Banking « North Korean Economy Watch

Archive for the ‘Banking’ Category

Money in Socialist Economies: The Case of North Korea

Sunday, February 28th, 2010

Ruediger Frank, “Money in Socialist Economies: The Case of North Korea,” The Asia Pacific Journal, 8-2-10, February 22, 2010.

Introduction
Dated January 29, 2010, the Foreign Trade Bank of the DPRK (North Korea) issued document No. DC033 10-004 to diplomatic missions and international organizations present in North Korea. They were informed that the use of foreign currency was to be stopped, payments were to be made in the form of non-cash cheques, and that the official exchange rate of the Euro to the North Korean Won was changed from 188.2 KPW to 140 KPW, effective January 2, 2010.

Foreign institutions and organizations now have to obtain non-cash cheques from the Foreign Trade Bank, denominated in KPW, in order to pay for accommodations, meals and service fees in hotels, fares for transport services like railways and airlines, communication charges, inspection fees, registration fees and commissions paid to institutions and enterprises in the DPRK, fuel, office materials, spare parts for vehicles, electricity, water, heating charges and rent. Bank transfers are now mandatory for any transfers between international organizations and all money paid to institutions and organizations of the DPRK (including the salary of DPRK citizens working in embassies or international organizations).

A recent visitor to Pyongyang confirmed in a talk with the author that individuals are subject to a cumbersome process if they wish to purchase anything. Rather than using a standard hard currency or exchanging it into the new Won, they now have to obtain a receipt stating the price of the good they want to buy, then present this at a desk where they exchange their money into exactly the needed amount of North Korean money, and finally return to the shop assistant, hand over the exact amount, and receive the product.

In the preceding weeks, North Korea had made international headlines related to what seems to be a concerted economic policy initiative. The domestic currency was reformed in a way that obviously aimed at reducing the amount of money in circulation (link). A few weeks later news emerged that the use of foreign currencies was banned (link).

This is no doubt a dramatic move with far-reaching consequences. Money matters for personal lives and for society, so when a country initiates a currency reform, it has significant repercussions.

But what are these consequences for the specific case of North Korea in early 2010? Are people in various sectors of society better off now, or worse? Will the economy benefit or suffer? Do the reforms promote or impede foreign trade and investment? Will the domestic political situation become more stable, or will it deteriorate? Are the economic reforms of 2002 reversed, or were they intended to be a temporary measure from the outset? Should we even interpret the currency reforms as part of the process of power succession?

(more…)

Posted in 2002 Economic reforms, Banking, Economic reform, Finance, Fiscal & monetary policy, General markets (FMR: Farmers Market) | 1 Comment »

DPRK government delivering rice to high risk areas

Tuesday, February 23rd, 2010

Daily NK
Jung Kwon Ho
2/22/2010

In late January, Kim Jong Il held a meeting of his highest officials, including Jang Sung Taek, Director of the Ministry of Administration of the Party, aiming to find ways to alleviate the negative side effects of November’s currency redenomination. In the meeting, the group apparently agreed to release emergency supplies of rice to those on the brink of starvation.

According to a Daily NK source, “Following the meeting, which he chaired, Kim Jong Il handed down a handwritten decree to the chief secretaries of all provinces on January 20 in which it was stated, ‘Preventing anyone from starving to death is your obligation.’”

Chief Secretaries of Provincial Committees of the Party, the recipients of the decree, handed on the threat to their subordinates, warning provincial cadres, “You will resign if anyone starves to death, because this was a direct instruction from the General.”

In the decree, the three most vulnerable provinces were named as Yangkang, South Hamkyung, and Kangwon Provinces, so the officials governing those provinces are understandably nervous. They are the provinces where most casualties occurred during the March of Tribulation, and they remain the most food insecure.

Under the decree, the Ministry of Procurement and Food Policy makes daily deliveries of 5kg of relief rice to each people’s unit and 5-15kg to each factory and enterprise. Chairpersons of people’s units and managers of factories are required to observe the circumstances of the people under their control and provide those in the greatest danger of starvation with relief rice first.

In late January, quite a number of households were reportedly facing starvation due to the aftermath of the currency redenomination; notably sky high prices coupled to strict market regulations. However, there have been no reports of starvation since relief rice deliveries began on February 1.

Alongside the chairpersons of People’s Units, cadres working for local government offices are required to cross-check whether or not starvation is occurring. In theory, they are reprimanded if they do not report the situation truthfully.

Upon hearing the news, a defector in Seoul commented, “It seems that the people will not lie still and suffer that dire situation. Kim Jong Il may have done this because he senses a crisis situation this time.”

Posted in Agriculture, Agriculture statistics, Banking, Finance, Fiscal & monetary policy, Food, Ministry of Administration, Ministry of Procurement and Food Policy, Political economy | Comments Closed

DPRK premier apologizes over currency revamp

Thursday, February 11th, 2010

According to the Chosun Ilbo:

A North Korean source has shed more light on an apology by Premier Kim Yong-il on Feb. 5 which apparently acknowledged that the currency reform in late December went disastrously wrong.

The source said Kim, not to be confused with leader Kim Jong-il, read out an hour-long statement before village chiefs and other party officials at the People’s Palace of Culture in Pyongyang on Monday morning. “I sincerely apologize for having caused great pain to the people by recklessly enforcing the latest currency reform without making sufficient preparations or considering the circumstances,” the source quoted him as saying.

Kim also pledged to rectify the mistakes, saying he would do “my best” to stabilize people’s financial circumstances. The revaluation of the won, instead of curbing inflation, led to skyrocketing prices of daily necessities.

He indicated that the regime will allow people to use foreign currency, which has been banned since the reform, and permit open-air markets to return to normal after a crackdown that seemed aimed at strangling a nascent market economy.

But Kim at the same time stressed the need to stick to state-set prices, adding that the government will strictly crack down on the hoarding of goods.

Some experts say the situation in the North has returned to almost the state before the currency reform. A South Korean official said North Korean authorities loosened their control of the markets since there has been unprecedented resistance from ordinary people. This seems to have forced Kim’s hand.

After Kim’s apology, most money changers and illegal traders who had been arrested were reportedly freed. The number of people leaving for China has grown noticeably as offices of state agencies or state-run corporations involved in earning dollars, which suspended business due to the ban on use of foreign currency, have resumed business.

The apology apparently quenched a lot of the simmering public anger.

“Premier Kim Yong-il’s direct apology to village chiefs, who are representatives of the people of each region, is tantamount to an apology to the people themselves. It’s a big event in the history of North Korea,” a former senior North Korean official who defected to the South said. “Authorities have never apologized to the people for wrong policies before.”

He believes the apology came “because discontent with the currency reform had spread widely even among core supporters of the regime,” he added.

Residents in Hwanghae Province are in some cases said to have beaten security officers who were cracking down on the use of dollars.

Since the climbdown, there have reportedly been calls to return the money the authorities confiscated. The won was revalued at a rate of 100:1, but the new won immediately plummeted in value, and those who saw their savings disappear into thin air have been demanding compensation.

The source said the apology may encourage North Koreans to become more assertive in the future.

The AP (Via Washington Post) adds:

South Korea’s National Intelligence Service and the Unification Ministry said they couldn’t confirm the Chosun Ilbo report. But Unification Ministry spokeswoman Lee Jong-joo said it would be “very rare” for a top North Korean official to issue a public apology.

Kim is believed to be the North’s No. 3 man in the country’s power hierarchy after autocratic leader Kim Jong Il and Kim Yong Nam, president of the Presidium of the Supreme People’s Assembly, according to South Korean media reports.

Last week, South Korean media reported that leader Kim Jong Il sacked a senior communist party official who spearheaded the currency reform, following arguments within the country’s elite over who should take responsibility for the fiasco.

Wow.

UPDATE: Good Friends reports that DPRK authorities are repealing market regulations. According to the AFP:

Communist North Korea has allowed private markets to reopen nationwide after a bungled currency revaluation worsened food shortages and fuelled anger at the regime, a Seoul welfare group said Thursday.

“All the markets across the country should be reopened — without exceptions — as before,” Good Friends said in a newsletter, citing what it said was a special order from the central committee of the ruling Workers’ Party.

It said security organisations across the nation were also ordered to launch “absolutely no crackdowns on trading in food” at the markets.

…

The official policy turnaround came last week, “based on assessments that the currency reform has caused enormous pain to people by paralysing distribution networks”, group director Lee Seung-Yong told AFP.

“I believe North Korea will not clamp down on market activities for a considerable period, or at least until its state distribution system is back to normal.”

The South’s unification ministry, which handles cross-border relations, could not confirm the welfare group’s report.

“We’ve heard the North gradually easing curbs on the markets but it is difficult to verify the full-scale reopening,” said spokeswoman Lee Jong-Joo.

…

Good Friends said this week that about 2,000 people had starved to death across the nation this winter.

Read the full article here:
N.Korea eases curbs on markets nationwide: group
AFP
Jun Kwanwoo
2/18/2010

Posted in Banking, Black markets, Finance, Fiscal & monetary policy, General markets (FMR: Farmers Market), Political economy | Comments Closed

DailyNK series on Chongryon

Sunday, February 7th, 2010

The Daily NK did a series of articles on the General Association of Korean Residents in Japan (Chongryon or Chosen Soren). Below are links to all seven parts:

Part 1: Chongryon feels the pinch

Part 2: Debts, Mergers, Collapses and Foreclosures

Part 3: Homecoming Project Speeds Chongryon Demise

Part 4: South Korea Visits Weakened Chongryon

Part 5: Chongryon Remittances and Investments

Part 6: “Study Group,” the Core of Chongryon

Part 7: Study Group Money Laundering Machine

Posted in Banking, Chongryun, Finance, Fiscal & monetary policy, Foreign direct investment, Japan | Comments Closed

Head of Office 39 replaced

Thursday, February 4th, 2010

According to the Guardian:

It is the nerve centre of North Korea’s money-making operations, the department dedicated to raising hard currency for Kim Jong-il while his country teeters on the brink of collapse.

Room 39 is responsible for some legal ventures, such as the country’s limited exports of ginseng and other items. But according to defectors, most of its energy goes into drug-trafficking, sales of weapons and missile technology, and the production of counterfeit US dollar bills.

Today, it was reported the department’s head – Kim Jong-il’s personal finance manager – has been sacked, possibly in response to international action against the alleged illegal moneymaking. South Korea’s Yonhap news agency said Kim Dong-un was dismissed because he had been blacklisted by so many foreign governments, including the EU in December, leaving him unable to travel on behalf of Room 39’s legal companies. He has been replaced by his deputy, Jon Il-chun, Yonhap said, citing an unidentified source.

Housed in an unremarkable government compound in Pyongyang, Room 39 oversees 120 companies and mines, accounting for a quarter of all North Korean trade and employing 50,000 people, according to Lim Soo-ho, a research fellow at the Samsung Economic Research Institute. He said Kim’s dismissal may be part of attempts to get around international sanctions.

While its inner workings remain a mystery to all but its occupants and the family they serve, Room 39’s role in enabling the regime to survive even in times of widespread famine and international pressure, has come under greater scrutiny since the imposition last year of tough UN sanctions over its nuclear programme.

…

Some of the money generated by Room 39 is used to buy the loyalty of senior party officials, a role that may take on greater prominence as Kim Jong-il, who suffered a stroke in 2008, prepares to hand over power to his third son, Kim Jong-un. Analysts have estimated that illegal activities account for up to 40% of all North Korean trade and an even higher share of total cash earnings.

Additional information:

1. More on the EU travel ban is here.

2. Office 39 is reportedly located here. Kim Jong Il’s office is reportedly nearby here.

3. This week the KWP’s finance director, Pak Nam-gi, was also let go.

4. Mike Madden notes the new director’s appearance with KJI at an “On the Spot Guidance” visit this week. Mike also points to a possible appearance the Korea Taepung International Investment Group meeting.

Posted in Banking, Bureau 39, Finance, Fiscal & monetary policy, Korea Taepung International Investment Group (Daepung Investment Group), Political economy, Worker's Party | Comments Closed

DPRK finance chief sacked over currency revaluation

Wednesday, February 3rd, 2010

According to the Choson Ilbo:

The North Korean regime apparently sacked the Workers’ Party’s Finance Director Pak Nam-gi, letting him take the fall for the failed currency reform late last year. Pak was appointed finance director in July 2007 to oversee North Korea’s economic policies and has spent the past few years trying to root out a nascent market economy.

“Right now, North Korean officials are busy blaming each other for the failed currency reform and Pak, who spearheaded the revaluation, is believed to have been sacked,” said a diplomatic source in Beijing. “Markets have come to a grinding halt following the currency revaluation and prices have soared,” the source said. It seems North Korea hoped to stabilize prices through the currency reform and then credit the achievement to Kim Jong-il’s third son and heir apparent Jong-un to consolidate his grip on power, but this flopped, the source added.

Some North Korea watchers in China predict that the regime may perform a U-turn back to timid market reforms now that Pak, who led the crusade against capitalism, has been fired. One North Korea expert in Beijing said, “There is a strong possibility that high-ranking North Korean officials who led the drive to crush market forces since 2004 will be removed from office, while policies will shift toward market reforms starting in the second half of this year.”

Meanwhile, the new North Korean won is still plummeting against the U.S. dollar. North Korea valued the new currency to 98 won per dollar after the old won weakened to 3,500. But the new won has plunged since last month and is now being traded at between 300 and 500 won per dollar, according to people who trade goods with North Koreans.

According to the Daily NK:

In the tradition of dictatorial regimes worldwide, scapegoats have apparently also been chosen. South Korea’s Chosun Ilbo today claimed that Park Nam Ki, Director of the Planning and Financial Department of the Central Committee, has taken responsibility for the failed redenomination, which initiated a period of hyper-inflation, and been dismissed.

According to the report, Park was appointed to the top economic position in the North Korean government in July, 2005, where he began to pull up the green shoots of spontaneous market economy.

If the news is confirmed, Park will be following in the undesirable footsteps of Ministry of Agriculture head Seo Gwan Hee and Premier Park Bong Ju.

Seo was executed for his role in the 1990s famine. According to defector testimony, Kim Jong Il shifted responsibility for the famine onto him and had him publicly executed in 1997.

Meanwhile, Park Bong Ju became the Premier of the North Korean Cabinet in 2003, the year after the adoption of the July 1st Economic Management Reform Measure, and was responsible for introducing revised market economic elements according to the July 1st Measure. However, results were not sufficient and he was sent to manage the Suncheon Vinylon Complex in South Pyongan Province.

Lets hope that the jangmadang come back with a vengeance.

Read the full articles here:
N.Korean Finance Chief Sacked Over Currency Debacle
Choson Ilbo
2/3/2010

Read the full story here:
Ban on Markets lifted
Daily NK
Jung Kwon Ho
2/3/2010

Posted in Banking, Black markets, Finance, Fiscal & monetary policy, General markets (FMR: Farmers Market), Worker's Party | 1 Comment »

Fighting in the Streets

Tuesday, February 2nd, 2010

Daily NK
Park Sung Kook
2/2/2010

There has been an explosion in the number of casualties resulting from popular resentment at harsh regulation of market activities by the security apparatus across North Korea, according to various Daily NK sources.

For instance, in Pyongsung, North Pyongan Province, normally one of the key distribution centers in North Korea, there have been several incidents of agents from the People’s Safety Agency (PSA), the organization charged with cracking down on the smuggling of food and other officially “immoral” acts, being attacked by unidentified assailants.

A Daily NK source reported on Monday, “A group of agents who had just finished doing the rounds of the jangmadang and alley markets in Naengcheon-dong, Haksu-dong, and Cheongok-ri in Pyongsung were attacked by a number of people, who assaulted them and immediately ran away. As a result, PSA officials are feeling very tense these days.”

Commenting privately on these incidents, some people savor them as acts of revenge, but others are worried about the situation, according to The Daily NK’s sources.

There have been more examples unearthed in recent days, too. For instance, North Korea Intellectuals Solidarity (NKIS), a Seoul-based defector group, recently received news that “a fight broke out between agents of the PSA, who monitor the Hyesan jangmadang, and some residents. As the fight turned serious, one resident snatched an agent’s gun and fired randomly into the crowd. One agent, Choe, is in a critical condition.”

According to NKIS, the fight began after the PSA agents beat up a trader who was trying to avoid the crackdown, and that made other residents angry, so they attacked the agents in return. As the fight grew more serious, agents threatened residents, but this only added fuel to the flames.

Finally, a Daily NK source from North Hamkyung Province released one other incident: Cho, who used to work for the Prosecutions Department of the National Security Agency in the region, was apparently killed by a Chongjin Steel Mill worker called Jeung Hyun Deuk.

The source explained, “Jeung’s father, the chief of a foreign currency-generating company, was interrogated last July on suspicion of embezzling enormous amounts of property and foreign currency, and in January was sentenced to life in prison. However, a few days after being imprisoned, he died. Thereafter, Jeung held a grudge against his father’s interrogator, Cho, and eventually killed him.”

The source concluded, “Traders and residents have lost their property due to the redenomination and are pretty much being treated as criminals as a result of the NSA and PSA’s ‘50-Day Battle.’ Therefore, people are taking revenge on agents, since they feel so desperate that, regardless of their actions, they will die. As a result, social unrest is becoming more serious.”

On January 2, the National Defense Commission released an order entitled “On completely sweeping away hostile factions who attempt to demolish our Republic from the inside,” initiating the “50-Day Battle” crackdown by the PSA and NSA in every city, county, and province which was referred to by the North Hamkyung Province source.

Posted in Banking, Black markets, Finance, Fiscal & monetary policy, General markets (FMR: Farmers Market), Ministry of People’s Security (Criminal Police), Ministry of State Security (MPSS, NSA, SSD), National Defense Commission, Revolt | Comments Closed

DPRK price level and exchang rate still unstable

Wednesday, January 27th, 2010

According to the Choson Ilbo:

North Korea is struggling to apply its new official foreign exchange rate, revised on Jan. 1, to hotels and shops in Pyongyang, according to a source.

A foreign diplomat stationed in Pyongyang said that the exchange rate is still “fuzzy,” citing hotel exchange rates in the capital dropping to W40 to one euro and rising to W51 a few days later. This is even after the North’s Central Bank initially set the rate at W138 to one euro earlier this month.

The source also said that shops near railway stations had stacks of goods unsold due to uneven prices.

Source:
New N.Korean Currency’s Value ‘Anyone’s Guess’
Choson Ilbo
1/27/2010

Posted in Banking, Finance, Fiscal & monetary policy | Comments Closed

First meeting of Korea Taepung International Investment Group held

Thursday, January 21st, 2010

UPDATE: According to the Choson Ilbo:

North Korea recently announced it wants to create a bank to finance national development projects and appointed a Korean-Chinese businessman named Pak Chol-su to head what is to be called the [North] Korea Taepung International Investment Group, which is to attract foreign capital for the bank. The seven-member board of directors at the investment company include usual suspects like Kim Yang-gon, the director of the Workers’ Party’s United Front Department, Jang Song-taek, Kim Jong-il’s brother-in-law, and other key players.

But analysts say Pak, a foreigner, is the only one with the ability to attract overseas capital, leading to a sense among South Korean intelligence analysts that Pak was brought in to save what he can of the North Korean economy. It is not the first time. In 2002, the hermit country appointed Chinese-Dutch entrepreneur Yang Bin governor of the Sinuiju Special Administrative Region, though the plan belly-flopped when the Chinese arrested Yang on corruption charges.

According to North Korean sources, Pak was born in 1959, graduated from Yanbian University and has a master’s degree in business and commerce from another university in China. He later developed close ties with high-ranking North Korean officials selling Chinese gasoline in the North. “Since Chinese gasoline is used in cars, it is sold directly to North Korean military officers or key government agencies” since top officials are practically the only ones likely to have one, said one North Korean source. “Pak appears to have gained the confidence of high-ranking officials in the process.”

Pak is believed to have been responsible for setting up a secret meeting between Kim Yang-gon and South Korean Labor Minister Yim Tae-hee in Singapore last October. “Pak used his connections to help North Korea when it was looking for a contact point with the South Korean government after August last year, and it appears this position is his reward,” said Cho Bong-Hyun, a North Korea analyst with the Industrial Bank of Korea. There is speculation that Pak may be tasked with luring South Korean capital for investment in North Korea.

The Taepung International Investment Group was established in China and Hong Kong in September 2006 to lure foreign investment to North Korea. In 2007, Taepung signed an agreement with China’s Tangshan Iron and Steel to build a production plant in North Korea and was involved in getting the New York Philharmonic Orchestra to perform in Pyongyang in February 2008. The North announced last Wednesday that both Taepung and the bank would be headquartered in Pyongyang.

It remains to be seen whether Pak will generate the results the regime hopes for. Lee Jo-won, a professor of North Korean studies at Chung-Ang University, said, “Unlike the appointment of Yang Bin, there seems to have been a certain level of consent in terms of the role Pak will play. But without progress in the North Korean nuclear crisis, it’ll be virtually impossible for him to attract foreign investment.” One senior South Korean government official said, “Last year, North Korea apparently held an investment blitz in the EU and was disappointed to learn that continued economic sanctions due to its nuclear weapons program in effect prevent other countries from making any investment there.”

UPDATE: DPRK establishes national development bank in order to attract foreign capital
Institute for Far Eastern Studies (IFES)
NK Brief No.10-01-22-1
1/22/2010

On January 20, the (North) Korean Central News Agency (KCNA) reported that the North’s most powerful government organization, the National Defense Commission, ordered the establishment of a ‘National Development Bank’ to “carry out investment affairs for projects important to national policy and to conduct business with international commercial banks and international financial institutions.”

Furthermore, the committee decided to establish the main branch of the ‘Korea Daepung International Investment Group’ in Pyongyang, which will operate as an economic consortium attracting foreign monies and ensuring the flow of capital for the National Development Bank. The KCNA reported that an announcement was made at the Pyongyang Yanggakdo International Hotel explaining that “the first meeting of the Korea Daepung International Investment Group board of directors had opened, and that at the meeting, the National Defense Commission’s decision regarding the establishment of the National Development Bank and the mediation committee of the Korea Daepung International Investment Group had been created.”

The news agency went on to explain that the National Development Bank would conduct business with international financial institutions and commercial banks according to “modern financial standards and systems,” ensuring necessary investments in support of projects central to the promotion of national policy. The KCNA also reported that at the meeting, an order from Kim Jong Il was passed down with the title “On Ensuring the Operations of the Korean Daepung International Financial Group.”

Kim Yang-gun (a member of the National Defense Commission and director of the Unification Strategy Department) was selected as Chairman of the Korean Asia-Pacific Peace Committee, while Chinese-Korean Bak Cheol-su was chosen as president and chairman of the board. The 7-member board of directors is reportedly made up of representatives from the National Defense Commission, the Cabinet, the Ministry of Public Finance, the Korean Asia-Pacific Peace Committee, the Korea Daepung International Investment Group, and other related offices.

The board of directors meeting also discussed and voted on bylaws, a 2010 action plan and an annual budget for the Korea Daepung International Investment Group as well as activities for a preparatory committee for the establishment of the National Development Bank. It was also decided to form a secretariat for the board of directors.

In September 2006 the Daepung International Investment Group was established in Hong Kong by North Korean authorities in order to serve as a window for foreign investment, and the group was part of the effort in October 2007 to entice investment from the Chinese Tangshan Iron and Steel Group. It also played a role in bringing the New York Philharmonic Orchestra to Pyongyang in February 2008.

This latest measure appears to indicate that the North Korean leadership is taking a more aggressive drive to entice foreign capital, but it is not yet clear if the move will have any significant impact. It stands out that as sanctions enforced against the North by the international community make it difficult for Pyongyang to attract foreign investment, the North is stressing its intention to uphold “modern standards” for those willing to invest.

The Daepung Group rose to prominence in 2007 as a new window for attracting foreign investment into the North when it reached agreements with China’s Dangshan Steel and Iron Group, the country’s 3rd largest steel company, and Datang Power to form a joint venture to build a 1.5 million-ton processing plant and a 600,000 kW coal-burning power plant in the Kimchaek Industrial District.

ORIGINAL POST: According to KCNA:

Pyongyang, January 20 (KCNA) — The first meeting of the Board of Directors of the Korea Taepung International Investment Group took place at Yanggakdo International Hotel on Wednesday.

It was attended by directors of the board of the group and officials concerned as observers.

Conveyed there were an order of the chairman of the DPRK National Defence Commission “On ensuring the activities of the Korea Taepung International Investment Group” and decisions of the DPRK NDC “On establishing the State Development Bank” and “On setting up the Coordinating Committee of the Korea Taepung International Investment Group”.

At the meeting Kim Yang Gon, chairman of the Korea Asia-Pacific Peace Committee, was elected director-general of the board of the group and Pak Chol Su, a Korean resident in China, permanent deputy director-general and president of the group.

The board of directors is made up of seven persons including representatives of the National Defence Commission, the Cabinet, the Ministry of Finance and an office concerned of the DPRK, the Korea Asia-Pacific Peace Committee and the Korea Taepung International Investment Group.

The meeting decided to set up a secretariat of the board of directors and named its members.

It deliberated and decided on the draft rules of the Korea Taepung International Investment Group, its action program and financial budget bill for 2010, a resolution on starting the operation of a preparatory committee for establishment of the State Development Bank and other agenda items related to the work of the group.

Kim Yang Gon made a keynote report and Pak Chol Su an address on the work of the group at the meeting.

The group, an external economic cooperation body, will play the role of an economic complex ensuring the induction of investment and finances for the State Development Bank, and it will be headquartered in Pyongyang.

The State Development Bank is to provide investment on major projects to be carried out according to the state policy after being equipped with advanced banking rules and system needed for transactions with international monetary organizations and commercial banks.

The Choson Ilbo has more:

North Korea will establish a state development bank which will deal with international financial organizations and commercial banks and invest according to state policies, the official [North] Korean Central News Agency reported Wednesday. The decision was made by the powerful National Defense Commission, which is headed by leader Kim Jong-il.

It will also set up an international cooperation agency called the Joson Daepung International Investment Group to take charge of attracting investment for the bank, KCNA said.

KCNA claimed the bank has “modern financial rules.” Kim Yang-gon, the director of the Workers’ Party’s United Front Department, has been named chairman of the Joson Daepung Investment Group, and Pak Chol-su vice chairman.

A North Korean source said Pak is a Korean-Chinese businessman who maintains relations with South Korean officials and businessmen. He apparently once arranged a secret inter-Korean meeting.

Pak is also believed to have been involved in a secret meeting held between Labor Minister Yim Tae-hee and Kim Yang-gon in Singapore last October.

Rumor has it that Jang Song-taek, Kim Jong-il’s brother-in-law and the director of the Administrative Department of the Workers’ Party, is also on the board of directors.

North Korea will establish a state development bank which will deal with international financial organizations and commercial banks and invest according to state policies, the official [North] Korean Central News Agency reported Wednesday. The decision was made by the powerful National Defense Commission, which is headed by leader Kim Jong-il.

It will also set up an international cooperation agency called the Joson Daepung International Investment Group to take charge of attracting investment for the bank, KCNA said.

KCNA claimed the bank has “modern financial rules.” Kim Yang-gon, the director of the Workers’ Party’s United Front Department, has been named chairman of the Joson Daepung Investment Group, and Pak Chol-su vice chairman.

A North Korean source said Pak is a Korean-Chinese businessman who maintains relations with South Korean officials and businessmen. He apparently once arranged a secret inter-Korean meeting.

Pak is also believed to have been involved in a secret meeting held between Labor Minister Yim Tae-hee and Kim Yang-gon in Singapore last October.

Rumor has it that Jang Song-taek, Kim Jong-il’s brother-in-law and the director of the Administrative Department of the Workers’ Party, is also on the board of directors.

(From a reader): The Korea Taepung International Investment Group (조선태풍국제투자그룹) will attract and coordinate investment – ostensibly from China as a founding member is a Korean Chinese. The group’s charter came from Kim Jong-il , Chairman of the NDC, and its board members include Kim Yang-gon, chairman of the Korea Asia-Pacific Peace Committee (who was elected chairman of the board), Pak Ch’ol-su, a Korean-Chinese (elected standing vice chairman of the board and president), and seven persons representing the NDC, Cabinet, Ministry of Finance, relevant ministries, Korea Asia-Pacific Peace Committee, and the Choson Taep’ung International Investment Group. This seems to be a major salvo in North Korea’s current campaign to ease international tensions, curry desperately needed investment, and ultimately get the country back on its centralized economy track.

According to NK Leadership Watch: In the video footage of the meeting (1/20/2010 on Elufa.net) Kim Chang-sun can bee seen. He is on Kim Jong il’s secretariat.

The Pyongyang Times has more here.

Posted in Banking, Finance, Korea Taepung International Investment Group (Daepung Investment Group), National Defense Commission, State Development Bank | 1 Comment »

DPRK won exchange rates falling after currency reform

Monday, January 18th, 2010

Institute for Far Eastern Studies (IFES)
NK Brief No.10-01-18-1
2010-01-18

Following the currency reform undertaken by North Korea at the end of 2009, the Chinese newspaper International Herald Leader (國際先驅導報) reported on January 7 that the Choson Bank of Trade had set the USD:DPRK Won exchange rate at 1:96.9. There have been other reports of the DPRK’s new exchange rate through organizations related to North Korea, but this is the first report of an official exchange rate by an official Chinese media source. The International Herald Leader is the global news paper of the government-run Xinhua news agency.

Good Friends, a South Korea-based organization working for human rights in the North, had reported earlier that the new exchange rate was 1 USD:35 Won. The conflicting reports appear to be a result of a constantly changing exchange rate. North Korean authorities control the exchange rate, announcing changes to the exchange rate system at their whim.

According to the International Herald Leader, the exchange rates for the new DPRK Won are 96.9:1 USD, 138.35:1 Euro and 14.19:1 Chinese Yuan. These new rates are approximately 25-30 percent lower than previous rates, indicating a rise in the value of the DPRK Won.

North Korean security forces released a notice titled ‘Regarding the Strict Punishment of Those Overissuing Foreign Currency Within the Republic’ on December 28, and banned the use of foreign currency across the country beginning January 1. Immediately following the announcement of the measure banning the use of foreign currency, the DPRK Won:PRC Yuan exchange rate rose sharply, indicating a steep drop in the value of the Won.

Until the December 28 announcement banning foreign currency, North Koreans were exchanging Chinese money for the new DPRK Won at a rate of 1:5 (the official rate was 1:1.6). Before the currency reform, the Won:Yuan exchange rate was 600:1. However, after the ban on foreign currency, the value of the new North Korean money quickly fell, with the exchange rate toppling 4-5 times over within just days. According to a Daily NK report, on January 5 of this year, the Won:Yuan exchange rate in Hyesan, Yanggang Province hit 20:1, while in North Hamgyeong Province’s cities and towns of Hoeryeong, Onseong, Musan, and Cheongjin, the Won is being exchanged for Yuan at a rate of 1:15. Therefore, it appears that the Chinese media’s report of a 1:14.19 exchange rate reflects the reality of only some regions of North Korea.

Posted in Banking, Black markets, Finance, Fiscal & monetary policy, Foreign Trade Bank | Comments Closed

North Korean Economy Watch