and system.

On the other hand, the Lawyer’s Act of 1993 prescribes the required qualifications of a lawyer. Those who are eligible to work as lawyers are those who are certified legal professionals, those who have working experience of no less than 5 years in legal affairs, or those who have a professional license in a certain area and have passed the bar examination after a short-term course in legal education. This qualification for working as a lawyer signifies that the state wants to equip the judicial system with legal professionals. Although there is no explicit professional qualification for a judge or prosecutor, we may assume that legal professionals have been elected or recruited in practice. This trend is likely to be reinforced as these social changes continue to unfold.

New provisions were also introduced to reinforce the judicial system. For example, interference with a law enforcement official’s performance of duties is now a punishable offence ; Threatening a witness or exacting revenge has been criminalized ; Non-execution of judgment will now be punished. Although the introduction of these provisions was an expression of the government’s effort to bring in a more effective judicial system, it would not be an easy task under the vague status of transformation. The state is very cautious and reluctant to undertake bold or fundamental changes due to concerns about political instability. Therefore, it takes time for various coherent mechanisms to fully support a market system.

You can download the entire paper in PDF format here.

You can read it on the IFES web page here.

According to Telegeography:

Vietnamese military-owned telco Viettel has announced plans to expand its network to North Korea, Cuba and Venezuela, according to reports in local paper Thanh Nien Daily. Tran Phuoc Minh, deputy director of Viettel, said the company is hoping to hold negotiations with the three countries in order to gain a foothold in their still relatively underdeveloped wireless markets. The cellco expanded its network to Cambodia last year, where it signed up 100,000 wireless subscribers after two months of pilot operations, as well as Laos, where it hopes to attract 50,000 subscribers this year. According to TeleGeography’s GlobalComms database, Viettel had a subscriber base of 28 million at end-2008.

Read the full story here:
Viettel plans network expansion to North Korea, Cuba, Venezuela
TeleGeography
2/6/2009

UPDATE: From the Institute for Far Eastern Studies:

The 12th election of representatives for the North Korean Supreme People’s Assembly, scheduled for March 8, and the opening of the session of the 12th SPA, expected to occur in late March or early April, will mark the launch of the third government under Kim Jong Il

Kim Jong Il was elected to his current position of NDC chairman by 10th SPA in 1998, and was reelected in 2003 by the 12th SPA. In those cases, as well, the Constituency No. 333 announced his nomination. It is expected that all other election constituencies across the country will begin holding celebratory events for Kim soon in order to disseminate propaganda portraying Kim as the representative for all the North Korean people.

Over at One Free Korea, Joshua points out KCNA’s gushing coverage of Kim Jong il’s nomination as a candidate in the upcoming elections for the Supreme People’s Assembly :

Pyongyang, February 4 (KCNA) — Upon hearing the news that General Secretary Kim Jong Il was nominated as a candidate for deputy to the 12th Supreme People’s Assembly at Constituency No. 333, the entire army and people are full of great happiness and pride of having the peerlessly great man as the leader of the nation.

Anti-Japanese revolutionary fighter Hwang Sun Hui said that the anti-Japanese revolutionary fighters were very happy to hear the news. She went on:

A few days ago the officers and men of the People’s Army nominated Kim Jong Il as a candidate for deputy to the SPA with boundless reverence. This is the unanimous will and ardent desire of the entire people.

On receiving this happy news with the February 16, the greatest holiday of the nation, ahead, I can hardly repress the swelling emotion.

We anti-Japanese revolutionary fighters will uphold the leader’s plan of building a great, prosperous and powerful nation in the van of the people.

Vice-premier of the DPRK Cabinet Thae Jong Su, noting that having nominated Kim Jong Il as a candidate for deputy to the SPA this time again is the unanimous will of the entire army and people and a great auspicious event of the nation, said:

Kim Jong Il has been leading the Party and the revolution along one road of victory for scores of years, thus performing great feats which will remain immortal in the history of the country.

He is the peerlessly great man who has defended firmly and developed in depth President Kim Il Sung’s Juche-oriented idea and line on state building and demonstrated the dignity and might of the DPRK all over the world with his original Songun politics.

All the officers and men of the People’s Army and the people came to have as a firm faith through life that he is the destiny and future of our country and nation and the symbol of all the victories.

Needless to say, the coverage from Singapore is far more sober and satisfying:

NORTH Korean leader Kim Jong-Il was Sunday nominated to run in next month’s parliamentary elections, a requirement if he to stay on as supreme army commander, a South Korean official said.

Elections for the rubber-stamp Supreme People’s Assembly should have been held last year, but did not go ahead amid reports that the 66-year-old Mr Kim suffered a stroke in August. They are now set for March 8.

He is legally required to be a lawmaker in order to be eligible to serve as chairman of the powerful National Defence Commission, which runs North Korea’s 1.1-million-strong army. It is in this capacity that Kim rules the country.

South Korean unification ministry spokesman Kim Ho-Nyoun told AFP that the North’s state television reported that Kim had been nominated to run in the 333th district for the polls.

Candidates are picked by either the government or the ruling communist party, and it is common for only one candidate to run for each electoral seat.

In the last elections in 2003, the North Korean media boasted a 99.9-percent voter turnout and 100-percent support for every candidate.

A new assembly usually reaffirms his chairmanship of the National Defence Commission, and brings a reshuffle of the cabinet and military leadership, the officials say.

Some analysts in Seoul have forecast the elections also may bring changes to North Korea’s leadership, in preparation for a post-Kim era.

Read the full story here:
NKorea’s Kim to run in polls
AFP via Stratits Times
2/1/2009

Martyn Williams writes in The Standard:

Koryolink, the North Korean 3G cellular network established in mid-December by Egypt’s Orascom Telecom, has attracted several thousand subscribers in the first two weeks since it began accepting applications in January.

“We didn’t start sales until about two weeks ago,” said Naguib Sawiris, chairman of Orascom Telecom in a telephone interview. “So far we have about 6,000 applications. The important point is that they are normal citizens, not the privileged or miliary generals or party higher-ups. For the first time they have been able to go to a shop and get a mobile phone.”

Orascom has a single shop in Pyongyang and is in the process of expanding its sales network, he said.

But while Koryolink’s first customers might not have high-profile official jobs, they are among the more wealthy in society and price, particularly of the handsets, stands as an obstacle to greater penetration.

“The price is quite high,” said Sawiris. “The government has put a big tax on handsets and it’s making it difficult for everyone to participate but we are having negotiations with the government to reduce that.”

The handsets Koryolink is offering, localized Korean versions of phones from China’s Huawei, cost between US$400 and $600 after the government levy has been added and there’s also calling charges.

The cheapest subscription costs 850 North Korean won per month. That’s about US$6 at the official exchange rate but only 24 cents at the current black market rate used by many citizens and traders. Calls on this tariff are charged at 10.2 won per minute. The highest package costs 2,550 won per month and call rates are 6.8 won per minute.

But all calls can be monitored:

With the launch of the Koryolink network the state continues to have the ability to monitor what its citizens are saying and can eavesdrop on calls if it wants, said Sawiris.

“That’s the right of the government,” he said.

How long to get the project moving?

It took about a year from that initial contact to reach an agreement and another nine months to get the network installed.

“We were quite worried about 2 things: the time it would take and the fact that they would really let normal citizens purchase lines.”

The full article is worth reading here:
North Korean 3G service attracts 6,000 in 2 weeks
The Standard
Martyn Williams
2/5/2009

Institute for Far Eastern Studies (IFES)
NK Brief No. 09-1-20-1
1/20/2009

It was revealed by Open Radio for North Korea on January 19 that DPRK authorities had handed down a decree to begin enforcing a ban the sale of imported goods in markets across the country on January 20. On January 3, North Korean authorities announced a measure to the Sinuiju Citizen Association and in the Chaeha Market banning the sale of imported goods, telling traders in the market to get rid of imported goods they had with them.

According to the report, the market management office in Sinuiju (operated under the control of the City People’s Committee) posted the decree at the entrance to the Chaeha Market, emphasizing that goods manufactured overseas were banned, while goods made domestically with imported materials were allowed to be sold. The report added that among goods banned from sale, those made in South Korea would be cracked down on especially hard.

Authorities are clamping down not only on markets in the city, but are also strengthening crackdowns on homeless vagrants, known as kotjebi, or literally, ‘flower swallows’. The report stated, “The Party, security office, trade association, youth association, and other organizations in Sinuiju are at the forefront of a coordinated crackdown on Kotjebi,” and, “As the crackdown is currently underway, between 20 and 30 vagrants, on average, are caught each day…those captured vagrants at the jail are sentenced to around 6 hours of forced labor in quarries or farms outside of the city, and must work hard before being given food.”

This same source reported that due to the Beijing Olympics last August, security on the border between North Korea and China had been tightened, and as winter rolled around and the river froze, this security was further strengthened, and, “recently, due to strengthened blockade of the border, the price of bribes to cross the river have more than doubled.”

In October 2008, the number of guards along the border near Hyesan was increased, and the distance between guardposts was halved from 200 to 100 meters. In addition, not only were military border patrols dispatched to the area, civilian patrols were also set up, increasing surveillance. This led to the cost (bribe) of a river crossing to jump from 1,000-2,000 Yuan (150-300 USD) in 2008 to as much as 4000-5000 Yuan (approx. 600-800 USD) this winter.

——–
Some immediate thoughts:

1. This is the kind of information that should be posted on the leaflets South Koreans are sending across the DMZ.

2. The Daily NK recently posted the “Top Nine” most popular goods list in the North Korean markets.  Many of these are imported.

3. Lets hope that these restrictions are as difficult to enforce as the previous directives.  As we all know, banning a product does not make it go away—even in North Korea.  It raises the price to the final consumer and enriches smugglers at the expense of the state and party organs (though individual party members and security personnel benefit as smugglers).

4. These trade restrictions, if enforceable, effectively amount to an import substitution policy….a policy that has pretty much been thoroughly discredited.

5. According to this IFES article, markets are controlled by a local “Market Management Office” which is in turn subordinate to each “City People’s Committee.”  According to the Worker’s Party organizational chart (view here), Each City People’s Committee is subordinate to a Provincial People’s Committee (PPC).  All PPCs are subordinate to the Central Committee of the Workers Party.  I am skeptical, however, that this is the only channel of authority.  Are the DPRK’s markets part of any ministry’s portfolio?

Institute for Far Eastern Studies (IFES)
NK Brief No. 09-1-15-1
2009-01-15   

The exchange rate for the North Korean won shot up approximately 13-15 percent at the end of last year, and has maintained this high rate into January, according to an article in the on-line newsletter, “Open News for North Korea,” on January 12.

According to the inaugural edition of the newsletter, the exchange rate last year was around 3,200 won per USD, or 460 won per Yuan, with only slight fluctuations, but shot up to 3,630 won per USD and 530 won per Yuan in December. In the first weeks of the new year, it has fallen only slightly, to 3,540 won per USD, and 530 won per Yuan.

According to traders who import and export between North Korea and China, “The sudden rise in the exchange rate appears to be related to trade regulations on goods imported from the North,” and they stressed, “After North Korea protested to China about inferior Chinese goods leading to accidents around the country, China decided to set an example, and unilaterally imposed [trade] restrictions.”

Because business with China makes up almost 50 percent of North Korea’s trade, if DPRK-PRC trade, and in particular, North Korea’s exports to China, are restricted, this would cause a large shock to the foreign currency market,” and, “China’s regulatory measures were eased as January come around,” but, “this year, North Korea is strengthening crackdowns on domestic markets, making it difficult to expect the exchange rate to return” to last year’s lower numbers. According to the article, “There is a foreign currency crisis in North Korea, as well, the scale of which is so great it can’t even be compared to what is happening in the South.”

The black market price for U.S. dollars has shot up from a low of 200 won, in July 2002, to 3,200 won in July of last year, and has continued to rise, peaking at 3.500 won currently. This is a sixteen-fold increase in just over six years. The newsletter put this in perspective by explaining, “North Korea has experienced a foreign currency crisis like that seen in South Korea in 1998 every year since 2002.”

North Korea’s haphazard currency distribution and chronic trade deficit has led to a reduction in the country’s foreign currency reserves, while the failure of the authorities’ currency stabilization policies combined with the growing demand for U.S. dollars by North Korean residents seeking imported goods have led to the sharp growth in the exchange rate.

According to Yonhap:

A group of South Korean information technology experts and businessmen will visit North Korea next month on a rare trip to the communist country amid frozen cross-border exchanges, organizers said Thursday.

The 80-member group is scheduled to tour North Korea’s major IT centers and hold a joint software exhibition during its Feb. 7-11 visit, said the non-governmental South-North Cooperation for IT Exchange. They also plan to donate 5,000 IT books and journals to the North.

“IT books we have delivered so far were mostly Korean language books, and the North Koreans requested original texts. So we collected some foreign language texts this time,” said Kim Jin-hyung, a member of the team and professor from the Korea Advanced Institute of Science and Technology (KAIST).

Through annual visits since 2006, the IT organization has delivered about 30,000 technical books and latest journals. Yoo Wan-ryung, chief of Seoul-based Unikotech Korea which has promoted investment in North Korea, participates in this visit, organizers said.

Read the full article here:
S. Korean IT experts to visit N. Korea
Yonhap
1/15/2008

NCNK Newsletter Vol. 2, Issue 1
January 13, 2009
Download PDF here

A DPRK “Shangri-la” Powered by Solar Electricity
By Victor Hsu

In 1988 Bongsu Church — the first Protestant Church built in Pyongyang since the end of the Korean War — opened its doors for the first time. The following year the Korean Christians Federation asked if my organization, Church World Service, would provide a generator for the brand new church. A generator would enable parishioners to enjoy air conditioning during the hot summer months when the temperature can reach 85 degrees Fahrenheit and above. I suggested to the church officials that we install solar generators from China. However, lacking experience with solar power, they preferred the more familiar diesel-powered generators. But the seeds of interest in alternative sources of energy were just starting to grow. Soon after this exchange I learned that the DPRK was investigating the possibility of using another form of renewable energy — windmills.

I have been visiting the DPRK for two decades in many different capacities, most recently as the DPRK National Director of World Vision International (WVI). Over this time, I have learned, as have many of my colleagues from the United States and around the world, that knowledge-sharing and knowledge transfer enhance the benefits of humanitarian assistance. There is increasing evidence that the DPRK seeks out and appreciates this form of international cooperation.

Since 2000, various technical cooperation and assistance projects have involved NGOs and professional organizations in Europe and North America, especially in the field of agriculture and medicine.

World Vision International (WVI) has been active in DPRK since 1995, when a serious humanitarian crisis hit the country. In 2006, shortly after becoming DPRK National Director at WVI, I suggested to the DPR-Korean American Private Exchange Society (KAPES) that they designate a province where WVI could concentrate its humanitarian interventions. Subsequently, after discussions with the DPRK Mission to the UN, North Hwanghae Province was designated as a World Vision International humanitarian zone, and we were asked to work in Dochi-ri. An ambassador at the DPRK Mission to the UN, Ambassador Han Song Ryol, told me he could envision the province becoming a DPRK Shangri-la!

Dochi-ri is a small sprawling farming community nestled in hilly terrain in Yongtan County, just about a two hours drive south of Pyongyang. A river runs through this community of 12,000 residents and the farmers enjoy a man-made reservoir. This village traditionally grows corn but has begun soybean cultivation as part of the DPRK agricultural program to replace corn with the more nutritious soybean. Like many “ris,” or villages, in the DPRK, Dochi-ri is served by a clinic and a nurse. Itinerant doctors visit the village for non-routine medical interventions. The clinic, the houses, the small primary school and the kindergarten rely on a sporadic electricity supply.

WVI agreed to provide Dochi-ri with an organic fertilizer plant, the first of its kind in the DPRK, a potable water and sanitation system, a bakery and a soymilk processing facility. We also agreed to upgrade the clinic, replace the roofs of the clinic, kindergarten and primary school, and replace the school furniture. All these projects have been completed over the last 2 years, with the exception of the potable water system, which will be finished by mid-2009. The 12, 000 Dochi-ri residents are happy with all of the various renovations, but they are most excited by one innovation: the experiment with solar generators. After careful research and planning among the DPRK partners at the national and local level with the help of a Chinese company, WVI agreed to provide solar generators to the school (5kWh), the clinic (3kWh) and the home of the village engineer (2kWh). These were purchased in China and installed by Chinese technicians.

Chinese technicians and American engineers – the latter coincidentally in Dochi-ri to drill wells and install the water and sanitation system – trained the local people’s committee managers on the use and maintenance of the generators. Our engineers have visited Dochir-ri several times over the past two years after the generators were installed and were happy to respond to all of the villagers’ technical questions. WVI engineers complimented our North Korean partners on the quality of the maintenance. Whenever the solar generator issue comes up in the conversations, our technicians assure the managers that good maintenance of the batteries will ensure at least the minimum of their five-year life span. Our engineers have no doubt that this will be the case given the track record of the DPRK’s technicians. DPRK technicians are known for the meticulousness and thoroughness of their approach to learning.

The village technician’s home with its constant supply of electricity is now the constant envy of the “ri.” In fact, the villagers are requesting WVI to supply each of their homes similar generator. When I visited Dochi-ri in September 2007 the engineer invited the WVI delegation to his home to show us how he is able to have lighting in his house and enjoy TV and music from his CD player. Though he could not speak a word of English, his smiles and a halting “Thank you!” were enough for us to know how the solar panels are making a real difference in the life of this farming community.

A year after the first generators were installed, Dochi-ri villagers determined that they needed a generator to power the water tower for the school. The decision to “go solar” was easy, based on the positive experiences with the first three generators. A fourth solar generator was installed in 2007, and it now provides water for the school. In the past two years, the cost of solar panels has soared, and China is investing heavily in anufacturing them. We hope to see a similar effort to design more powerful, maintenance-free and efficient batteries to enable us to continue to bring solar power to Dochi-ri and other villages in the DPRK.

The experience of the community has been overwhelmingly positive especially with regard to this low-maintenance but highly efficient technology. Now Dochi-ri has ready access to organic fertilizer for its crops, a water sanitation system, an upgraded school, kindergarten and clinic, and bread and soymilk for the children’s lunches. With electricity in the school and clinic, Dochi-ri is beginning to become the Ambassador’s vision of a DPRK Shangri-la!

Institute for Far Eastern Studies (IFES)
NK Brief No. 08-1-9-1
1/9/2009

The Jochongryeon mouthpiece, Chosun Sinbo, reported on January 5 that North Korea is working to boost economic production by establishing “concrete attainment goals” in each sector in a “yearly, phased plan” from last year until 2012 in order to reach the goal of establishing a “Strong and Prosperous Nation” by the 100th anniversary of the birth of Kim Il Sung. The paper reported that the North had not made an official announcement regarding this plan, but that it was currently in the process of implementing a 5-year economic development plan

In the textile industry, North Korea is focusing efforts on upgrading equipment in five weaving factories, including major sites in Pyongyang and Sariwon, with the goal of increasing cloth production 400 percent by 2012. The newspaper also reported that North Korea is aiming to increase coal production over the next few years, with the goal of reaching 1980s-levels of production. Coal production peaked in 1989 at 43 million metric tons, and it is estimated that North Korea has over 20 billion metric tons of coal reserves, but the Bank of (South) Korea estimates that in 2007, the North mined a mere 24.1 million metric tons of coal due to a lack of electricity and spare parts. Many of North Korea’s coal reserves are below the waterline, and require constant electricity in order for pumps to maintain an environment in which mining can take place. Last year, in order to boost coal production, North Korea increased budget allocations for energy, coal and metal industries by nearly 50 percent.

This year’s New Year’s Joint Editorial placed heavy emphasis on the metals industry, and emphasized that efforts last year to modernize equipment and improve technology increased 2008 steel production by 150 percent at the Chollima Steel Complex and the Kim Chaek Iron and Steel Complex. The newspaper stressed that these plans were not merely wishful thinking, but that they were “the basis for meaningful achievements,” pointing out that last year, the North Korean cabinet increased investment into both basic industries and vanguard enterprises 49.8 percent. In 2008, North Korea either refurbished or newly constructed over 140 new production facilities, and, “in particular, actively promoted metal, instrument, science, and light industrial sectors.”

According to the newspaper, North Korea would continue to promote economic development in the new year, as well, citing the current global economic crisis and the need to build an independent economic foundation not reliant on South Korea.

Although the South’s annual tangerine shipment to the DPRK has been suspended reduced (and Seould has suspended direct financial support), food aid from other South Korean groups continues unabated.  According to Yonhap:

The Korea Peasants League said they have arranged to have a ship collect rice from across the country at ports along the coast. The boat left the southern island of Jeju on Monday and will depart from the port of Incheon, west of Seoul, on Friday. It will likely arrive at the North Korean port of Nampo on the same day if weather conditions at sea are normal, they said.

Non-governmental aid has continued amid the political stalemate. The South Korean government suspended its customary food and fertilizer aid to the impoverished state last year as North Korea cut off dialogue and intensified an anti-Seoul media tirade.

A Seoul-based Buddhist organization, the Jungto Society, shipped food aid worth 380 million won (US$293,436) intended for mothers and children in North Korea last week.

This week’s shipment by the Peasants League includes some 60 tons of rice donated by the Korean Confederation of Trade Unions, a labor umbrella group. The union group and the farmers are calling for legislation that would implement the regular delivery of rice aid to North Korea.

Read the full article here:
S. Korean farmers to send rice to N. Korea amid frozen relations
Yonhap
1/7/09