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19 Dollars a Month Means Three Corn Meals a Day

Monday, April 2nd, 2007

Daily NK
Han Young Jin
4/2/2007

“100,000 won (approx. US$32.2) doesn’t cut it.” This is a sigh-ridden comment of a North Korean citizen, who states that even if he has 100,000 won, it is not much to spend.

The recent currency depreciation of the North Korean won has been exacerbating the North Korean citizens’ burdens of their costs of living.

Such a situation has been ongoing since the July 1st Economic Measure in 2002, but with the concentration of money in the privileged class, the grim realities of life of vulnerable persons have been becoming more difficult.

Hoiryeong citizen Park Hyun Sik (pseudonym), in a phone conversation with Daily NK on the 30th, stated that “a decent Chinese jumper costs 30,000 ~50,000 (approx. US$ 9.7~16) won for one, 3,000 won for 1kg of meat, and 2,700 won per a bottle of oil. After eagerly awaiting a month, I go to the market with 100,000 won (approx. US$ 32.2), but end up with nothing even though I did not buy much.”

Mr. Park, who conducts the wholesale business of relaying goods received from overseas Chinese emigrants to the provinces, receives a monthly income of 300,000 won. This puts him in a good class in North Korea. Mr. Park’s family, which consists of his wife and son, plans to secure food with this money.

Evidently, a family of four needs 50kg (50,000 won) of rice, which costs 1,000 won per kg, and 20 kg (7,000 won) of corn, which costs 350 won per kg, to survive. Additionally, the cost of buying a bottle of bean oil at 2,700 won as well as pepper powder, vinegar, garlic, onions and other vegetables is almost equal in value to the cost of buying rice.

On top of this, the family says they eat pork meat about once a month, which costs 3,000 won per kg. The rest of the money goes to the three family members’ clothing and cigarettes and drinks for Mr. Park, all of which cost about 300,000 won. Even then, Mr. Park tends to be on the well-fed side.

Working Citizens Cannot Eat Meat Even Once A Month

Kim Jung Ok (Alias), who sustains her living through a noodle business in the Hyeryung South Gate jang (market), has a monthly living expense of approximately 60,000 won. Ms. Kim is a housewife, who has taken on the responsibility of her three-member family.

Even if she sells noodles all day, she only makes 2,000~3,000 won. She merely earns around 60,000 won per month, all of which goes to food. Making a profit from her business is a mere dream, she expresses. She cannot even think about rice; after buying 70 kg of corn (23,000 won), bean oil, beans (950 won per kg) and other vegetables, she has nothing left.

The monthly income of her husband, who works at a machine shop in Hoiryeong, is 4,000 won. That is enough to buy 4kg of rice. Fearing starvation if she solely depended on her husband, she opened her noodle shop 10 years ago. “Even if we are both working like this, it is barely enough for corn meals. It is difficult to buy a kg of meat in a month. It has been a long time since I fed meat to my child,” she confessed.

Currently, with the exception of storekeepers who trade with Chinese emigrants, foreign currency traders, and those who have relatives in China, a majority of residents in Hoiryeong live daily as Mr. Park.

Recently, the Ministry of People’s Safety Agency issued the order that “Rations will be distributed in April. So, stop engaging in illegal trade.” Due to this decree, the control of the jangmadang (market) has been tightened. Discontent among residents who sell Chinese industrial products has climaxed, “How can we live if they feign ignorance while not providing the rations?”

The regulation of jangmadang (market) by ministry officials has only raised the price of Chinese industrial products. Before that, there would be joint bargains, but now, purchasers are visiting the merchants and so the costs of products are going up.

On one hand, the influence of the dollar’s recent bearish turn in the international market is fully reflected in the North Korean black market. The exchange rate of 800 won to a dollar between the Chinese Yuan and the dollar remains unchanging, but the North Korean currency following suit to the dollar and the Yuan changes day to day. Ultimately, North Korea is not “a region with a fixed exchange rate” due to the fact that exchange merchants occasionally apply the exchange information received from China.

Due to the dollar’s slump, the ratio of the North Korean won to the dollar and to the Yuan has been on the decline for several months. Mr. Park said, “In January, the North Korean currency went up to 42,000 won per 100 won RMB, but has drastically gone down to 36,500 won per 100 won.”

Posted in 1990s Famine, 2002 Economic reforms, Agriculture, Agriculture statistics, Black markets, General markets (FMR: Farmers Market), Price liberalization, Private property | Comments Closed

Money Means Everything

Monday, March 19th, 2007

Daily NK
Kim Min Se
3/19/2007

Today, a rich person in North Korea is someone who can spend roughly US$100~$500 (300,000~1.5mn North Korean won) a month. This amount is so large, that it is a figure unfathomable to the average North Korean.

Nowadays, a small number of lower class North Koreans sell noodles at the markets and earn 1,500~2,000won a day. On average, this equates to 50,000~60,000won a month. Additionally, the living costs of a family of 4 in Pyongyang normally costs about 50,000~100,000won.

While a laborer with a stable job earns about 2,000~3,000won (approx. US$0.66~1) a month, spending more than 100,000won (approx. US$32.2) a month is an extravagant figure. Simply put, it has become difficult to live only on selling noodles.

Anyone who spends more than 100,000won a month is probably eating rice and can afford to eat nutritious vegetables. This is the middle class of North Korea today.

The distinctive nature of this middle class is the disparity of the work as well as their past background being rather simple. This class has naturally appeared simply because of their genuine skills. These people know exactly the flow of the market and know how to make money. The only thing important to them is finding the opportunity to make money. In all, they have come to an understanding that money is needed in order to buy goods and live a life to the envy of others.

This middle class is closely linked to power. If a person only takes pride in the sense that he/she can money, then that person will be hit with a severe fall. It is a characteristic of North Korean society that power is critical in living a life making lots of money without trouble.

With money, these people are earning even more by buying the supervision of low ranking safety and security agents and local administrative officers. Simply put, the small amount of money invested as bribery in securing a good location at the markets is petty compared to the income reaped. In other words, whenever a new market is established at a village, a person can be confident in having the best spot by winning over the person in charge. For example, the bidding for the best spot at the Sunam Market, Chongjin is 900,000~1.5mn won (approx. US$290~$490).

Entrepreneurs may become the rich after regime reform

In 2002, the North Korean government passed the July 1st economic reforms which gave more freedom to marketers with less control by authorities and hence, trade became more active.

The mindset of the middle are so fixated on money, that they believe that money can solve anything even if a war was to break out the following day or North Korea was to be completely overturned. Though these people conspire with those in power in order to make money, they are unconcerned with what happens or rather does not happen to the Kim Jong Il regime.

There is a definitive difference between the middle class who are rubbing hands and the central class just in case the Kim Jong Il regime did collapse, compared to the upper class. The middle class are not from any particular special background, but with the skills and guile of making wealth, they are confident that there will be no problems irrespective of regime change.

People from this class even have the freedom to save and keep some food and daily necessities in preparation of this incident. Furthermore, currency is undoubtedly being saved, this also being foreign currency such as dollars. This, they call emergency relief in preparation for the time the North Korean regime does collapse, as well as a safe deposit to use whenever trade needed.

In addition, with the change of the North Korean regime, this class will be able to celebrate and radically transform from being an entrepreneur to the newly-rich with all the wealth acquired during the Kim Jong Il regime.

Posted in 2002 Economic reforms, Agriculture, Black markets, Civil society, Economic reform, General markets (FMR: Farmers Market), Labor conditions/wages, Real estate, Sunam market | Comments Closed

Taking Pulse of Herbal Medicine

Monday, March 19th, 2007

Korea Times
Andrei Lankov
3/19/2007

Herbal medicine occupies a very prominent place in the North Korean health care system.
In fact, it would be but a minor exaggeration to say that nowadays the North Korean health care system is largely built around traditional herbal medicine.

But this was not always the case. In the early years, until the mid-1950s, herbal medicine was looked upon with disapproval.

It did not appear ‘scientific’ enough, and the Soviet educated doctors saw it as a potentially dangerous superstition.

The first signs of the coming change in attitude were in 1954 when the licensing system for herbal doctors was first introduced.

But the revival of herbal medicine began in earnest in April 1956, when the North Korean cabinet of ministers accepted Decree No. 37, which envisioned the incorporation of herbal medicine into the official medical system. At the same time, Kim Il-sung made a very positive reference to herbal medicine in his lengthy speech delivered to the KWP Third Congress. By the end of 1956, there were 10 herbal medicine centers operating across the country, and by 1960 the number had reached 332.

I think it was not without good reason that this sudden revival of the medical tradition took place in 1956. This was when the North began to steer itself away from its Soviet patron, whose new policy of de-Stalinization met with growing disapproval in Pyongyang. It was also the time when nationalist trends began to grow in the North _ partially because nationalism served the interests of Kim Il-sung and his group, but also because it resonated with the feelings and world view of common Koreans. This created a fertile soil for the rejuvenation of hitherto neglected traditions. It is not incidental that in later eras the initial rejection of herbal medicine came to be blamed on the ‘factionalists’ _ that is, people who did not share Kim Il-sung’s nationalism and his drive for heavy industry and a powerful army at all costs.

And there was another dimension as well. We have been accustomed to thinking of herbal medicine as more expensive than its Western counterpart, but back in the 1950s the opposite was the case. Generally, East Asian medicine, which relied on local herbs, tended to be cheaper and this mattered in a poor country with limited resources.

Around the same time, herbal medicine was encouraged by the South Korean authorities as well. They also saw it as a cheap palliative, a substitute for the “real” Western medicine which only a few South Koreans could afford.

And, last but not least, the basic ideas of herbal medicine resonated quite well with Kim Il-sung’s new policy of selfreliance.

In a sense, herbal medicine was an embodiment of self-reliance in health care.

Thus, the 1960s was a period of triumphal advance for Eastern medicine in the North. For a while herbalists were trained in junior colleges, but from 1960, Pyongyang medical college opened a traditional medicine department. A number of research centers were created with the task of fusing the achievements of Western and traditional medicine. From 1960, a state evaluation committee began to operate, and in that year 239 North Korean herbalists became “Eastern medicine doctors, first class,” while 1,495 had to satisfy themselves with their inferior standing of “Eastern medicine doctors, second class.”

Of course, the growth of herbal medicine was accompanied by claims about wonder drugs and miraculous discoveries, to which the Stalinist regimes were so vulnerable (suffice to remind ourselves of the Lysenko affair in the USSR, or the improbable claims of wonder harvests in Mao’s China).

But the domination of Dr. Kim Pong-han, North Korea’s Lysenko, lasted for merely six years. In 1960 he claimed that he had discovered a new principal type of centralized system in the human body, somewhat similar to a nerve system of blood circulation. There was much talk of this alleged discovery and related medical miracles, but from 1966 all references to Professor Kim suddenly disappeared from the Pyongyang press.

The subsequent decades witnessed a continuous growth in the herbal medicine endeavor, which frequently received direct encouragement and approval from the Great Leader himself (after all, Kim Il-sung’s father once was a part-time herbalist himself). The reasons for the policy remained the same, and even some statements by Kim Il-sung were remarkably frank.

In 1988 he said, “If we produce a lot of Koryo medicine drugs, it is good not only for curing diseases, but also for solving the drug problem, since it will reduce the importation of drugs from other countries.” More than a dozen colleges now train herbalists in the North, and from 1985 would-be Western doctors have also been required to take introductory classes in Eastern medicine.

Perhaps, in some post-unification world the North will become a major source of quality herbal doctors, and their presence will help to drive down prices for this service which many Koreans take so seriously. Who knows, but there are already North Korean herbalists working in the South.

Posted in Health care, Indigenous medicine, Juche, Russia | Comments Closed

North Korea’s Middle Class…“Money is Power”

Sunday, March 18th, 2007

Daily NK
Kim Min Se
3/18/2007

In socialism, the laborer and the peasant dominate the nation and society. However, since the late `60’s, the role of the laborer and peasant has decreased with the bureaucracy taking power, to the extent that a country can no longer remain in traditional socialism.

Currently, North Korea’s leader Kim Jong Il with a minority of the central class surround this core power. In North Korea, the laborers and peasants are rather subject to extortion.

Amidst a North Korean market economy, a middle class is being established. The middle class comprises of people who have assets that the average citizen cannot afford and own medium-sized businesses or engage in wholesale trade.

Undoubtedly, this group of people are dominating the middle class as well as playing a vital role in the lifeline of North Korean citizens and market, a fact that could not have been fathomable in North Korea’s past.

Until the 80’s, North Korea’s economy was a planned economy. Supply and demand of goods was distributed according to the national plan. However, in the late-80’s, small holes began to emerge in the socialist planned economic system and with a lack of daily necessities, people began to rely on the black market.

Arising from the major cities, goods were secretively traded in the black market and eventually the majority of North Koreans acquired their needed goods through this system. This system operated evading the control and regulation of North Korean authorities, but when caught, a person was condemned to severe punishment and the goods confiscated.

However, the mass food crisis of the mid-90’s completely collapsed the remnants of a socialist planned economy that had subsided unto the time. What had happened was the end of the national food distribution system.

In particular, the collapse of the food distribution meant the death sentence. Tens and hundreds of thousands of North Koreans began to die of starvation and as a means to live, people became active in the market and trade began to emerge in different regions of North Korea.

Mass starvation which created expert tradesmen

The immobilization of a socialist planned economy activated Jangmadang (North Korea’s integrated markets) which then led to the formation of a new class within North Korea’s own expert tradesmen. North Korean authorities who had no other countermeasures had little choice but to comply as the lives of the citizens were now left to the hands of trade.

In the mid-90’s, North Korean authorities approved personal trade to occur between North Korea and China and then permitted markets to exist along the border districts. Simply put, the mass food crisis created a new class which actually gave North Koreans an opportunity to trade.

At first, people would sell goods that they already had such as household appliances, television, recorder and bicycle. Furthermore, any type of stock accessible, particularly clothing, candy and other foods coming from China such as rice, flour and corn were also traded.

As people gained more experience and came to know the basics of marketing, tradesmen became more specialized. People who sold rice, only sold rice, whereas people who traded fabric only sold fabric.

North Koreans began to realize that specializing in a particular field was the way to make money and the people who were unable to assimilate to this culture broke away penniless.

Accordingly, the market gradually became a center for specialized tradesmen to provide goods and daily necessities. The goods sold by these tradesmen eventually became the mark for the middle class merchant. During this time, stabilized distributors began to dominate the market and more individualized entrepreneurs surfaced.

People skilled at cooking, baked decorative and delicious bread in their homes and then sell them at the markets. In addition, candy distributors have made a mark at the markets with candy making having become an advanced skill. People who once made candy in their homes now brag that they have been able to produce a small-scale sugar factory. In particular, clothes making and candy making has become enterprises leading to great money.

Today, 50% of candy, home-made clothing and 30% of uniforms, sold at North Korean markets are products made from home. Through goods such as these, Chinese merchants, tradesmen and the middle class are earning money through North Korea’s markets supplying the customers, the majority of the lower class.

Posted in 1990s Famine, Black markets, Civil society, Economic reform, General markets (FMR: Farmers Market), Price liberalization, Private property, Public Distribiution System (PDS), Restaurants | Comments Closed

North Korea’s Central Class Fear Kim Jong Il’s Ruin Will Lead to Their Ruin

Saturday, March 10th, 2007

Daily NK (Part 1)
Han Young Jin
3/10/2007

The reason North Korea’s regime can persevere is because of the central class’ fear of regime collapse.

As a result of this perseverance, North Korea has been able to resist isolation and pressure for more than half a century, with the system even defeating the “March of Suffering” where tens and thousands of people died of starvation.

Today, powers maintaining the North Korean system are the hierarchical upper class including the North Korean Workers’ Paryy, the National Security Agency, the National Protection Agency, prosecutors and adjudicators.

Overall, there are about 4 millions members in the North Korean Workers’ Party (statistics as of 1995), this being roughly 20% of the population. Retrospectively, these people control the 23mn North Korean citizens.

The central class incorporating junior secretaries to the party, training officers, novice elites, generals from the army, safety and protection agents use their power position to control directly the North Korean people.

The most of these people have strong loyalty for the regime. In particular, military generals or party officials especially fear punishment and the thought that their privileges may be removed. Though they may be leaders, it is not one’s own desire to escalate in power but fear of retaliation from new powers.

Local party officers, security agents and protection agents directly control, inspect and punish civilians. In essence, they absolutely control the North Korean people and hence fear direct retaliation from the people. The collapse of the regime, also means that they may become jobless and troublesome.

In the 80’s, there was an incident where the Kangkye Munitions Factory incurred an explosion. The people who thought that a war had risen killed the security agent in charge and threatened to evacuate the country regardless of war or not. The people armed with weapons even raided the home of the security agent in charge, with stones and batons. As this rumor spread, security officers throughout the country felt the tension and were all on alert. Hence, control forces even to the lowest rank have become the trustworthy pillar to the North Korean regime.

Since the early stages of the regime, North Korea trained members of anti-Japan protestors and their families, Mankyungdae Revolutionary Academies and distinguished servicemen from the Korean War. As a result, the mindset of North Korea’s central class is relatively high in societal class awareness, as is their loyalty to Kim Jong Il.

Ideology amidst the central class and brainwashed passion

These people believe that the survival of the North Korea system is directly connected to their lifeline. They fear that they will not be able to receive the same privileges given by Kim Jong Il, if the current North Korean regime were to collapse. They believe that Kim Jong Il’s fate is their fate.

The North Korean regime is currently strengthening the multiple control system for their central class so that the ideology of the class is not shaken and the principals of Kim Jong Il kept intact.

In North Korea, every position and decision is focused around Kim Jong Il and his every single word is glorified. In one sense, it is a specialty of the dictatorial regime, but in reality it is a way to force the upper class to stand in awe and even dread the grand Kim Jong Il. Some defectors, once members of North Korea’s elite say that people work having no conscious awareness of their heavy duty or how to modify words spoken by Kim Jong Il.

Educational jobs by the central class are different to that of the common citizen. As the former Soviet Union and Eastern European bloc was merging in the 90’s inflicting collapse to the regime, elite officials internally passed video tapes on the end of Romania’s former President Nicolae Ceausescu to calm other comrades but in the end stirred greater fear.

Recently, it is said that tapes on the Iraq situation have been televised for commanders and military elites to see. The aim of this viewing, to plant into the minds of the commanders that compromises to the protection of the system means death.

The Kim Jong Il regime gives privileges to inspire the people supporting them. For example, people who work for the Central Committee systems department or the elite propagandists, receive a Mercedes Benz with the number plate ‘2.16’ symbolizing Kim Jong Il’s own birthday, and depending on the position, the car series is upgraded.

Other elites from the Central Committee and figures in key military posts are provided with luxurious apartments in Pyongyang. The apartment blocks are built and located separately to the average house. Soldiers guard the homes, even restraining relatives from entering the apartment premises. These homes are furnished with electrical goods, sofas, food and goods made in Japan, as well as being accompanied with western culture.

As Military First Politics was implemented in the late 90’s, private nurses, full-time house maids, private apartments and country residences, private cars, office cars, as well as “recreational clubs” with beautiful women, were granted as privileges to the head military and provincial officers.

Every Lunar New Year, expensive foreign gifts are presented to the core central class. However, across the bridge, local and system secretaries, public control officers await common goods that can be found in South Korea’s supermarkets such as mandarins, apples, cigarettes and alcohol. Nonetheless, people who work for North Korea’s local offices are more than happy to receive these gifts are it distinctly segregates them from the common North Korean citizen.

OK to Capitalist Goods But NO to Capitalist Regime
Daily NK (Part 2)
Han Young Jin
3/11/2007

The higher the class, the closer one is to the 2nd and 3rd tier network. If a person is discovered to be in opposition to the regime they will be brutally punished and so a person is cut off early if they are found to show any signs of anti-Kim Jong Il.

The people who inflict the greatest control are the military high commanders. North Korea’s military can be seen as a branch of national politics that really does represent half of the regime. Political elites from the military closely control high commanders with under cover spies whose job is to specifically tattle on suspicious officers to the Party. Then, the protection agency in command contacts an expert who equipped with bugging devices carefully monitors the high commander’s every move, 24 hours a day.

In addition to this, control over university students who are being trained to become North Korea’s next elite group is also severe. In order to intensify regulations on university students, the protection agency initiates secret movements. Protection agents and even information staff are grouped to control the student’s movement with one information staff in charge of monitoring every each 5 students.

Even amidst the Workers’ Party and the ministries, national safety agents are dispatched to monitor the elite.

“Capitalist goods are good, but reform is unacceptable”

Though envious of South Korea’s economic development, North Korea’s upper class are opposed to growth and reform.

There is a popular story of an elite North Korean official who visited the South and frankly revealed “Though we may crawl and be worn, we cannot follow South Chosun’s economy.” It is also a well known fact that elite officials preferred Samsung digital cameras and showed interest in Hyundai cars at a South-North Cabinet talks and Aug 15th event in Seoul. Nonetheless, when it comes to acknowledging the need for capitalist reform, North Korea’s central class discards it with a wave of the hand.

The reason that capitalist goods are preferred but reform rejected is a result of the ideology that their individual power will be lost with change to the regime. Those who have loyally followed authorities have no mindset nor special skills that will enable them to survive a capitalist system. Rather than confronting a competitive society, they prefer their current position and the glory that comes with it.

The central class is also well aware of the restraints on North Korea’s economy. Every year as the harvest season arrives, they see citizens march onto the fields malnourished and underfed. They know that the economic policy implemented by authorities has failed and is incoherent. Yet, ultimately they are unwilling to let go of the small privileges they are endowed upon by the preposterous and unreasonable regime.

These people have become accustomed to their power which is utilized to gain them their privileges and tyranny. Even if North Korea enters a famine, they need not worry about food or clothing.

For example, in the case of an official factory secretary, he/she satisfies ones own personal needs by selling factory goods. Using the excuse that factory profits are being raised, he/she orders the workers to engage in more work, on the side. This is how tyranny occurs with the factory secretary manufacturing personal gains. Yet, these officials are not punished with any legal sentences.

Newly-rich dualism, collaborative relationship with official powers

Following the July 1st economic measures in 2002 trade became legal and North Korea experienced a sudden boom in newly rich elites. What led this new rich class to accumulate so much wealth was the fact that they had introduced an enterprise system which allowed trade with China.

The newly rich have a great interest in reform and development, and are well aware that the North Korean regime will not be able to solve the economic issue without facing reform.

However even this class of people are disinterested in bringing an end to the regime. They have already accumulated their wealth and feel no onus in the poverty stricken situation in North Korea. Whether capitalism or the current North Korean regime, as long as they can sustain a living, these people can continue to remain in a dualistic mindset.

While North Korean authorities are strengthening control over this new class, they are in another sense, receiving money and bribes to protect them. Where investigations are involved, authorities are risking their own identities being revealed and hence often ignore the illegalities of the people, even going to the extent of passing on information.

It is a fact that North Korea’s central class is acting as the forefront in sustaining the regime, but then again, these people have greater educational standard than the average commoner and they have had more opportunities to experience Western civilization. Hence, they can compare the North Korean regime with the outside world. Though the majority of this class accommodates to the North Korea regime, the possibility that a fraction of the elites may have some sort of antagonism against the Kim Jong Il regime and the odds that these people may just act upon these feelings cannot be discarded.

In addition, as North Korean society continues to decay, the organization of its systemic corruption may just be hit with danger. As corruption deepens and a crack appears in the regime, authorities will try to control this leak but while doing so, it is possible that endless punishment may just incite some elites to secede.

Particularly, the more information about foreign communities flow into North Korea and the people’s animosity against Kim Jong Il increases, even the elite will not be able to completely suppress feelings of antipathy.

Posted in 1990s Famine, 2002 Economic reforms, Automobiles, DPRK Policies, Education, Kangkye Munitions Factory, Military, Political economy, Songun, Transportation, Worker's Party | Comments Closed

Chinese Merchants in North Korea – Cure or Poison to Kim Jong Il?

Wednesday, March 7th, 2007

Daily NK
Kim Min Se
3/7/2007

90% daily goods made in China, 50% circulated by Chinese merchants

While some prospect that North Korea may be an affiliated market of China’s 4 provinces in the Northeast, the real focus is on the merchants who actually control North Korea’s markets. Recently, North Korean citizens have been asserting that markets would immobilize if Chinese merchants were to disappear.

Lately, Chinese merchants are nestling themselves with their newly found fortune in North Korea, undeniably to the envy of North Korean citizens.

In a recent telephone conversation with the DailyNK, Kim Chang Yeol (pseudonym) a resident of Shinuiju said “Most of the tiled houses in Shinuiju are owned by Chinese merchants in Shinuiju are upper class and the rich.” Unlike Pyongyang, tiled houses in Shinuiju are greater in value than apartments. In particular, the homes owned by Chinese merchants are luxurious and impressing.

Kim said “At the moment, 90% of daily goods that are traded at Shinuiju markets are made in China.” What Kim means by 90% of goods is basically everything excluding agricultural produce and medicinal herbs. Apparently, about half of the (90% of) supplies are circulated by Chinese merchants.

Kim affirmed that the market system could be shaken if supplies were not provided by the Chinese merchants. Hence, Chinese merchants have elevated themselves in North Korea’s integrated market system, to the extent that the market could break down without their existence.

In addition to this, Chinese merchants are playing a vital role in conveying information about the external world into North Korea. Even in 2004, it was Chinese merchants to first telephone China through mobile phones relaying the news about the Yongcheon explosion. As a result, rumors say that the movement of Chinese merchants can either be a “cure” to the economic crisis in which the North Korean government seems unable to fix, or “poison,” as more and more foreign information flows into the country.

How many Chinese merchants are there in North Korea?

A report by China’s Liaoning-Chosun Newspaper in 2001 sourcing data from North Korea, states that immediately after WWII, approximately 80,000 overseas Chinese were residing in the Korean Peninsula. Then following the Korean War and the formation of a Chinese government, the majority of people, approximately 60,000 Chinese, returned home. In 1958, statistics show that 3,778 families of overseas Chinese were living in North Korea, totalling 14,351 people.

These Chinese engaged in business related to farming, home made handicrafts and restaurant business, and in the late 50’s, lost all this due to the implementation of economic planning and dictatorial regime. Since then, the majority of merchants continued to return to China until the early 80’s.

In 2001, Liaoning-Chosun Newspaper confirmed that approximately 6,000 Chinese were living in North Korea. Of this figure, more than half were residing in Pyongyang, approx. 300 families living in North Pyongan and approx. 300 families residing throughout Jagang and northern districts of South Hamkyung.

At present, there are 4 middle and high schools for children (11~17 years) of Chinese merchants, located in Pyongyang, Chongjin, Shinuiju and Kanggae. In addition to these schools, there are a number of elementary schools (for children aged 7~11 years) located sporadically throughout each province.

Wang Ok Kyung (pseudonym) a resident of Shinuiju attended Chongjin Middle School for children of overseas Chinese in 1981~86. Wang said “At the time, there were about 40 students in each year. Now there is only about 5~6 students.” Nowadays, many Chinese children complete their elementary studies in North Korea, but the general trend is to send the children to China for middle school. She said “In order to enter a Chinese university, students must have completed their middle school studies in China and must be fluent in Chinese. He/she can also go to private institutes in China.”

Fortunes made through trade between North Korea-China during the food crisis

Even until the early 80’s there were no such thing as a wealthy North Korean-Chinese merchant. They were no different to North Korean citizens.

However, in the 80’s, many people began importing and selling goods such as socks, handkerchiefs, hand mirrors and cards from China, literally through their sacks. As the 90’s approached North Korean-Chinese merchants began to experience great wealth, the time where North Korea-China trade fundamentally kickstarted.

Today, Son Kwang Mi (pseudonym, 52) falls under the top 10 wealthiest Chinese merchants in Dandong, characterizing an unique rags to riches story. In the past, Sun lived in Chongjin and was one of the first figures to trade with China in the 80’s.

In the beginning, Son was so poor that she had to sell her watch received as a wedding gift in order to buy goods to sell.

Fortunately, Son found her money smuggling gold. In North Korea, gold is considered a public good or simply put Kim Jong Il’s personal inheritance, so private trade of gold is strictly regulated. Nonetheless, there are still some laborers who export gold secretly and a great number of people still collect gold through dubious ways. In particular, after the 80’s as North Korea began to experience economic decline, more and more people sold gold secretly.

Hence, a small number of Chinese merchants infiltrated the market of secretly trading gold with China. Chinese smugglers were able to take advantage of North Koreans by greatly raise their market margins, as the supply of gold and North Koreans wanting to sell their gold was high yet the demand in North Korea low.

Son said “Of the Chinese merchants in North Korea, 60% earned a great fortune at that time through illicit trade.”

She says that there were two opportunities for overseas Chinese to make a great fortune. The first was in 1985~89 through illicit trade of gold and the second, during North Korea’s mass food crisis in 1995~98.

“During the mass famine, everything in North Korea was in shortage and so Chinese merchants began to provide the daily necessities of life. At the time, if you brought large amounts of goods such as fabric and sugar, you could make a profit of 1 million Yuan (US$137,000),” she said.

Son was fortunate enough not to miss these two opportunities which led her to great wealth and allowed her to possess a fortune of 50 million Yuan (US$6.31 million).

Chinese merchants can relatively enter and exit China freely. Also, with the ability to speak Chinese fluently and the possibility of staying in the homes of many relatives in China, the occupation possesses ideal conditions.

Posted in 1990s Famine, Black markets, Cell phones, China, Communications, Economic reform, Education, Foreign direct investment, Gold, International trade, Labor conditions/wages, Light Industry, Manufacturing, Real estate | Comments Closed

The Political Economy of Sanctions Against North Korea

Sunday, March 4th, 2007

Ruediger Frank
Asian Perspective, Vol. 30, No.3, 2006 pp. 536

PDF Here: DPRK sanctions.pdf

Abstract:
This article explores sanctions as a policy tool to coerce North Korea’s behavior, such as by discontinuing its nuclear weapons program. It discusses the characteristics of sanctions as well as the practical experience with these restrictions on North Korea. It becomes clear that the concrete goals of coercion through sanctions and the relative power of the sending country to a large extent determine the outcome. Nevertheless, the general limitations of sanctions also apply, including the detrimental effects of unilateral and prolonged restrictions. It appears that the imposition of sanctions against the DPRK is unlikely to succeed. As an alternative way of changing the operating environment for North Korea, assistance deserves consideration. Despite many weaknesses, this instrument is relatively low in cost and risk, and can be applied continuously and flexibly.

Highlights below the fold:
(more…)

Posted in 2002 Economic reforms, Black markets, Economic reform, Foreign direct investment, International Aid, International trade, Japan, Kaesong Industrial Complex (KIC), Political economy, Rason Economic and Trade Zone (Rajin-Sonbong), USA | 1 Comment »

Law on Bankruptcy of Foreign-invested Enterprises

Thursday, March 1st, 2007

From Naenara:

The Law of the Democratic People’s Republic of Korea on Bankruptcy of Foreign-invested Enterprises was adopted by Decree No. 1504 of the Presidium of the Supreme People’s Assembly on April 19, 2000 and is in force.

This law contributes to correct settlement of debts and claims of foreign-invested enterprises and protection of the rights and interests of creditors.

The law consists of 54 articles in 6 chapters.

__________________________________

Chapter 1. Fundamentals (Articles 1-7)

This chapter stipulates the purpose of institution of the law, foreign investors to which the law is applied, conditions of bankruptcy, reason for exemption from their obligations, and a competent court to handle and settle the cases of enterprise bankruptcy.

The law applies to foreign-invested enterprises (equity or contractual joint-venture enterprises, and wholly foreign-owned enterprises) and foreign-invested banks (equity or contractual joint-venture banks, and wholly foreign-owned banks) that are registered as a corporate body of the DPRK and carry out business activities in the territory of the DPRK.

A foreign-invested enterprise may be declared bankrupt when it fails to repay its debts within the set period for its insolvency, or the debts of the business exceed its assets, or the enterprise cannot be maintained any longer due to a grave loss, or the enterprise cannot be dissolved through normal procedures.

An enterprise may be exempted from bankruptcy when there is assurance that the overdue debts can be settled within 6 months from the time of application for bankruptcy or when it can receive financial assistance for its management from an organ, enterprise or association of the DPRK, or when the parties agree to reconcile with each other after an application is made for bankruptcy.

Chapter 2. Application for and Declaration of Bankruptcy (Articles 8-22)

This chapter defines an applicant for bankruptcy, procedures for an application of bankruptcy, the declaration of bankruptcy of an enterprise made by the court and its legal effect, and the organization (or appointment) of a liquidation committee and its responsibility.

The procedures and method for application of bankruptcy are as follows.

A creditor who is unable to receive the repayment of his claim within the period set in the contract may apply for declaration of bankruptcy of the enterprise to the court having jurisdiction over the seat of the enterprise concerned with a view to collecting his claim. In this case, he should obtain an approval from more than one creditor when the enterprise has over three creditors.

The application will state the title (or name) and address of the creditor, the name and address of the legal representative and his agent, the description, amount and period of the claim, the name and address of the enterprise to be declared bankrupt, and be accompanied by documents explaining the reason for non-repayment of the claim and certifying that the approval has been obtained for an application of the bankruptcy.

An enterprise that has become insolvent may apply to the court for its bankruptcy according to a decision of its board of directors or joint consultative board in order to be exempted from its obligations.

The application for bankruptcy will state the contents concerning the enterprise and its operation, a description of the loss of the enterprise and the reasons for its inability to repay its debts, and be accompanied by such documents as a list of debts and assets.

In case that the debts of an enterprise exceed its assets, the liquidation committee in charge of handling the dissolution of an enterprise may apply for its bankruptcy to the relevant court when it is deemed appropriate for creditors and enterprise to declare the enterprise bankrupt.

The application for bankruptcy will state the name and address of the enterprise, information on its assets and debts and the fact that the enterprise cannot be dissolved through normal procedures.

A court will decide whether to accept or reject an application for bankruptcy within 30 days of receipt of the application. In this case, it may undertake investigation as it deems necessary.

When a court believes that an application for bankruptcy is reasonable after the investigation, it will declare the enterprise bankrupt by making a judgment to that effect and send copies of the written judgment to the applicant and the enterprise concerned.

The written judgment will state the name of the enterprise declared bankrupt, the name of the legal representative, the reason for bankruptcy, the date of judgment and the like.

An enterprise declared bankrupt will suspend its bookkeeping, normal property transactions and management activities from the day of receipt of a copy of the written judgment.

An enterprise notified of the declaration of its bankruptcy will, within 2 days of the receipt of the notice, inform the central organ for guidance of economic cooperation of the fact that it has been declared bankrupt and make necessary registration.

The legal representative (manager of an enterprise) or his agent of the bankrupt enterprise cannot leave the seat of the enterprise and his domicile without permission from the court until the bankruptcy procedures have been completed and will give answers to matters related to the bankruptcy or cooperation in the bankruptcy procedures.

Where a bankrupt enterprise has concealed, distributed, donated or transferred at a low price its assets during the period of 6 months preceding the application for bankruptcy or after the submission of the application or where it has waived its claims without legal ground during the period of 30 days preceding the application for bankruptcy or after the submission of the application or where it has afflicted losses upon its creditors in anticipation of its bankruptcy, such acts will be null and void.

Chapter 3. Declaration, Investigation and Determination of Claims (Articles 23-31)

The chapter stipulates the claim declaration, receipt of declaration, investigation and determination of the claims and the preparation of a list of claims.

A creditor to the bankrupt enterprise will declare his claims in writing to the liquidation committee within the period of claim declaration.

Any claim that has not been declared during the period of claim declaration will be null and void.

The liquidation committee will investigate the claims on the basis of the contents of the declaration within the period of claim investigation.

The creditor may institute a civil lawsuit against the complainant before a court handling the bankruptcy case.

The liquidation committee will be responsible for the final determination of claims for which there is discrepancy between the declarations and finding of the investigation and claims for which a complaint has been raised but no civil lawsuit has been instituted.

Claim declarations and list of claims may be kept by the court. The court may allow parties related to the bankrupt enterprise to read relevant documents upon their request.

Chapter 4. Distribution of Assets of a Bankrupt Enterprise (Articles 32-44)

This chapter defines the securing of assets of the bankrupt enterprise, the order of distribution, an assets distribution schedule, distribution of the assets and termination of the bankruptcy case.

Chapter 5. Reconciliation (Articles 45-52)

The chapter stipulates the reconciliation, procedure and method for submission of reconciliation and the decision of the court approving or rejecting the reconciliation.

Chapter 6. Penalties (Articles 53-54)

It defines the authority of the liquidation committee for sanctions and the legal responsibilities for the violation of this law.

Posted in Law on Bankruptcy | Comments Closed

In the Name of the Father

Tuesday, February 20th, 2007

Korea Times
Andrei Lankov
2/20/2007

In July 1997, the five most important government agencies of North Korea published a joint declaration which informed the North Korea populace and the entire world that the country was introducing a new calendar. The year 1912 became the First Year of Chuche. The reason? This was the year Kim Il-sung was born.

The decision allowed the occasional use of the Christian-era years, but these four-digit numbers would accompany the new official chronological designation only when deemed necessary. Thus 2006 AD is the Year 95 of the Chuche Era. In other words, Kim Il-sung’s birthday replaced that of Christ in the official North Korean calendar.

The world has seen other attempts to break with old calendar traditions. In France of the 1790s, the revolutionaries began to count years from the proclamation of the French Republic. In South Korea of the 1950s, the government tried to implement the so-called ‘Tangun Era.’ None of these attempts succeeded for more than a few decades.

However, the decision to introduce the Chuche Era was just one of the many manifestations of Kim Il-sung’s posthumous “personality cult.”

Indeed, the memory of the North Korea’s founding father is treated in Pyongyang with the utmost respect. Obviously, this was the intention of the dead founder when he chose to transform his country into the first communist monarchy in world history.

He saw what had happened to Stalin and Mao’s posthumous reputations, and arranged the transition of power within his family, so the new leaders have a vested interest in keeping the old man’s memory intact.

First of all, Kim Il-sung is to remain the country’s only president.

After his death, the President’s office was left vacant _ and is meant to remain vacant forever. Kim Il-sung is North Korea’s “eternal president” while Kim Jong-il runs the country not as president, but merely as “chairman of the national defense committee.”

Kim Il-sung’s body has been embalmed and left on public display in a special glass-covered coffin. Actually, in this regard they follow an established _ if bizarre _ communist tradition. Lenin’s body was treated in such a way in 1924 (against his own clearly expressed will), and since then many other communist leaders have had their bodies left on public display _ also often against their will.

However, the sheer size of the North Korean mausoleum is impressive. In other Communist countries, bodies of the dead leaders were held in specially constructed and relatively small _ if impressive _ buildings.

The North decided to transform the entire Presidential Palace into the mausoleum and major center of Kim Ilsung’s posthumous cult.

The construction of Kmsusan Palace began in 1974, and in 1977 it was presented to Kim Il-sung as a present for his 65th birthday. In Kim’s lifetime, the imposing building, with floor area of 35,000 square meters, was strictly off-limits to the public, but in recent years it has become the center of a government- sponsored pilgrimage.

Of course, portraits of Kim Il sung are everywhere, albeit often accompanied by images of Kim Jong-il and his mother Kim Jong-suk. From the late 1960s, the North Korean bureaucracy has developed intricate rules to determine where and how Kim Il-sung’s likeness would be displayed. I’ll probably say more about these rules later, but now it suffices to say that every living room, office, and entrance to every official building, as well as every railway carriage, has been adorned with the portrait of the leader from the 1970s.

After 1980, the portrait of his son has complemented that of the father.

The currently approved portrait of Kim Il-sung is officially known as the ‘sun image’ (taeyangsang in Korean). Here the Great Leader is depicted as smiling kindly at his subjects, and he is dressed in the Western suit and necktie that he actually preferred in the last years of his life (prior to 1984 Kim had worn a Mao suit).

These portraits are mass-produced by the ‘Mansudae Creative Group,’ a special workshop whose sole purpose is to design and manufacture portraits and statues of the Great Leaders.

An important part of Kim Ilsung’s posthumous glorification is the numerous “Yongsaengtap,” or “Towers of Eternal Life.” Their name reflects the official slogan: “Kim Il-sung will live with us forever!” These towers have a shape, slightly reminiscent of ancient Egypt’s obelisks, and they are decorated with slogans on Kim’s alleged “eternal presence” in his realm.

As of 1997, there were 3,150 “Towers of Eternal Life” nationwide. They are normally erected at crossroads, and every major town is required to have one. Most of these structures are relatively cheap and easy to build, but some of them are quite elaborate and expensive.

The tallest of all towers is, of course, located in Pyongyang. It has a height of 92.5 meters _ just a bit lower than the Chuche Tower, one of the city’s major architectural monuments.

However, Kim Il-sung’s cult is now giving way to the cult of his son, who has successfully become the new supreme ruler of the country.

Posted in Civil society, Domestic publication, Juche, Kim's New Year Address (Joint editorials), Mansudae creative Company (art studio) | Comments Closed

Deliver Humanitarian Aid Directly to the Starving Affected Areas

Tuesday, February 20th, 2007

Daily NK
Kang Jae Hyok
2/20/2006

Every year when spring arrives, North Korea faces yet another food crisis. 10 years after the “march of suffering,” North Korea has still made little change.

The greatest change that has occurred is by the North Korean people. The most of North Koreans have surpassed the ‘march of suffering’ and have survived by relying on themselves

In comparison to last year, the Korea Rural Development Administration (RDA) estimated that North Korea had experienced a loss of 1.8% (60 thousands tons) in agricultural production at 4.48 million tons of cereal. The World Food Program (WFP) also predicted similar figures at 4.3 million tons.

On the other hand, a national North Korea aid organization Good Friends reported that only 2.8 million tons of agricultural production had been made and that if any less than 1.5 million tons of food aid was supported, North Korea would be faced with another severe food crisis.

In the 90’s foreign aid could block mass starvation

During the “march of suffering” that began in the mid-90’s, food distributions were suddenly terminated. Nonetheless, people went on working, starving, believing that food distributions would begin once again.

However, one month passed then two, and still the distributions did not resume. In the end, the number of deaths from starvation began to arise. Yet, North Korean authorities did not respond with any countermeasures. As a result, in 3~4 years, 3mn North Korean citizens died of starvation.

Nonetheless, the tragic mass starvation that occurred at the time could have been stooped if it weren’t for the irresponsible acts of North Korean authorities. We can view this by analyzing the figures denoting the amount of aid supplied from 1995~1999.

Year   1995   1996   1997   1998   1999
Production of food
         3490   2500   2680   2830   4280
Aid from FAO
           980   1070   1440   1490   1190
Aid from S.Korea
           960   1050 1630   1030 1070
Food distributions in North Korea
         4450 3550   4120 3860 4450
       ~4470 ~3570 ~4310 ~4320 ~5476
Death rate
               615    1704    549
         (Unit: 1,000 tons, million persons)

Table of North Korea’s food production and foreign aid in the 90’s in comparison to the death rate. (Good Friends 06.12.22)

According to the table above, South Korea and the Food and Agriculture Organization of the United Nations (FAO) aided North Korea with 2mn tons of food annually from 1995~1999.

If we consider that only 10,000 tons of food is needed to provide the whole of North Korea a day, then there would be no reason for a shortage in food distributions with a total of 3.7mn tons of food aid being supplied. According to the table above, annual aid provided to North Korea was 3.55mn tons at the minimum and 4.45mn tons maximum. This equates on average at 4.09mn tons of supplies.

However, during this period 3mn people died of starvation and 30mn people defected from North Korea. Contrary, there has never been a time where so much foreign aid was supplied to North Korea. Why then at a time where greatest aid was given to North Korea, was there the greatest number of deaths?

One of the essential reasons behind this occurrence was the fact that foreign aid never reached the provinces of North Hamkyung, Yangkang and Jakang where food was most needed. If food aid had been distributed to the areas most dire of starvation, then at the least, this incident would not have occurred.

At the time, most of the aid was distributed preferentially to soldiers, authorities and powerful ministers in Pyongyang. On the whole, aid to North Korea had been sent via ship through Nampo, Haeju and Wonsan harbor, then supplied to Pyongyang and South Pyongan province.

During the 90’s, transportation of cargo was practically immobilized due to the shortage of electricity and lack of fuel which ultimately led to the suspension of locomotives. On the whole, goods are transported via railroad, however, in the 90’s, both passenger and freight trains had come to a halt.

Basically, it takes about a fortnight to travel return, from Wonsan, Gangwon province to Najin, North Hamkyung on train 21. The Pyongyang-Tumen River train which departs from Pyongyang to Sunbong, North Hamkyung on train 1, also takes more than 10 days travel return.

Back then, it took twice as long to for a freight train to reach its destination in comparison to a passenger train. 10,000 tons of foreign aid that arrived at Wonsan harbor took 2~3 months to transport from North Hamkyung to Chongjin. In other words, it would take more than 2 years to distribute 100,000 tons of food to Wonsan in Gangwon province to Chongjin in North Hamkyung province. Hence, it is pointless to rely on railroad to distribute goods.

Losses incurred while transporting aid

Further, 30~40% of goods go missing while being transported. Every time a cargo train stops, guards responsible for the goods sell rice to traders at wholesale prices so they can use the profits to live. Also, street kids and thieves often steal the goods so that the intial 1,000 ton of rice is often depleted to 600~700 tons upon arriving at its destination.

The problem is that North Korean authorities well aware of this fact that are unwilling to modify the routes or assert change. Ultimately, foreign aid is distributed throughout the regions of Pyongan province where the situation of food is relatively good in comparison to the rest of North Korea.

As rice only lands in the hands of people living in Pyongyang and Pyonan where influential ministers and Kim Jong Il’s elite reside, it can only be analyzed that this situation is occurring under specific motives. In the end, the majority of deaths occurred in Hamkyung, Yangkang and Jakang, and the situation has remained the same until today.

Following the missile launch and nuclear experiment, last year South Korea and the international community suspended food aid to North Korea, and in Feb 13th, the third phase of 5th round 6 Party talks ended with the South Korean government confirming that food aid would resume.

Undoubtedly international food aid is important but unless rice is distributed to the areas in most need, a similar situation to the 90’s will occur once again.

More importantly and urgently, aid must be delivered directly to the provinces of Yangkang, Hamkyung and Jangang. Thinking that North Korean authorities will wisely distribute food aid throughout the country is merely a South Korean fallacy.

Posted in 1990s Famine, Agriculture, Agriculture statistics, Arduous March, Energy, Good Friends, International Aid, International Governments, Railways, Statistics, Transportation, UN Food and Agriculture Organization | Comments Closed

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