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DPRK ministerial shakeup and SPA elections announced

Monday, January 5th, 2009

UPDATE 3: According to numerous media sources, Choe Sung Chol has been shot (h/t Marmot). Read more here: Bloomberg, Reuters, Korea Times.

UPDATE 2: According to the Joong Ang Daily:

North Korea’s point man on South Korea, who was earlier said to have been sacked for misjudgment, is said to be undergoing what sources called “severe” communist training at a chicken farm, sources here said yesterday.

Choe Sung-chol, once a vice chairman of the Asia-Pacific Peace Committee, the North’s state organization handling inter-Korean affairs, was reported to have been dismissed in early 2008 for what sources called his lack of foresight on South Korea’s new conservative administration under President Lee Myung-bak.

Political dissidents in North Korea are said to often undergo training on the communist revolution. This includes hard labor in harsh environments, such as mines or in labor camps.

Choe, 52, became better known to South Korean officials and the public in 2007, when he escorted then-President Roh Moo-hyun throughout his visit to Pyongyang for a summit with North Korean leader Kim Jong-il.

He is also known to have played a key role in arranging the summit.

Officials in Seoul have acknowledged the dismissal of Choe, but could not confirm his whereabouts or why he was sacked.

“He has been undergoing training for about a year now, so it really is hard to tell whether he will be reinstated or not,” another source said, also speaking on condition of anonymity.

(UPDATE 1) Shortly after the DPRK’s ministerial and leadership changes were dscovered, the DPRK announced the Supreme People’s Assembly will be recomposed in March. According to Reuters:

The reclusive North’s official media said in a two-sentence dispatch the election for deputies to its Supreme People’s Assembly would be held on March 8, without offering details.

North Korea wants to promote economic elite to the assembly to help lay the groundwork for the next generation of its leadership, a think tank affiliated with the South’s intelligence service said in a report in December, Yonhap news agency said.

However, analysts cautioned against reading too much into the leadership changes, saying Kim Jong-il and his inner circle hold the real power while ministers and other government officials have almost no influence in forming policy.

The assembly session that typically meets in April each year is a highly choreographed affair focused on budget matters where legislation is traditionally passed with unanimous approval.

North Koreans can vote only for the candidates selected by supreme leaders who allocate assembly seats to promote rank-and-file officials and purge those no longer in favor.

“Even if we know that someone was replaced, everything related to it is pure speculation because we have no clue as to the individual inclinations of these people,” said Andrei Lankov, an expert on the North at the South’s Kookmin University. (Reuters)

The Joong Ang Ilbo provides some additional facts:

The election is also a mere formality in the North because the candidates are hand-picked by the Workers’ Party and then approved by North leader Kim Jong-il.

The five-year terms of the 687 representatives, selected in 2003, were supposed to end last September. North Korea watchers have speculated that Kim’s health was linked to the election delay. According to intelligence sources in Seoul, Kim suffered a stroke in August.

North Korea watchers said Kim’s appearance at a polling station will put an end to speculation about his health. Kim had cast ballots in the 1998 and 2003 elections, according to past North Korean media reports.

With the upcoming election, Kim’s regime will enter its third term. The newly formed legislature will, on paper, form a cabinet, devise a national budget plan and conduct foreign policy.

Following former leader Kim Il Sung’s death in 1994, the Supreme People’s Assembly did not meet for four years. At that meeting, it elected the younger Kim as the National Defense Commission chairman and officially launched his regime. At the time, the legislature also amended the Constitution and undertook a dramatic cabinet shakeup.

ORIGINAL POST
According to the Joong Ang Daily:

Yu Yong-sun, a 68-year-old Buddhist leader, has become North Korea’s senior South Korea policy maker, a top Seoul official told the JoongAng Ilbo yesterday.

Choe Sung-chol, deputy director of the United Front Department of the North Korean Workers’ Party, was in charge of Pyongyang’s South Korean affairs until early last year. After he lost the job, Yu, head of the Korean Buddhists Federation, was appointed to the post, the source said.

“Yu succeeded Choe in March last year,” the source said. “Choe was once deeply trusted by [North Korean] leader Kim Jong-il, but he stepped down because he had failed to accurately assess the outcome of the 2007 presidential election in the South, the Lee Myung-bak administration’s North Korea policy and the outlook for inter-Korean relations.”

The source also said corruption scandals involving the overseas North Korean assistance committee under the United Front Department played a role in Choe’s sacking.

Choe played a crucial role in arranging the second inter-Korean summit between the president of South Korea at the time, Roh Moo-hyun, and Kim in 2007.

Yu, the successor, is not an entirely new face in inter-Korean affairs. Since 2000, he represented the North in several rounds of inter-Korean ministerial talks. He has led the Buddhist group since May 2006.

“We’ve also obtained intelligence that Kwon Ho-ung, who used to be the chief negotiator for the inter-Korean ministerial talks, stepped down from the post and has been put under house arrest,” the source said.

The North reshuffled its cabinet recently, according to the South’s Unification Ministry. Ho Thaek, vice minister of the electric power industry, was promoted to minister. Other minister-level promotions also took place at the Ministry of Railways, Ministry of Forestry and Ministry of Foreign Trade. (Jeong Yong-soo, JoongAng Ilbo)

The Choson Ilbo reports on some more ministerial changes:

North Korea has reshuffled two cabinet ministers and appointed a new man to a key post in the Workers’ Party. North Korean state media reported that Kim Tae-bong was appointed new metal industry minister and Hur Tack new power industry minister. They replace Kim Sung-hyun and Pak Nam-chil. Kim Kyong-ok as newly-named first deputy director of the ruling party’s Organization Guidance Department that controls the party, Army and administration and is headed by leader Kim Jong-il.

It is rare for reshuffles to be announced separately. The new economic appointments may be related to the emphasis on “economic recovery” in a New Year’s statement released in the state media last week that is the closest the North has to an annual message from Kim Jong-il, a government official here speculated. The statement described the metal industry as the “pillar of the independent economy of socialism” and said the electricity, coal and railroad sectors “should take the lead in the people’s economic development through reforms.” Hence replacement of the metal and power industry ministers, according to the official. He admitted little is known about the newly appointed ministers.

The Organization and Guidance Department’s new first deputy director Kim Kyong-ok is reportedly in charge of regional party organizations.

“If the power succession is to move smoothly, the economy must be revived and control of the party organization is essential,” an intelligence officer here said. He predicted noticeable changes in the North’s power structure this year. A researcher at the Korea Institute of National Unification said North Korea “is going to take various steps in a bid to prevent Kim Jong-il’s authority from weakening due to ill health.”

And from Yonhap:

North Korea promoted industrial veterans to top posts in its latest Cabinet reshuffle, signaling Pyongyang’s stepped-up drive to rebuild the country’s frail economy, Seoul officials and analysts said Tuesday.

A reshuffle in the communist state is usually inferred when new faces appear in its media, as the country does not publicize such moves.

Five new names were mentioned as the North’s ministers of railways, forestry, electricity, agriculture and metal industry in the North’s New Year message and reports in October, Seoul’s Unification Ministry Spokesman Kim Ho-nyoun said.

“They are formerly vice ministers or those who climbed the ladder in each field. The reshuffle considered their on-spot experiences and expertise,” the spokesman said.

It was not clear when the reshuffle took place, he said.

North Korean media have been reporting a brisk campaign to rebuild the country’s ailing industrial infrastructure, following up on the New Year economic blueprint rolled out by leader Kim Jong-il. Kim called on citizens “to solve problems by our own efforts” and increase production in electricity, coal and daily equipment.

In the reshuffle, Jon Kil-su was named minister of railways; Kim Kwang-yong minister of forestry; Ho Taek minister of power industry; Kim Chang-sik minister of agriculture; Kim Tae-bong minister of metal industry.

Kim Kwang-yong and Kim Chang-sik were vice ministers and Jon held a senior post in their respective ministry. Ho was formerly a power plant chief, while little was known about Kim Tae-bong, Seoul officials said.

The shakeup was rumored to have affected more posts, but the Seoul spokesman could not officially confirm it.

Koh Yu-hwan, a North Korea studies professor at Seoul’s Dongguk University, said the reshuffle is a sign that the North is shifting its focus to the economy from the military. In its New Year message, Pyongyang pledged to build a “prosperous and powerful nation” by 2012, the 100th anniversary of North Korean founder Kim Il-sung’s birth, he noted.

“The key word this year is the economy,” Koh said. “The reshuffle seems to suggest officials with technical expertise should take the initiative to develop the economy.”

Kim Young-yoon, a researcher with the Korea Institute for National Unification, said Pyongyang is turning to its natural resources amid suspension of South Korean aid. The Seoul government halted its customary aid of rice and fertilizer this past year as Pyongyang refused offers of dialogue.

“North Korea has no other way but turn to its own natural resources as long as inter-Korean relations and the nuclear issue are in limbo,” he said.

Read the full articles here:
Buddhist leader gets North’s South policy spot
JoongAng Daily
Jeong Yong-soo
1/5/2009

N.Korea Reshuffles Economic Posts
Choson Ilbo
1/5/2009

N. Korea promotes industry veterans in Cabinet reshuffle
Yonhap
Kim Hyun
1/6/2008

North Korea says to elect MPs in government shake-up
Reuters
1/6/2009

North to hold parliamentary election
Joong Ang Ilbo
Ser Myo-ja
1/8/2009

Top North official said to be getting re-educated
Joong Ang Daily
1/12/2009

Posted in Buddhist Alliance, Cabinet, Environmental protection, Forestry, Inter-Korean summit, Lumber, Manufacturing, Ministry of Electrical Industry, Ministry of Foreign Trade, Ministry of Forestry, Ministry of Metal Industry, Ministry of Power and Coal, Ministry of Railways, Organization and Guidance Department, Political economy, Railways, Supreme Peoples Assembly, United Front Department | 6 Comments »

2008 Top Items in the Jangmadang

Thursday, January 1st, 2009

Daily NK
Park In Ho
1/1/2009

The marketplace has become an extremely important ground in North Korean people’s lives. 70 percent of North Korean households in the city live off trade, handicrafts and transportation businesses related to trade. If the jangmadang works well, people’s living situation is good, otherwise it is not. In the situation where the food distribution system has broken down, the whole economic existence of the populace is bound up in jangmadang trade.

Trade is bound to generate successful merchants but also failures, due to a lack of know-how or confiscation of products by the People’s Safety Agency (PSA), or simply because a competition system operates. These failures in the jangmadang do not have any second opportunity to rise again so they frequently choose extreme acts like defection, criminality or suicide. Failure is serious.

However, the revitalization of markets has caused great changes in North Korean people’s values. The individual-centered mentality among the people is expanding and the belief that money is the best tool is also spreading. Due to such effects, the North Korean communist authorities in 2008 made the regulation to prohibit women younger than 40 years old from doing business, but of course the people use all necessary means to maintain their survival.

Daily NK investigated the 2008 top ten items in the jangmadang, so as to observe developments in North Korean society.

1. Rice in artificial meat, the first instance of domestic handicraft

Since 2000, the most ubiquitous street food has been “rice in artificial meat,” which is made from fried tofu with seasoned rice filling. This food is found everywhere on North Korean streets. One can find women who sell this snack in alleys, at bus stops and around stations. It costs 100 to 150 North Korean Won.

Meanwhile, the most popular street food is fried long-twisted bread. Individuals make the fried bread at home and sell it on the street. The length of the fried bread is around 20 centimeters and it sells for 100 won.

In around 2005 corn noodles were popular on the streets, but now street-stands for noodles have largely disappeared due to the existence of a permanent store controlled by the state.

These days, if one can afford to eat corn noodles, at approximately 1,000 won for a meal, one can safely say that one is living comfortably.

2. Car battery lights North Korea

The reason why North Korean people like car batteries is that the authorities provide a reliable electricity supply during the daytime, when consumption is less than at night, but at night they don not offer it. The authorities shut down the circuit from around 8 PM to 9PM, and from 12 AM to 2 AM: when the people watch television the most.

As a result, the people charge their car batteries during daytime and use it at night. A 12V battery can run a television and 30-watt light bulb. If they utilize a converter, they can use a color television, which needs more electricity.

Ownership of batteries is a standard of wealth. Officials use electricity from batteries in each room. They usually draw thick curtains in their rooms, to prevent light shining through that might draw attention to their status.

3. The strong wind of South Korean brand’ rice-cooker, Cuckoo

A South Korean brand pressure rice-cooker called Cuckoo appeared as a new icon for evaluating financial power among North Korean elites.

It has spread from the three Chinese northeast provinces into North Korea. In North Korea, Chinese rice and third country aid rice, dry compared to Korean sticky rice, generally circulates, but if the lucky few use this rice-cooker, they can taste sticky rice the way Korean people like it.

There are Cuckoo rice-cookers from South Korean factories that arrive through Korean-Chinese merchants, and surely other Cuckoo products from Chinese factories. These two kinds of rice-cookers, despite having the same brand name, sell for different prices.

The Chinese-made Cuckoo sells for 400,000-700,000 North Korean Won (approximately USD114-200), while the South Korean variety costs 800,000-1,200,000 (approximately USD229-343). A Cuckoo rice-cooker tallies with the price of a house in rural areas of North Korea. According to inside sources, they are selling like wildfire.

4. An electric shaver only for trips

The electric shaver is another symbol of wealth.

It is not that they use electric shavers normally, because one cannot provide durability. At home, North Korean men generally use disposable shavers with two blades made in China or a conventional razor. However, when they take a business trip or have to take part in remote activities, they bring the electric shaver.

There are North Korean-made shavers but most are imported from China. Among Chinese products, you can see “Motorola” products and fake-South Korean products with fake labels in Korean. A Chinese-made electric shaver is around 20,000-40,000 North Korean Won.

5. Chosun men’s fancy shoes

Dress shoes are one of the most important items for Chosun men when they have to participate in diverse political events, loyalty vows or greeting events at Kim Il Sung statues on holidays. Right after the famine in the late 1990s, it was considered a symbol of the wealth, but now general workers, farmers and students are wearing dress shoes.

The shiny enameled leather shoes with a hard heel cannot be produced in North Korea because of a lack of leather. The North Korean authorities provide the National Security Agency (NSA) and officers of the People’s Army with dress shoes, which are durable but too hard and uncomfortable.

Shoes for general citizens and students are mostly made in China and some are produced in joint enterprises in Rajin-Sunbong. The price of shoes ranges from 30,000 to 100,000 Won depending upon the quality.

6. Cosmetics prosper despite the economic crisis

Cosmetics and accessories for women are getting more varied. Lately, false eyelashes have appeared in the jangmadang in major cities. Chinese cosmetics are mainly sold, alongside fake South Korean brands. In Pyongyang, Nampo, Wonsan and Shinuiju Chinese and even European cosmetics are on sale.

“Spring Fragrance,” a North Korean luxury cosmetics brand, is famous for being Kim Jong Il’s gift that he presents to women soldiers or artists when he visits military units or cultural performances. It costs more than 200,000 North Korean won.

Lotions for women, made in China, are approximately 2,000-4,000 won, foundation cream is 3,000-5,000 won, and lipstick is from 500 won to 2,000 won. Hand cream is 3,000-5,000 won.

7. Hana Electronics recorder, the biggest state-monopoly production

“Hana Electronics” was originally set up to produce CDs and DVDs of North Korean gymnastic performances or other artistic performances, so as to export them foreign countries. The company has been producing DVD players since 2005.

Due to the state monopoly, the DVD player of the Hana Electronics dominates the market. North Korean people call a VCR and a DVD player a “recorder.” Since around 2005, after the booming interest in South Korean movies and dramas, the players have been selling very well.

At the beginning, North Korean visitors to China brought the DVD or CD players into North Korea, but as they got popular among the people, Chinese-made players were imported from China and since 2006 they have been really popular in every jangmadang.

Accordingly, since 2006, the authorities have started blocking the importation of the Chinese player and are selling the Hana Electronics players, which sell for around a 20 or 30 percent higher price than Chinese players in state-run stores. Now, they can be sold in the jangmadang by private merchants and comparatively free from inspection by the PSA. The prices are 130,000-150,000 won.

8. Bicycles are basic, the motorcycle era is here now

In major cities, numbers of motorcycles are increasing. Especially in border regions where smuggling with China is easier than in other cities, motorcycles are common.

The motorcycles are ordinarily used for mid or long distance business. Most motorcycles are made in China and some are Japanese second-handed products, which sell for 1.5-2.5 million won. 125cc new products are over 5 million won. The cheapest second-handed motorcycle is 500,000 won.

9. Vinyl floor covering for the middle class and vinyl for the poor

Demand for vinyl floor coverings and vinyl has been increasing since the late 1990s, when residential conditions improved. In the late-1990s people had to use sacks of cement or Rodong Shinmun (newspaper) as a floor covering, but now they are using vinyl floor coverings.

Uses for vinyl are unimaginably diverse: from a basic protection against wind and cold to when people take a shower at home in the vinyl tunnel hung on the ceiling of the bathroom.

Depending on the thickness and width, there are four or five kinds of vinyl in the jangmadang for from 150 to 500 won. Vinyl floor covering is a Chinese product selling for from 3,000 to 10,000 won.

Posted in Agriculture, Black markets, Clothing, Cosmetics, Economic reform, Electricity, Energy, Food, General markets (FMR: Farmers Market), Manufacturing, Ministry of People’s Security (Criminal Police), Ministry of State Security (MPSS, NSA, SSD), Price liberalization, Television | Comments Closed

DPRK manufactures DVD players

Friday, December 26th, 2008

According to an anonymous qoute by a South Korean intelligence official in the Choson Ilbo:

“Especially, North Korea developed its own DVD player in 2006 with a view to developing its own IT industry, this ironically provided momentum for the spread of South Korean soap operas.”

I had assumed the DPRK imported DVD players.

Read the full article here:
Pyongyang Bids Korean Wave to Recede
Choson Ilbo
12/26/2008

Posted in Computing/IT, Film, Light Industry, Manufacturing | 2 Comments »

Inter-Korean trade falls for second straight month

Saturday, December 20th, 2008

Quoting from the Korea Times:

Inter-Korean trade fell 27.7 percent in November from a year earlier to $142.72 million, according to the ministry data posted on its Web site.

“Payments to North Korea are mostly made in dollars or euro, so the weak Korean currency has been the primary reason behind the falling trade,” a ministry official was quoted as saying.

More than 80 South Korean firms produce watches, shoes, clothes and kitchenware at a joint industrial complex in the North’s border town of Gaeseong. North Korea also exports sand to the South.

In October, South and North Korea traded goods and services worth $163.06 million, down 23.2 percent from a year earlier.

Meanwhile, inter-Korean trade from January to November reached $1.69 billion, an increase of 3.7 percent from the same period in 2007.

And According to the Hankyoreh (h/t OneFreeKorea):

According to a report, seven companies have canceled their contracts to build facilities at Gaeseong complex since October. Three of the seven bought space at a site reserved for machinery and metal cooperatives in June, and were in the process of constructing or designing factories. The report was submitted to Rep. Chun Jung-bae of the main opposition Democratic Party by the division supporting the Gaeseong Industrial Complex at the Ministry of Unification.

Two companies are in situations unrelated to the breakdown in inter-Korean relations, one had a fire last summer and another is suffering from losses incurred as a result of investment in KIKO, “knock-in knock-out” currency options trading.

The remaining five companies were believed to have abandoned their plans because of the deterioration in inter-Korean relations. An official at one of the five companies, which canceled its investment contract in December, said, “Although the economic crisis was one of the reasons why we canceled the contract, the main reason was that business prospects have darkened due to strained inter-Korean ties. Other companies that moved to (the Gaeseong complex) at the same time also decided to cancel their contracts for the same reason.”

In canceling their contracts, the seven companies forfeited their initial investments, which ranged from 17 million won (US$12,500) to 70 million won each. Land at the Gaeseong Industrial Complex was sold at 45,000 won per one square meter and the companies paid 10 percent of that price as part of their deposit.

Seven other companies also canceled their contracts last year, but they did so after an on-site feasibility study was conducted and it was determined that their businesses were not financially viable. All seven companies were able to receive their deposits under a special provision on contract cancellation, which allows companies to receive their deposits if the contract is canceled within six months of when it was signed.

The companies that canceled their contracts this year were not able to take advantage of the provision because they canceled over six months after signing their contracts.

There are growing concerns that more companies may be canceling their contracts as well. The head of Company “H,” who signed a contract to build a facility at the Gaeseong complex last year, said, “Though I would lose my initial investment of several millions of won, I’m considering canceling the contract because the tensions inter-Korean relations are likely to continue for another five years.”

Read the full story here:
Inter-Korean Trade Falls for Second Straight Month
Korea Times
12/20/2008

More companies cancel contracts at Gaeseong complex
Hankyoreh
12/17/2008

Posted in Economic reform, Foreign direct investment, Joint Ventures, Kaesong Industrial Complex (KIC), Light Industry, Manufacturing, South Korea, Special Economic Zones (Established before 2013), Statistics, Trade Statistics | Comments Closed

DPRK pushes to meet yearly production plans

Wednesday, December 17th, 2008

Institute for Far Eastern Studies (IFES)
NK Brief No. 08-12-17-1
2008-12-17

As the end of the year approaches, North Korea has launched a ‘Year-end Battle’ in order to encourage every sector of the economy to meet annual production targets, without exception.

On December 1, (North) Korean Central Broadcasting announced, “workers, laborers and technicians of the harvesting industry sector overcome difficulties and barriers with indomitable moral strength, while thoroughly accomplishing the (New Year) Joint Editorial’s fighting tasks, focusing all strengths on the struggle to brightly wrap up the deeply meaningful year,”while also reporting on the production innovation of the nation’s mining and smelting facilities.

The program also announced that each North Korean region’s hydroelectric power plants, “brightly bring the year to a close, while the issue more important than any other is ensuring the People’s Economy electrical use, strongly demanding power production, is supported,” reporting that efforts were being focused on ensuring power production equipment was operating at full capacity, and electrical production was being expanded.

Rail transportation in Pyongyang, Kaechun, Anju, and other areas also reported high achievements in distributing coal for electrical production and ores sent to metal factories, as efforts are put into the ‘Year-end Battle’, according to the broadcasters.

One member of the North Korean Cabinet’s office of light industry announced on November 30 that, in accordance with this year’s New Year Joint Editorial’s ‘prioritization of the lives of the people’, the government invested in the Sariwon Weaving Factory, the Haeju Textile Factory, etc., “struggling to produce more good-quality cloth” in textile factories under the guidance of the office of light industry’s department of textile industry management.

North Korea’s broadcasts also reported that the Ranam Coal Mine Cooperative Enterprise, the Musan Mine Cooperative Enterprise, the Chungjin Tractor Accessories Factory and others were also engaged in this ‘Year-end Battle’.

In South Hamgyung Province, a new lecture hall and electronic library were built at the Hamheung Medical Science College, and construction was underway to expand the number of classrooms. Also, the Heungnam Basic Foods Factory, the Hamheung Orthopedic Surgery Hospital and the Sinheung Irrigation were under construction as each locality is pushing forward with selected economic construction projects.

Posted in Agriculture, Clothing, Dams/hydro, Electricity, Energy, Institute for Far Eastern Studies, Light Industry, Manufacturing, Railways | Comments Closed

Number of North Koreans in the Kaesong Industiral Zone increases

Sunday, December 14th, 2008

Quoting from the article:

North Korea has increased the number of its nationals working at a Seoul-funded industrial estate in the communist state since tighter border controls were introduced, data showed Sunday.

Statistics from South Korea’s unification ministry show North Korean workers numbered 37,168 in Kaesong, the estate just north of the border, on Friday, up from 36,618 on November 31.

On December 1 North Korea imposed stricter border controls and expelled hundreds of South Koreans from Kaesong amid strained cross-border ties, leading to fears in Seoul that Kaesong will eventually be closed down.

“The latest statistics show North Korea will not shut down Kaesong but thoroughly protect business there,” Kim Yong-Hyun, a professor of North Korean studies at Seoul’s Dongguk University, told AFP.

“The North is saying tighter border controls are targeting the Seoul government, not private businesses there, in a dual-track policy on the South.”

Read the full article here:
Number of NKoreans increased at Seoul-funded estate
AFP
12/14/2008

Posted in Economic reform, Foreign direct investment, Joint Ventures, Kaesong Industrial Complex (KIC), Labor conditions/wages, Manufacturing, Private property | 1 Comment »

Behind North Korean Plan to Reopen State Stores

Wednesday, December 10th, 2008

Daily NK
Moon Sung Hwee
12/10/2008

The North Korean authorities recently announced the intention to sell all industrial products in state-operated stores, soon after announcing the revised “10th-day farmers markets,” which open only on the 1st, 11th and 21st of every month, starting from next year.

According to an inside source in North Hamkyung Province, a new instruction on the sale of industrial products in state-operated stores was introduced during the latest cadres’ lectures. As rumors of the large-scale entry of Chinese goods onto the market due to Chinese loans circulate among people, there has been in a flutter in the market.

The source stated that the idea of industrial product sales was introduced during a cadres’ lecture on the 29th of November under the title, “measures to improve the current situation and people’s lives,” which also explained the transformation of the current market system into the “10th-day farmers market” system.

In the source’s opinion, “It signifies the government’s attempt to monopolize the industrial-product market, which was actively and spontaneously established by the people after the ‘march of tribulation’ in the late 1990s. Industrial goods to be sold in the state-operated stores would include both Chinese and North Korean products.

During the lecture, it was stated that “All industrial goods that have been passing through the jangmadang (markets) must now be sold in the state-operated stores and only vegetables or certain agricultural products can be sold within the farmers markets,” which suggests the prohibition of individuals selling food-related products and industrial goods.

With regard to the backdrop of this policy, the authorities explained that, “The current market was a temporary measure taken by the state considering the difficult situations caused by the march of tribulation. However, the markets after some time deviated from the state’s intention and socialist economic principles and have become a hotbed of crimes generating capitalist and anti-socialist trends. Therefore, we are ridding ourselves of all markets and reviving the farmers market.”

The source explained that this measure does not seem to “simply control the markets. But if they begin selling industrial products in the state-operated stores, they would be able to circulate money within the regime that has been circulating within private markets and among individuals by tying purchase profits to national banks.

He said, “Due to the jangmadang, the gap between the rich and the poor has widened. And, because money is not flowing within the regime, the authorities are getting rid of private sales to revive the banks so as to recover the regime economy… It seems the state-controlled economy will become better next year” he added.

However, the source also relayed that “Although they announced the selling of industrial goods only in the state-operated stores from next year, nothing, regarding exactly when and how, was mentioned during the lecture.”

“There is also another rumor that even ‘procurement stores’ would have to sell products on the same price level with the state-operated stores, or they would have to close down. It basically signifies that the regime will not permit any form of private sales, by selling all products that had been sold by individuals” he added.

The source reported that there have been heated debates on this decision among North Koreans.

“Famers gladly took this decision that industrial goods will sell in state-operated stores because they have been complaining that they sold agricultural products at next to nothing while buying industrial goods at such a high price. They are expecting that industrial goods will cost less than now” the source reported.

“However, workers in urban areas are extremely concerned that they cannot sell anything in the jangmadang. An average workers’ salary is 1,500 North Korean Won and if individuals are not permitted to sell, workers’ families will be harshly affected” he forecasted.

The source continued on and said, “Even though they say workers get paid well, how are they expected to live when a pair of military boots costs 9,000 North Korean won. One month’s salary is not even half a kilo of rice.”

The source in the end expressed concern because workers began “explicitly complaining about cadres who only fill themselves up. I personally think that there will begin a massive war within the markets starting from New Year’s Day”.

Posted in Agriculture, Black markets, China, Economic reform, Food, General markets (FMR: Farmers Market), Labor conditions/wages, Light Industry, Manufacturing, Price liberalization | 2 Comments »

DPRK reemphasizes priority development of national defense industries

Monday, December 8th, 2008

Institute for Far Eastern Studies (IFES)
NK Brief No. 08-12-8-1
12/8/2008

The North Korean online magazine ‘Our Nation (uri minjokkiri)’ emphasized on January 1 that development of national defense industries would be prioritized, stating that it was “the best way to move forward and harden a strong national defense while at the same time developing the entire economy.”

In an article titled, “The Path to Economic Construction of the Military-first Era,” the website reminded the reader of the goal of building a strong and prosperous nation by 2012, and stated that Kim Jong Il had said that building up the economy was the “main line of construction for the building of a Strong and Prosperous Nation.” It went on, “Today’s era is the era in which the national economic strength is determined by the amount of development of the national defense industries,” and, “National defense industries are in a leading position, while the independent establishment of the core economic structure is necessary, and a strong economic base can be constructed.”

The magazine emphasized, “The might of heavy industry can be further strengthened following the completion of the basis of the national defense industries, also ceaselessly developing light industry and agriculture.” The article also stressed that as North Korea’s national defense industries are at a comparatively high level internationally, matching that of the United States, and that he national economy overwhelming potential is easy to see.

The article noted that today’s military competition between nations is practically scientific and technological competition, and, “strengthening of national defense in every way based on science and technology, and establishing a framework of science and technology and deciding to quickly develop a strong and prosperous nation by focusing on science is really the path for building the economy in the Military-first Era.”

The magazine emphasized that this military-first era economic building plan was “truly for the people, and was the most civic path to prepare national economic strength for public services.” “In accordance with changes in the political atmosphere and actual conditions, the amount of energy applied to building of national defense and economic construction, citizens’ livelihoods, or other realms could vary, but the true requirement of the building of the socialist economy is to ceaselessly raise the level of the livelihoods of the people, and ultimately, this goal can never waver.”

Posted in Domestic publication, Economic reform, Light Industry, Manufacturing, Military, Songun | Comments Closed

Little sunshine on this cloudy day

Monday, November 24th, 2008

Last week, North Korean Economy Watch reported Pyongyang’s irrational economic policy threats which could end the flow of millions of South Korean dollars into North Korean coffers. I use the word “irrational” because government policies are typically designed to increase revenues to the treasury (or to coalition / constituent members), not scare them away. Today, however, North Korea reaffirmed its commitment to closing the border with South Korea on December 1, though with some qualifications:

1. The North Koreans will end “the train to nowhere” (c) NKeconWatch. This is puzzling because of all the inter-Korean projects, this one is the least “contaminating.” The South Korean government pays the North Korean government to send an empty train across the border each day. Why jeopardize this easy money?

2. The North Koreans will end the Kaesong day tours. This will not be good for Hyundai Asan (HA), which is already suffering losses from the idle Kumgangsan resort. On the plus side for HA, since this project merely bussed people around Kaesong, they will not be leaving much fixed capital on the northern side of the DMZ. Still, it is strange that the North Koreans would seek to end this program. Although it is slightly “contaminating” in that hundreds of South Koreans are shuffled through Kaesong every day, the North’s citizens are generally isolated from their wealthy neighbors. Additionally, I estimate that this program has grossed the North Koreans nearly USD$10 million since it was launched nearly a year ago. This is not an insignificant amount of money to the DPRK.

3. The ultimate fate of the Kaesong Industrial Zone remains uncertain. Although the North Koreans have threatened to “selectively expel” up to half of the South Koreans in the facility, some managers remain optimistic:

“(The North) never said it would halt production or expel staff related to the production process. So even in the worst case of operating with only half of the staff, we think there won’t be any problem in production,” said Lee Eun-suk, an official at Shinwon Corp, which has clothing factories at Kaesong. (Reuters, via the Washington Post)

Unless North Korea’s policy makers are terminating the flow of economic rents into the country to curb the power of some particular official or interest group, there are not many instances where these actions could be considered shrewd. Adding to the confusion, most analysts presume that the majority of the South’s construction and wage fees are distributed to the small cohort of high-ranking North Korean policy makers who ostensibly signed off on the projects in the first place. So why would they now decide to end their own direct funding?

These policy decisions, moreover, will likely affect the North Koreans in ways they do not yet seem to anticipate, particularly when it comes to attracting private foreign direct investment (which is desperately needed). Private investors will not be attracted to a business environment where the rules of the game are prone to changing every few months. Investment entrepreneurs will not risk the appropriation of large scale fixed assets. International aid and official foreign direct investment will probably go on as usual as these tasks have more to do with political decisions than economic.

So what is going on? That is the million dollar question, and speculation in this case is not worth all that much. The Daily NK, however, claims to have interviewed an “official” from Pyongyang who discussed recent developments in the Kaesong Industrial Zone. His claim is that the North Koreans made the decision to close the Kaesong Zone for internal political reasons:

Q. What is the reason that North Korea is trying to suspend the business in the Kaesong Industrial Complex?

A. In fact, the story about the suspension of the Kaesong Complex has emanated from Pyongyang since this fall, but it had been decided as an instruction of the Party in Pyongyang late last year.

It is hard to say conclusively what is happening in Kaesong, because there are so many complicated things at work. People from the Party in Pyongyang say that the Kaesong Complex and tourism should fall into disuse and the Mt. Geumgang tourism site should be left alone. Whether or not the Kaesong Complex is thrown away is only up to our economy condition and also the General (Kim Jong Il)’s decision.

Q. Do you mean that instructions on the Kaesong Complex have already been decided internally by the Party?

A.Yes, you can say that. This was because at the beginning, they started it on in the precondition of switching workers once a year, but now they know that switching workers every year is impossible.

Additionally, rumors on South Chosun have been constantly circulating among workers and their families, so illusion of the South have now become uncontrollable among the people. The authorities cannot overlook this situation.

From the Party’s view, each worker in Mt. Geumgang and Kaesong is like a poster advertising capitalism. Due to them, our socialist system could be cracked.

As I know, at least 20 affiliates with Kaesong Complex came into questioning for advertising South Chosun and capitalism.

There was a thorough reshuffling in the Party last year. There is nobody who talks about Kaesong or Mt. Geumgang.

Q. Can North Korea ignore the abundant dollars from Kaesong in practice?

A. Frankly speaking, we have relied on it due to money. Even right now, if South Korea treats things like the Mt. Geumgang shooting accident flexibly and starts the tours again, everything is okay. The money we want does not need to come only from South Korea. There are Yuan, Rubles and dollars as well. They are all the same.

Although our economy is so terrible, we will not establish the national vision only targeted on making money. You should bear this point in mind.

Thoughts and opinions apprecaited.

Read more here:
There Is an Internal Reason for the Bluff on Kaesong
Daily NK
Jung Kwon Ho
11/16/2008

Kaesong Staff to Be Expelled
Daily NK
Kim So Yeol
11/24/2008

Kaesong Tour and Trains are Suspended
Daily NK
Jeong Jae Sung
11/24/2008

North Korea to Halt Cross-Border Rail Service, Tours
Bloomberg
Heejin Koo
11/24/2008

North Korea prepares to shut border with South
Reuters (via Washington Post)
Jonathan Thatcher
11/24/2008

N. Korea Stiffens Diplomatic Stance
New York Times
Choe Sang-hun
11/24/2008

Posted in Advertising, Economic reform, Foreign direct investment, International Aid, International trade, Joint Ventures, Kaesong Industrial Complex (KIC), Korea Land Corp. (RoK office), Light Industry, Manufacturing, Mt. Kumgang Tourist Special Zone, Private property, Railways, Real estate, Special Economic Zones (Established before 2013), Tourism, Transportation | 2 Comments »

(Updated) Kumgang/Kaesong update

Thursday, November 13th, 2008

UPDATE: Marcus Noland discussed this subject with the Daily NK. Joshua has some thoughts at One Free Korea.

ORIGINAL POST: Hyundai Asan (HA) was having a good year up through July 2008. At that point, inter-Korean trade volume had experienced a 23% year-over-year increase—reaching US$880 million. Commercial trade comprised 94% of this volume, up from 78%, and the number of firms conducting inter-Korean trade reached 526, up from 324.

…and then a South Korean tourist was shot by North Korean soldiers at HA’s flagship project, the Kumgang tourist resort. Shortly after the shooting, the South Korean government halted tourism to Kumgangsan until the DPRK agreed to launch a joint investigation into the shooting and guaranteed the safety of tourists—which never happened. As a result, the newly constructed six-star “Kumgang Ananti Golf and Spa Resort” desigend by Korean- American architect Min Sung Jin, sits unused, and revenues at HA are likely to fall to as low as 220 billion won (US$165 million), from about 300 billion won last year (Yonhap).

Despite the troubles at Kumgangsan, the joint-Korean projects on the west coast (Kaesong Industrial Zone and Kaesong tourism) remained unaffected. The Kaesong Industrial Zone, the most ambitious and risky project, has continued to receive support from both the North and South Korean governments, and the Kaesong tours have grossed the North Korean government nearly $10 million since the project was launched in December 2007.

Since I operate on the assumption that people will never turn down free money, even communist governments, I have been skeptical that the DPRK would jeopardize these investments. As of this week, however, it looks like my assumption is wrong. It seems the DPRK remains intent to cut off its nose to spite its face. On November 9, 2008:

A North Korean military team visited an inter-Korean industrial complex in Gaeseong, North Korea, last week to check personnel and facilities there.

Local experts speculated that the unprecedented survey is aimed at putting pressure on the South, whose civic groups continue to send propaganda fliers containing criticism of the North’s dictatorship.

Five military officials looked around the industrial park, Moon Moo-hong, chairman of the Kaesong Indutrial District Management Committee (KIDMAC), said.

“They made the rounds of 11 companies in the complex in the morning and asked about the amount of investment, capital, the number of workers, their salaries and working conditions,” he said.

The officials, in military uniforms, asked about how long it would take to empty the complex several times during the six-hour inspection, he added.

They did not show an amicable attitude either, saying they were not visiting to give out business cards and they had nothing to talk about.

A government official asking to remain anonymous said the visit can be read as a threat to drive out South Korean companies from the complex. (Korea Times)

Who was leading the military delegation? Lt. General Kim Yong Chol:

Kim is widely known as Pyongyang’s chief delegate to inter-Korean general-level talks in South Korea, but this time, he assumed the title of policy chief of the National Defense Committee, the most powerful organization in the North. While inspecting infrastructure and companies at the complex, he reportedly asked, “How long would it take for South Korean companies to pack up and go home?” (Donga Ilbo)

Economically, this is a terrible move:

The complex employs 35,000 North Korean workers who earn 55 dollars a month (63 dollars including social insurance), an amount considered extremely high by North Korean standards. Though the communist regime deducts a significant sum from their salaries, workers there are clearly healthier and better fed than their malnourished neighbors. If each of these workers is assumed to be part of a family of four, the complex feeds 140,000 North Koreans. (Donga Ilbo)

Yet yesterday, the implicit threat to close the border was made explicit:

[On] Wednesday, North Korea’s military threatened to “strictly restrict and cut off” all overland passage through the military demarcation line starting Dec. 1 in protest over Seoul’s “confrontational” policy. (Yonhap)

and

A Red Cross office in the North with the only civilian phone link will shut. (BBC)

Hyundai Asan Corp. said that it has yet to receive an official notice from North Korea on the suspension of its tour program to a historic city in the North, despite Pyongyang’s announcement to restrict border crossings. (Yonhap)

So what has made the DPRK so angry that its leaders are willing to take such drastic action? Judging only from the public statments by the DPRK’s military spokesmen, it seems to be the proliferation of balloons and anti-Kim Jong il leaflets that human rights groups are sending across the DMZ.

This seems bizarre because balloons have been crossing the DMZ for decades. The North Korean villages along the DMZ know exactly how to deal with these leaflets and it is fairly routine for work groups to be organized to go pick them up. Additionally, North Korea’s leaders are smart enough to know that the South Korean government has no legal authority to prevent its citizens from undertaking these activities. So the DPRK’s ultimate goals here must be greater than stopping human rights groups from sending the balloons.

Ironically, it is the same human rights groups that are sending the balloons across the border who are most vocal about closing down the Kaesong Industrial Zone and ending the Kaesong tourism project. This is because they believe that the revenues generated by these projects are diverted to support the government with little going to the actual workers. If the North Korean government ends these inter-Korean projects it will be delivering its most vocal opponents a double victory—the DPRK will end up with more balloons and less South Korean money. If I was in the business of sending balloons across the DMZ, I would be sending out fundraising letters right now telling potential donors how effective my strategy is.

Anyhow, if all of this was not strange enough, North Korea has slowed dismantling of the Yongbyon reactor (again), claiming the US owes it energy aid, and asserted that they never agreed to a nuclear verification deal which gives inspectors permission to collect samples and remove them from the country for analys. Are they just trying to squeeze more concessions out of the Six-Party talks? Or is this a calculated political strategy?

Posted in Economic reform, Foreign direct investment, Joint Ventures, Kaesong Industrial Complex (KIC), Manufacturing, Mt. Kumgang Tourist Special Zone, National Defense Commission, Special Economic Zones (Established before 2013), Tourism, Uncategorized | 1 Comment »

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