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Daedong Credit Bank Press Release

Monday, December 20th, 2010

On November 18, 2010, the US Treasury Department issued the following press release:

Treasury Designates Key Nodes of the Illicit Financing Network of North Korea’s Office 39

WASHINGTON – The U.S. Department of the Treasury today designated Korea Daesong Bank and Korea Daesong General Trading Corporation pursuant to Executive Order (E.O.) 13551 for being owned or controlled by Office 39 of the Korean Workers’ Party. Office 39 is a secretive branch of the government of the Democratic People’s Republic of Korea (North Korea) that provides critical support to North Korean leadership in part through engaging in illicit economic activities and managing slush funds and generating revenues for the leadership. Office 39 was named in the Annex to E.O. 13551, issued by President Obama on August 30, 2010, in response to the U.S. government’s longstanding concerns regarding North Korea’s involvement in a range of illicit activities, many of which are conducted through government agencies and associated front companies. Korea Daesong Bank is involved in facilitating North Korea’s illicit financing projects, and Korea Daesong General Trading Corporation is used to facilitate foreign transactions on behalf of Office 39.

“Korea Daesong Bank and Korea Daesong General Trading Corporation are key components of Office 39′s financial network supporting North Korea’s illicit and dangerous activities,” said Under Secretary for Terrorism and Financial Intelligence Stuart Levey. “Treasury will continue to use its authorities to target and disrupt the financial networks of entities involved in North Korean proliferation and other illicit activities.”

E.O. 13551 targets for sanctions individuals and entities facilitating North Korean trafficking in arms and related materiel; procurement of luxury goods; and engagement in certain illicit economic activities, such as money laundering, the counterfeiting of goods and currency, bulk cash smuggling and narcotics trafficking. As a result of today’s action, any assets of the designated entities that are within U.S. jurisdiction are frozen and U.S. persons are prohibited from conducting financial or commercial transactions with these entities.

You can learn more about the Treasury’s press release here.

Here is the US Treasury Department’s new North Korea resource page.

In response, the Daedong Credit Bank issued the following press release:

FOR IMMEDIATE RELEASE:

US Treasury Press Release 18th November 2010

London UK/Pyongyang DPRK, December 20th 2010

Daedong Credit Bank (DCB) has noted the press release of 18th November 2010 by the US Treasury and makes the following comments:

1.    Korea Daesong Bank (KDB) is a 30% shareholder in DCB. DCB is not, and never has been, aware of any activity by KDB which is in breach of any of its obligations, domestic or international. In particular, DCB is not aware of KDB having acted in breach of any sanctions. DCB is not aware of any cause of concern about the conduct of KDB.

2.    KDB has no executive control of DCB.

3.    DCB is majority owned by overseas investors and is foreign-managed.

4.    DCB does not act and has never acted in breach of any of its domestic or international obligations. DCB acts in a manner consistent with domestic and international law.

5.    DCB is apolitical and promotes foreign investment in the DPRK as a positive development.

The Daedong Credit Bank looks forward to playing a significant part in facilitating normal commercial relationships between the DPRK and the international business community.

About Daedong Credit Bank

Daedong Credit Bank is a joint venture retail bank based in Pyongyang. It was established in 1995 as “Peregrine Daesong Development Bank”. The Bank underwent a change of name and foreign ownership in 2000.

Daedong Credit Bank is the first, by fifteen years, foreign majority held bank in the DPRK. DCB considers itself a flagship successful joint venture in the DPRK, and a key part of the infrastructure needed to assist the foreign-invested ventures, which drive the country’s economic reforms.

The bank’s principal function is to offer normal “high street” banking facilities in hard currency to; foreign companies, joint ventures, international relief agencies and individuals doing legitimate business in the DPRK.

Daedong Credit Bank was the first bank in the DPRK to introduce, and vigorously implement, a comprehensive set of anti-money laundering procedures. DCB’s anti-money laundering procedure manual was introduced seven years ago, and subsequently updated based on anti-money laundering guidelines provided by the Asian Development Bank. The manual has been sent to, and accepted by, DCB’s international correspondent banks.

Daedong Credit Bank also maintains strict procedures for the detection and rejection of counterfeit bank notes; it uses regularly updated note checking machines, and has personnel with over 10 years’ of experience of handling notes. DCB have encountered and impounded the so-called ‘superdollar’ notes, proving that these notes (despite media misconceptions) are not undetectable.

The wealth of experience garnered over Daedong Credit Bank’s 15 years of successful operation is unrivaled.

Daedong Credit Bank has a significantly strong position in relation to the future economic development of the DPRK and, being the oldest established foreign invested commercial bank in the DPRK, it is the intention of the bank to capitalise on these advantages.

CONTACT INFORMATION:

Daedong Credit Bank office address in Pyongyang is:

Daedong Credit Bank
401, Potonggang Hotel
Ansan-dong
Pyongchon District
Pyongyang
Democratic People’s Republic of Korea

Phone Switchboard +850 2 381 2228/9    ext 401
Direct line     +850 2 381 4866
Mobile          +850 193 801 8400 *
*Note, the mobile number may not be obtainable from certain countries (eg UK and Hong Kong).
Corporate Website www.daedongcreditbank.com

FOR IMMEDIATE RELEASE:

US Treasury Press Release 18th November 2010

London UK/Pyongyang DPRK, December 20^th 2010

Daedong Credit Bank (DCB) has noted the press release of 18th November 2010 by the US Treasury and makes the following comments:

1. Korea Daesong Bank (KDB) is a 30% shareholder in DCB. DCB is not, and never has been, aware of any activity by KDB which is in breach of any of its obligations, domestic or international. In particular, DCB is not aware of KDB having acted in breach of any sanctions. DCB is not aware of any cause of concern about the conduct of KDB.

2. KDB has no executive control of DCB.

3. DCB is majority owned by overseas investors and is foreign-managed.

4. DCB does not act and has never acted in breach of any of its domestic or international obligations. DCB acts in a manner consistent with domestic and international law.

5. DCB is apolitical and promotes foreign investment in the DPRK as a positive development.

The Daedong Credit Bank looks forward to playing a significant part in facilitating normal commercial relationships between the DPRK and the international business community.

About Daedong Credit Bank

Daedong Credit Bank is a joint venture retail bank based in Pyongyang. It was established in 1995 as “Peregrine Daesong Development Bank”. The Bank underwent a change of name and foreign ownership in 2000.

Daedong Credit Bank is the first, by fifteen years, foreign majority held bank in the DPRK. DCB considers itself a flagship successful joint venture in the DPRK, and a key part of the infrastructure needed to assist the foreign-invested ventures, which drive the country’s economic reforms.

The bank’s principal function is to offer normal “high street” banking facilities in hard currency to; foreign companies, joint ventures, international relief agencies and individuals doing legitimate business in the DPRK.

Daedong Credit Bank was the first bank in the DPRK to introduce, and vigorously implement, a comprehensive set of anti-money laundering procedures. DCB’s anti-money laundering procedure manual was introduced seven years ago, and subsequently updated based on anti-money laundering guidelines provided by the Asian Development Bank. The manual has been sent to, and accepted by, DCB’s international correspondent banks.

Daedong Credit Bank also maintains strict procedures for the detection and rejection of counterfeit bank notes; it uses regularly updated note checking machines, and has personnel with over 10 years’ of experience of handling notes. DCB have encountered and impounded the so-called ‘superdollar’ notes, proving that these notes (despite media misconceptions) are not undetectable.

The wealth of experience garnered over Daedong Credit Bank’s 15 years of successful operation is unrivalled.

Daedong Credit Bank has a significantly strong position in relation to the future economic development of the DPRK and, being the oldest established foreign invested commercial bank in the DPRK, it is the intention of the bank to capitalise on these advantages.

CONTACT INFORMATION:

Daedong Credit Bank office address in Pyongyang is:

Daedong Credit Bank
401, Potonggang Hotel
Ansan-dong
Pyongchon District
Pyongyang
Democratic People’s Republic of Korea

Phone

Switchboard +850 2 381 2228/9 ext 401
Direct line +850 2 381 4866
Mobile +850 193 801 8400 *
*Note, the mobile number may not be obtainable from certain countries (eg UK and Hong Kong).

Corporate Website www.daedongcreditbank.com

#004

Posted in Banking, Bureau 39, Daedong Credit Bank, Daesong Bank, Daesong-BAT JV Company, Finance, Foreign direct investment, USA | Comments Closed

Recent papers on DPRK topics

Friday, December 17th, 2010

Forgotten People: The Koreans of the Sakhalin Island in 1945-1991
Download here (PDF)
Andrei Lankov
December 2010

North Korea: Migration Patterns and Prospects
Download here (PDF)
Courtland Robinson, Center for Refugee and Disaster Response, Bloomberg School of Public Health, Johns Hopkins University
August, 2010

North Korea’s 2009 Nuclear Test: Containment, Monitoring, Implications
Download here (PDF)
Jonathan Medalia, Congressional Research Service
November 24, 2010

North Korea: US Relations, Nuclear Diplomacy, and Internal Situation
Download here (PDF)
Emma Chanlett-Avery, Congressional Research Service
Mi Ae-Taylor, Congressional Research Service
November 10, 2010

‘Mostly Propaganda in Nature:’ Kim Il Sung, the Juche Ideology, and the Second Korean War
Download here (PDF)
Wilson Center NKIDP
Mitchell Lerner

Drug Trafficking from North Korea: Implications for Chinese Policy
Read here at the Brookings Institution web page
Yong-an Zhang, Visiting Fellow, Foreign Policy, Center for Northeast Asian Policy Studies
December 3, 2010

Additional DPRK-focused CRS reports can be found here.

The Wilson Center’s previous NKIDP Working Papers found here.

I also have many papers and publications on my DPRK Economic Statistics Page.

Posted in Agriculture statistics, Arduous March, Black markets, China, Demographics, Drug smuggling, Emigration statistics, Finance, Fiscal & monetary policy, Food, Foreign aid statistics, Illicit activities, Military, Nuclear, Political economy, Statistics, Uncategorized | Comments Closed

North Korean restaurants generate revenue overseas

Wednesday, December 15th, 2010

According to the Choson Ilbo:

The Okryugwan chain of North Korean restaurants opened its first China branch in Beijing in 2003. Located in the Wangjing district, which has large numbers of Korean residents, it apparently makes more than W7 million (US$1=W1,141) a day in revenues.

The chain is most famous for naengmyeon or cold noodles, but its beef rib stew and kimchi are also popular, and customers can buy them to take home. Seasonal North Korean delicacies such as steamed crabs from the East Sea or wild mushrooms are also served.

So popular are the restaurants that a knockoff has popped up in Shanghai employing Korean Chinese instead of North Koreans.

North Korean restaurants are also famous for the performances put on by their staff, who sing not only their country’s folk and pop songs but also South Korean pop songs. Staff at the Shanghai Okryugwan reportedly sing even American pop songs like the “Titanic” theme.

Most of the North Korean staff are graduates of Jang Chol Gu University of Commerce or attended professional culinary school in Pyongyang. Earlier this year, a beautiful waitress at a North Korean restaurant in Siem Reap, Cambodia gained near-celebrity status in South Korea after a picture of her was posted on the Internet.

North Korean restaurants began opening overseas branches during the 1990s. Okryugwan has outlets in China, Vietnam, Thailand, Cambodia, Laos, Mongolia, Russia, Nepal and Dubai. North Korean provincial governments, their affiliated agencies and other organizations raced to open restaurants abroad, and now there are more than 100.

Depending on the size of their staff, the restaurants must wire back between US$100,000 and $300,000 to North Korea each year. Those with poor revenues are forced to close, so they advertise heavily, even featuring ads in South Korean community journals abroad.

The North Korean staff have experience working at restaurants in Pyongyang and spend around three years abroad. Even if they come from privileged backgrounds in the North, they are still vulnerable to the temptations of capitalism. In Qingdao, China, a North Korean restaurant was forced to close for months because its staff absconded. Last week, the manager the Okryugwan in Nepal apparently fled to India with a stash of dollars that were supposed to be sent to the North.

But with a drop in the number of South Korean customers following North Korea’s artillery bombing of Yeonpyeong Island, compounded by the defections, North Korean restaurants abroad may face a cold winter.

Read the full story here:
Why N.Korea Values Its Restaurants Abroad
Choson Ilbo
Oh Tae-jin
12/15/2010

Posted in Finance, Fiscal & monetary policy, Restaurants | 4 Comments »

DPRK restaurant manager allegedly defects

Tuesday, December 14th, 2010

UPDATE (1/3/2011): According to the Choson Ilbo:

North Korea has shut down a restaurant in Kathmandu and recalled all of its staff after the manager absconded with the takings in late November.

South Koreans in Kathmandu said the 13 to 15 North Korean staff of the Kumgangsan restaurant were recalled to the North right after the manager fled.

But the Kathmandu branch of the Pyongyang Okryugwan restaurant chain, which had been misidentified as the one where the manager worked, is still in business in a back alley about 1 km across the street from Kumgangsan.

Most South Korean tourists and about 400 expats in Kathmandu have stopped going to the restaurant since the South Korean Embassy in Nepal wrote to expats and tour operators asking them to refrain from visiting North Korean restaurants after the North’s torpedo attack on the Navy corvette Cheonan in March last year.

“Please refrain from visiting North Korean restaurants that are becoming sources of funds for the Kim Jong-il regime. Anyone who has visited such restaurants will be subject to investigation on charges of violating the Inter-Korean Exchange and Cooperation Law and the National Security Law upon returning home,” the embassy warned in an email.

A South Korean resident said the Kumgangsan and Okryugwan restaurants had depended largely on South Korean customers, so their sales must have dwindled.

The Kumgangsan manager, identified as Yang, reportedly came to South Korea via India. Nepalese police released two South Koreans who were arrested after North Korea accused them of kidnapping him and were deported on charges of violating immigration law.

UPDATE (12/23/2010): According to the AFP, the Nepalese have released the two South Koreans who allegedly assisted the North Korean to defect.

Nepal has released two South Koreans held for their alleged involvement in the case of a missing North Korean, the South’s foreign ministry said Thursday.

The two men, who live in Nepal, were ordered to leave the country within 15 days after being freed, the ministry said.

Yonhap news agency said the pair were accused of helping a North Korean surnamed Yang flee the Himalayan nation across the border into India, after which he defected to the South.

A local media report in the Himalayan country had said they were arrested following pressure from Pyongyang’s embassy in Kathmandu, which wanted them charged with kidnapping Yang.

South Korean newspapers have said Yang was the manager of the local franchise of an overseas restaurant chain operated by the North.

The franchises are an important source of scarce foreign currency for the cash-strapped regime.

Some 20,000 North Koreans have fled their homeland and arrived in South Korea since the end of the 1950-53 war, almost always through a third country.

UPDATE (12/15/2010): According to the Choson Ilbo the defector left with some substantial funds from the DPRK restaurant in which he worked.

ORIGINAL POST (12/14/2010): According to the Choson Ilbo:

A North Korean who went missing in Nepal recently had been the manager of a North Korean restaurant there, it emerged on Monday.

A diplomatic source said the man, identified as Yang, managed the Kathmandu branch of the Pyongyang Okryugwan restaurant chain and had been there for about a year. It seems he defected and is believed to be in New Delhi, India now.

Overseas branches of Okryugwan are a main source of hard currency for North Korea, and the regime carefully selects managers. The North is apparently very sensitive about Yang’s defection, according to South Korean intelligence, because he made off with a stash of dollars that were supposed to be sent to the North.

The North Korean Embassy has asked the Nepali authorities to investigate two South Koreans identified as Choi and Sun who it says had friendly ties with Yang and kidnapped him. Choi and Sun have been arrested, and South Korean Embassy officials are negotiating for their release.

Read the full story here:
N.Korean Restaurant Manager Absconds from Nepal
Choson Ilbo
12/14/2010

Posted in Emigration, Emigration statistics, Finance, Restaurants | 1 Comment »

Untangling a North Korean Missile Business

Monday, December 6th, 2010

According to the New York Times:

Suppliers of Precision Machinery
North Korea needs supplies and machinery to make its missiles. The cables indicate that precision metal machinery like hydraulic presses has been supplied by Taiwanese companies; tons of specialized steel has been routed from China; unspecified goods came from Japan; and computerized lathes were sold by a Swiss company.

Suppliers of Parts
North Korea cannot provide all the components its missile customers need. The cables outline how North Korea sought to sell a mobile missile launcher to Yemen. It arranged for a MAZ-543 engine and a ZIL-131 truck from a Russian company, which was to be shipped from Odessa, Ukraine, to Al Hudaydah, Yemen.

Markets for the Missiles
North Korea’s customers for missiles and other weaponry include countries mainly in the Middle East, Africa and Asia. They have included Iran, Egypt, Uganda, Yemen and Sri Lanka. The cables also outline the tracking of a North Korean ship suspected of carrying weapons, possibly for Angola or the Democratic Republic of Congo.

The Money Flow
The cables outline how the United States suspects money has flowed through bank accounts in well-established financial institutions so North Korea can buy supplies, and customers can pay for missiles. These have included bank accounts in Germany, Hong Kong and Japan.

Regarding the hydraulic presses, these could be domestically sourced. The DPRK media regularly features innovations in press machines.

The government of Myanmar is also a purchaser of conventional weaponry. Here is a post on one of their shopping trips in the DPRK.

Read the full story here:
Untangling a North Korean Missile Business
New York Times
12/6/2010

Posted in Arms shipment, Finance, Fiscal & monetary policy, Illicit activities, Military | 1 Comment »

ROK financial transfers to the DPRK

Friday, December 3rd, 2010

According to the Choson Ilbo:

South Korea gave North Korea an astronomical US$2.98 billion during the Kim Dae-jung and Roh Moo-hyun administrations from 1998-2008, according to a government tally announced Thursday. That is 1.5 times more than the amount of aid China gave to North Korea over the same period, which totaled $1.9 billion.

The government and private businesses gave North Korea $1.84 billion through commercial trade, $544.23 million for package tours to the Mt. Kumgang resort, $450 million for an inter-Korean summit, $41.31 million in land use fees and wages for North Korean workers at the Kaesong Industrial Complex and $30.03 million as part of various social and cultural exchanges, according to internal documents of the Unification Ministry and other government agencies.

Funds to Develop Nuclear Weapons

“North Korea is believed to have spent $500-600 million to develop long-range missiles and $800-900 million to develop nuclear weapons,” a South Korean government source said. “And the cash provided by South Korea could have been used to develop them.”

Former government officials during the previous administrations deny this. Lee Jae-joung, a former unification minister, said in a lecture in July last year, “It’s frustrating to hear claims that North Korea conducted nuclear tests using money that the Kim Dae-jung and Roh Moo-hyun administrations gave. So far the government offered cash to North Korea only once.”

He claims that the government was not responsible for paying North Korea $450 million for the first inter-Korean summit in 2000 as that was provided by private businesses together with the cash for the Mt. Kumgang package tours and the Kaesong Industrial Complex.

However, the whereabouts of the cash payment of $400,000 Lee admits to is also uncertain. That was the money North Korea demanded in April 2007 to build a video-link center for the reunions of families separated by the Korean War. North Korea has yet to start construction. “I think they just extorted the money,” a South Korean government official said.

Hungry for Cash

“North Korea demanded money for every event,” said one Unification Ministry official who was in charge of humanitarian cooperation projects during the Roh administration. “We got the feeling that North Korea was trying to use the reunions of families separated by the Korean War as a means to make money.” The North even demanded that South Korea pay $1,000 for each video clip exchanged by families in addition to all of the filming and editing equipment as part of a project back in 2007 that would allow some separated families to stay in touch via video messages, the official said.

A National Assembly audit in 2006 revealed how North Korea made money off South Korean broadcasters. A key example is the W1 billion (US$1=W1,149) that state-run South Korean broadcaster KBS gave North Korea in 2003 to record a TV show about a singing contest in Pyongyang to mark Liberation Day.

In 2005, SBS gave W700 million in cash and W200 million worth of paint and other goods to North Korea for a concert in the North Korean capital by South Korean singer Cho Yong-pil, while in 2002, MBC paid the North W320 million in cash and provided 5,000 TV sets (worth W734 million) for two concerts in Pyongyang by South Korean singers Lee Mi-ja and Yoon Do-hyun.

North Korea also received sizable amounts from South Korean businesses and civic groups through unofficial channels or backroom deals. “Many business owners in the South had problems managing their companies because North Korea habitually made excessive demands for money,” said Cho Bong-hyun, a researcher at the Industrial Bank of Korea’s economic research center

This suggests that a considerable amount of bribes were paid. One South Korean owner of a garment company that was based in Pyongyang said, “Bribes South Korean businesses paid in the early stages to prevent any problems later became customary. After North Korean officials got a taste of the money, they ended up asking for bribes first.”

A Unification Ministry official said, “It’s impossible to estimate how much money was given to North Korea through unofficial channels. We can’t even trace the use of official government money given to North Korea, such as the $400,000 for building a video-link center for the family reunions, so there is no way of telling what happened to money handed over under the table.”

Read the full story here:
S.Korea Paid Astronomical Sums to N.Korea
Choson Ilbo
12/3/2010

Posted in Civil society, Finance, Fiscal & monetary policy, South Korea | 2 Comments »

DPRK bank transfers for nuclear program alarms EU

Thursday, December 2nd, 2010

According to Bloomberg:

North Korea’s use of international banks to facilitate nuclear weapons-related trade requires financial institutions to step up their vigilance, the European Union said.

North Korea exports $100 million in weapons and missiles each year in violation of United Nations sanctions, a UN panel wrote in a report released on Nov. 10. The EU said it’s concerned that some of the country’s trade involves prohibited nuclear technologies.

The 27-nation EU today urged all members of the International Atomic Energy Agency to “exercise particular vigilance over exports and financial transfers” in order “to prevent a contribution to proliferation-sensitive activities.”

Tensions with North Korea have increased in recent weeks. The country has built a new facility for extracting uranium, the key ingredient for nuclear weapons, a U.S. scientist reported on Nov. 20. Three days later, North Korea fired artillery at Yeonpyeong island, killing soldiers and civilians.

North Korea’s new nuclear facilities “could bolster its pursuit of a weapons capability and increases our concerns about prospects for onward proliferation of fissile material and of sensitive technologies to other parties,” U.S. Ambassador Glynn Davies said in a statement at IAEA’s meeting in Vienna.

The U.S. has been pressuring banks to cut ties with the North Korea’s regime, State Department documents posted today on WikiLeaks.org showed.

Reputation

Austria’s Financial Market Authority told the U.S. that it “exercised additional surveillance regarding North Korean financial activities” and that one bank cut ties with the country “to maintain its good reputation,” according to a February 2006 cable.

The U.S. and Japan will hold a week of naval drills beginning tomorrow. The aircraft carrier USS George Washington will join a force of about 400 aircraft and 60 warships. Drills will include responding to ballistic missile attacks on Pacific islands, the Joint Staff of the Japan Self-Defense Forces said in a statement.

“We will not accept North Korea as a nuclear-weapon state,” Davies said. “We seek an immediate halt of all nuclear activities in North Korea, including enrichment.”

Recent posts about the DPRK’s nuclear program can be found here.

Recent posts on Yonpyong can be found here.

Read the full story here:
North Korean Use of Bank Transfers for Atomic Work Alarms Europe
Bloomberg
Jennifer M. Freedman, Andrew Atkinson
12/2/2010

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

Rice price up 40-fold in last year

Thursday, December 2nd, 2010

According ot the Korea Herald:

The price of rice in North Korea has soared nearly 40-fold in the year after the country’s botched currency reform.

Rice is now traded at around 900 North Korean won per kilogram in Pyongyang’s markets, according to online media outlet Daily NK. This is up 3,990 percent from 22 won late November last year in the newly introduced currency.

The North knocked two zeros off the face value of its old currency on Nov. 30 last year, exchanging 100-won bills for new 1-won notes. Therefore the price of a kilogram of rice, which was 2,200 won in the old currency, was redenominated to 22 won.

Under the currency reform plan, a 100-won note in the new currency should have the exchangeable value of a 10,000-won bill in the old currency. However, due to 4,000 percent inflation, the new 100-won note is now only worth 250 won in the old currency.

The price of rice in North Korea is deemed the benchmark of all prices in commercial trade.

“The apparent purpose of the North Korean currency reform was to reduce the amount of money in the markets to stabilize prices, but it failed to achieve this due to an absolute lack of commodity supplies,” said Cho Myung-chul, a senior fellow at the Korea Institute for International Economic Policy.

“The fact that rice prices jumped 4,000 percent based on the currency’s exchangeable value shows that the effect of the 100-fold revaluation has mostly disappeared.”

After major markets in the reclusive state were shut down in mid-January this year, rice prices in Pyongyang soared, hitting 1,300 won per kilo in early March. They dropped to the 400-won range in May as markets began to function again, but soared over the 1,000-won mark in August due to an exchange rate hike and damage caused by heavy rains.

When the North redenominated its currency, it placed a cap on the amount of money that could be converted per person, telling people to deposit the rest in state-run banks.

The measure, which was aimed at crippling the growing merchant class and reasserting control over market activities, tightened the distribution of food and stirred anti-regime sentiment.

This Daily NK story asserts that the average salary of a general worker is around 1,500 won a month, and it is not paid regularly.

Read the full story here:
N.K. rice price soars nearly 40-fold in a year
Korea Herald
Kim So-hyun
11/20/2010

Posted in Agriculture, Black markets, Finance, Fiscal & monetary policy, Food, General markets (FMR: Farmers Market), Labor conditions/wages, Price liberalization | Comments Closed

More DPRK loggers reportedly running away

Monday, November 22nd, 2010

According to the Daily NK:

According to a former North Korean logger in Russia, instances of forestry workers running away from a “Forestry Mission” program organized by North Korea’s Forestry Ministry in the Russian Far East are increasing due to excessive salary deductions currently being imposed by the North Korean authorities.

Song Ki Bok, a 48-year old former logger who now lives in South Korea told The Daily NK on November 18th, “The Forestry Mission takes 70% of monthly salary in the name of Party funding. Who would want to work there when all the money you earn from working yourself to death is taken from you?”

Prior to 2008, North Korea took 30% of the North Koreans’ wages for “Party loyalty funds”. However, after sanctions put in place by the international community following the first North Korean nuclear test began to bite, the amount was increased to 70%.

The North Korean forestry workers do hard physical labor. Depending on the intensity of their work, they receive just $40 to $100 per month.

Therefore, once 70% is deducted as Party funds, the take-home pay of the worker is between $12 and $30. As a result, workers cannot even dream of wiring sums back to family in the North. They just deliver what cash they can gather via colleagues returning home.

Worse yet, with this kind of swingeing monthly deduction, many workers cannot even recover the bribe they had to offer Party officials in order to be sent to Russia in the first place. For example, the total amount Song ended up paying was nearly $400.

Before escaping from the forestry program, Song saw a monthly salary of $30, meaning that even if he had saved every penny he earned for a year he still would not have recouped the $400 he paid out in bribes.

In the beginning, he was buoyed by the ‘Russia Dream’. The family of a worker in a foreign country traditionally lives in better conditions than most people. Therefore, Song went to Russia in the belief that if he worked hard for three years, he could make 10 years of a North Korean working man’s salary; however, the reality was as harsh as the bitter cold of Siberia.

The Forestry Mission in Russia; Kim Jong Il’s hard currency provider

According to Song, there are 17 forestry sites in Russia which employ North Koreans. Depending on the size of the camp there are differences; however, approximately 1,500~2,000 North Koreans work at each.

The major activities of the Party Committee in each camp are surveillance and the collection of Party funds. A manager, Party secretary and an agent from each of the National Security Agency and People’s Security Ministry are assigned to each site, and 15 administrative officers below them manage operations.

The life of workers is the same as it would be if they lived in North Korea. They must partake of weekly evaluation meetings, and food is provided by distribution. They plant potatoes and wheat in cleared areas near their digs to supplement the insufficient state provisions.

If workers leave without permission, they are punished upon their return. If the crime is grave, the worker might be summoned to North Korea for reeducation.

Song commented, “Sometime people leave the camp to go hunting to earn money. They can only escape punishment by bribing the management.”

In total, the amount gathered in the name of Party funds by the North Korean authorities from each camp can exceed $140,000 per month. Calculations suggest that the annual North Korean government take from the program exceeds $25 million.

However, this harsh Party policy is driving escapes, according to Song, “Since most of their monthly salary began to be taken away as Party funds, the number of workers escaping started to increase. Just from those I know, the average has reached 30 workers per a year.”

Song, describing the harsh working conditions at the site, said, “In 2006, a wood cutter from Dukcheon in South Pyongan Province who had frostbite in both feet at work didn’t receive treatment in time. In the end, they had to cut off both his legs. His co-workers, who could not ignore the situation, raised it with the Party Committee there; however, not only was this opinion ignored, but the wood cutter was sent home with the explanation, ‘It was an accident caused by my own carelessness’.”

“The life of a forestry worker fighting against cold which can reach -40˚C in winter is unspeakably tough,” Song said. “Meanwhile, they don’t even receive a proper month’s salary, which reduces their will to work.”

“If a worker escapes, in the end he has no choice but to head to South Korea. When I think about those of my colleagues who couldn’t come to South Korea with me, it is still hard to sleep at night.”

Read more about logging camps in Russia (including satellite imagery) here and here.

Read the full story here:
Runaway Loggers on the Rise Due to Wage Cuts
Daily NK
Kang Mi Jin
11/22/2010

Posted in Finance, Fiscal & monetary policy, Forestry, International trade, Labor conditions/wages, Lumber, Ministry of People’s Security (Criminal Police), Russia, Worker's Party | 1 Comment »

KJU and the realignment of patronage

Tuesday, November 9th, 2010

According ot the Daily NK:

The rapid ascent of Kim Jong Eun and the building of a new ruling cast in Pyongyang is causing ripples to be felt in North Korea’s foreign currency earning apparatus. In Beijing, it is clear that anyone considered a supporter of Kim Jong Nam or Oh Keuk Ryul faces a rough ride.

One of the most prominent cases is that of Kang, a pro-Kim Jong Nam foreign currency earner who has distinguished himself in various ways, including by installing air conditioning in the Mansudae Assembly Hall. He is noteworthy among North Korea trade workers in China, and was mentioned in articles released by The Daily NK in June on the subject of emergency inspections over North Korean trade departments.

According to the testimony of Kang’s acquaintances, Kang was supposedly summoned to Pyongyang in early July, whereupon he was violently beaten by agents of the National Security Agency. The alleged reason behind the summons was that Kang was guilty of embezzling national assets and corruption; however, trade workers in China generally assume that it was a part of systematically “taking care” of Kim Jong Nam‘s closest associates.

In North Korean diplomatic circles in Beijing, the general interpretation is that Kim Jong Nam‘s outspoken negativity towards North Korea‘s third generation succession has helped to bring trouble upon his supporters.

One Chinese building contractor, Jwa, who sells construction materials to North Korean traders, commented, “Kang pledged allegiance to Kim Jong Nam and received a lot of favors as his affiliate. But a battle between Kim Jong Eun and Kim Jong Nam is taking place, and trade workers are suffering.”

However, the more surprising fact was the return of Kang to Beijing in October. It is highly unusual for someone from a privileged office to be so severely “investigated” by the National Security Agency but then return to their former seat in a foreign trade office.

According to one of Kang’s acquaintances, this was down to the fact that he is actually the person in charge of the North Korean Liaison Office in Beijing.

One Chinese trader who has done business directly with Kang told The Daily NK, “Kang, who is well known as a famous trade worker, was really in charge of North Korean maneuvers for more than ten years while maintaining the identity of a trade worker. This fact has been confirmed through several sources.”

However, South Korean intelligence has neither confirmed nor denied Kang’s true role.

The North Korean Liaison Office is an organization said to be responsible for maneuvers against South Korea, and is thought to have pulled the strings in the South Korean Chosun Workers‘ Party incident of 1992, in which the largest spy ring since the liberation was uncovered, that of Kim Dong Sik, an armed espionage agent arrested in 1995, Choi Jung Nam and Kang Yeon Jung, an agent couple who committed suicide in 1997, the assassination of Lee Han Young, Kim Jong Il’s nephew, in 1997, and the 2006 Ilsimheo spy ring incident.

Mr. Kang also owns a well-appointed villa, recent sedan and VIP membership of the fitness center at a five-star hotel.

Generally, North Korean employees abroad have to leave one of their children in Pyongyang as what can only be described as hostages to loyalty. However, the testimony of Kang’s acquaintances states that he is permitted to live in Beijing with his wife, daughter and son, who has studied in England. This is due to Kim Jong Nam’s full support, an extraordinary level of operational funding and the superior status of a person in charge of a covert operation.

He has avoided being outright purged, despite the fact that he is an affiliate of Kim Jong Nam, thanks to the fact that he is the person in charge of operations against the South. However, other trade workers in China who are also affiliated with Kim Jong Nam are desperate to forge new connections in Pyongyang to secure their positions, and, as such, many seem to have been absorbed by the Jang Sung Taek camp.

Other overseas officials are also on the back foot. Not only are affiliates of Kim Jong Nam being called into Pyongyang, but affiliates of Oh Keuk Ryul, a Vice Chairman of the National Defense Commission who is also actively involved in bringing foreign capital into North Korea in de facto competition with Jang Sung Taek, are also being summoned. Oh Keuk Ryul was shut out of the recent process of realigning the Chosun Workers’ Party and has lost a lot of his former influence as a result.

North Korean foreign trade departments are a target of veneration within North Korea. However, trade workers must strive to preserve their status with bribes like supplies which are hard to find within North Korea or large amounts of money. Now the dynamic is changing, so it is proving difficult to preserve their desirable positions.

Read the full story here:
Traders Living in Fear of Pyongyang Summons
Daily NK
Shin Joo-hyun
11/8/2010

Posted in Banking, China, Construction, Finance, Fiscal & monetary policy, International trade, Kim Jong Un, Political economy | 1 Comment »

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