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DPRK revises law on Rason zone and enacts law on coal to attract foreign investment

Wednesday, March 17th, 2010

Institute for Far Eastern Studies (IFES)
NK Brief No. 10-03-17-1
2010-03-17

Following North Korea’s decision to raise the status of the Rajin-Sonbong region to the ‘Rason Special City’, it has revised the ‘Law on the Rajin-Sonbong Trade Zone’, considerably boosting the likelihood that the region will attract the foreign investment necessary to develop the free trade zone, as the revised law further protects investor activities in Rason.

The Rajin-Sonbong region was designated a ‘Free Economic and Trade Zone’ in 1991, but had very little economic impact. Over the years, North Korean authorities have enacted a few measures to try to keep the project alive, but there has been no significant turnaround. With the revision of the law on Rason, North Korean authorities are again focusing their attention on the region, with the goal of ‘opening the door to a strong and prosperous nation’ by 2012. It is also possible that the regime is eyeing the development of the region as a tool to solidify the transfer of power to yet a third Kim.

In December, 2009, after designating the special economic and trade zone, Kim Jong Il traveled to ‘Rason City’ for the first time in 18 years. Jang Song Thaek, director of the administrative bureau of the (North) Korean Workers’ Party, has also visited the area, leading observers to believe that even working-level preparations are being made following the policy decision to highlight the area.

The law on Rason, revised on January 27, is now made up of 5 chapters and 45 articles. 6 of those articles specifically concern promotion of the investment area and trade with overseas Koreans.

The most eye-catching article is no. 8, which addresses economic and trade activities by overseas Koreans. This type of activity was already protected by the existing law, but the revision reiterates that Koreans living outside of the North are allowed to carry out economic activities and trade in an attempt to snare investments from North Koreans living in China and Japan, as well as other diasporas.

In addition, Article 21 addresses the economic dealings of enterprises, groups and organizations outside of the zone, and stipulates that these groups operating within the Rason Special City would be able to engage in business activities with North Korean businesses in other regions. This essentially legalizes the sale of goods produced in the zone throughout the country.

Article 3, addressing investment opportunities, stipulates that investors are allowed to engage in business regarding manufacturing, farming, construction, transportation, communications, science and technology, tourism, distribution, and finance.

By revising the existing law, North Korean authorities have strengthened incentives for investors.

The latest revision also set the basic income tax of enterprises at 14 percent, while stating that enterprises specifically designated by the government would be taxed at a rate of 10 percent.

Furthermore, Article 2 of the revision emphasizes the tourism and investment roles of the special zone, referring to the zone as one for ‘investment, a transport hub, finance, tourism, and public service,” adding ‘investment’ and ‘tourism’ to those activities stipulated in the original law. The Rason Zone Law has been revised five times since its passing in 1993, undergoing change in 1999, 2002, 2005, 2007 and now 2010.

Authorities also revised the law on coal, which now legally regulates the exploration, distribution and use of coal, by the addition of Chapter 6 Article 76 of the ‘Coal Law’. Article 1 lays out the basis of the North’s law on coal, while Article 2 covers exploration, Article 3, ‘mine development,’ Article 4, ‘coal production,’ Article 5, ‘coal distribution and use,’ and Article 6, ‘management structure regarding the coal industry.’ The new law advocates “expansion of cooperation and exchange with other countries and international organizations on the exploration and mining development, as well as production and use.”

Posted in Foreign direct investment, Law on the Rason Economic and Trade Zone, Rason Economic and Trade Zone (Rajin-Sonbong), Special Economic Zones (Established before 2013) | Comments Closed

North Korea Offers Sand, Rents for Concrete, Fuel, Munhwa Says

Wednesday, March 10th, 2010

Sangim Han
Bloomberg
3/10/2010

North Korea’s cash-strapped government is offering to swap sand, resources licenses and rental income in return for concrete, steel and fuel, according to Munhwa Ilbo newspaper.

The government sent letters to companies in China and South Korea asking them to invest $320 million in a construction project in the capital, Pyongyang, the Korean-language paper reported. In addition to the investment, the government is seeking 30,000 tons of diesel and gasoline, 50,000 tons of steel bars and 300,000 tons of cement, the paper said, citing one of the letters.

In return, the letters offer investors long-term rental income, the rights to resource development and sand. North Korea’s finances are being squeezed by United Nations sanctions imposed because of the country’s nuclear weapons program.

The letters were sent to the companies via an investment group, the paper said. The government wants to build 100,000 homes in Pyongyang, it said.

Posted in 2012 Strong and Prosperous Nation (Kangsong Taeguk), Construction, Economic reform, Foreign direct investment, Real estate, Sand | Comments Closed

Collective or Farmer: Land Ownership in North Korea

Wednesday, March 10th, 2010

Daily NK
Yoo Gwan Hee
3/5/2010

North Korea’s “Land Reform Law” was signed into law on March 5th 1946, and for a while it offered North Korea a way to produce enough food to feed its people.

The following are the basic contents of the law as implemented by the North Korean Provisional People’s Committee, which was led by Kim Il Sung.

Those Japanese and Korean landlords who possessed more than 50,000 square meters of land were to have it expropriated and distributed to existing tenant farmers for free, whilst the existing tenant farming system was to be abolished. The basic principles of the law were land expropriation without compensation and land distribution for free to former peasant tenants. However, those owning more than 50,000 square meters of land but without tenant peasants were excluded.

In accordance with the provisions of Article 5 of the law, the Committee granted farmers ownership, stating, “All expropriated land is to be distributed to farmers for free.” However, post-distribution use of the land was restricted; Article 10 of the law prohibited using land as collateral in lending, the selling of land or subletting to tenants. As the law itself puts it, “The distributed land cannot be given over to tenant farming and/or used as collateral.”

At the time of the law’s enacting, Korea had been liberated from Japanese colonial rule, but around 58 percent of arable land was still owned by a minority of pro-Japanese landlords constituting just four percent of the population. Meanwhile, most North Koreans in 1946 were farmers, 80 percent of all farmers were extremely poor, and they represented a majority of the total North Korean population. Naturally, the new law was very popular. It was, after all, an opportunity for the Communist Party to appeal to the masses. The political situation was especially complex; a country divided between Soviet-occupied North and American-occupied South, political factions coalescing around different parties, and factions emerging within the Party itself.

In North Korea, the North Korean Provisional People’s Committee and the Communist Party led land reform by organizing 90,697 members into 11,500 farming committees in 1946. They also organized 210,000 farmers aged 18-35 into a semi-military organization, the so-called “self-defense forces,” who supported the projects of the farming committees. During three weeks of land reform, 98 percent of confiscated land was distributed to farmers; poor farmers suddenly became the landlord of up to 13,200 square meters of land. Thereafter, they tended to farm hard and gave their allegiance to the Party.

The farming committee members were instrumental in carrying out the land reform, mostly by aiding in distribution and record keeping. Committee members subsequently became Communist party members and supported the regime at the regional and local level. Consequently, the number of party members rose from 4,530 in December 1945, to 26,000 in April 1946 and 356,000 by June 1946. The success of the land reform consolidated the authority of the North Korean Provisional People’s Committee, and resulted in successful elections for the North Korean Provisional People’s Committee in February 1947 at the local level.

However, following the birth of the North Korean state, individual ownership of land was ended by another national project. The collective farming system, implemented over the course of 1954-1958, resulted in farmers becoming employees on collective farms. The pretext for the collective farming system was communal ownership under the socialist system, but in reality it was a way to realize state control. Article 5 of the Land Reform Law was abolished and the farmers’ dreams of personal and equitable land ownership were swept away in the name of socialist modernization.

Ultimately, the inefficiency and unjust nature of the collective farming system combined with other factors resulted in the March of Tribulation in the late 1990s and the continuing hardships of the average North Korean family today.

Nowadays, farmers tend to solve their food security problems not by working hard on the collective farms, but by farming their own fields around their houses or on steep mountainsides. Their private production is, of course, relatively greater than that of the collective farms.

The way to solve the food crisis is, of course, quite simple; return the land back to the farmers. The North Korean authorities know that private ownership of land is the best way in practice to solve the food problem, but they fear what this might mean for the regime’s viability.

Posted in 1946 Land Reform Law, Agriculture, DPRK Policies, Food | 3 Comments »

North Korea: It’s the Economy, Stupid

Thursday, March 4th, 2010

Nautilus Institute Policy Forum Online 10-015A
Aiden Foster-Carter
3/4/2010

Too many Kim Yong-ils

Korean names can set traps for the unwary. Amid a multitude of Kims, almost all unrelated, North Korea adds an extra twist. German speakers, and some others, tend to mispronounce the J in Kim Jong-il as a Y. Not only is this incorrect, but currently it can confuse; for North Korea’s Premier – head of the civilian Cabinet, as distinct from the Dear Leader who chairs the more powerful National Defence Commission (NDC) – is named Kim Yong-il.

To add to the confusion, another Kim Yong-il was until recently vice foreign minister (one of several), but in January became director of the ruling Workers’ Party of Korea (WPK)’s international department: a post apparently vacant since 2007. As such, this Kim Yong-il met his Chinese counterpart Wang Jiarui, head of the Chinese Communist Party (CCP)’s international liaison department, when Wang visited Pyongyang in early February. Since his promotion, Kim Yong-il 2 (as it may be best to call him) has been reported as frequently at Kim Jong-il’s side. This suggests he may see far more of the Dear Leader than does anyone else involved in DPRK foreign policy, including the man hitherto thought to be the eminence grise on that front: first vice foreign minister Kang Sok-ju, who negotiated the 1994 Agreed Framework with the US. It was Kang whom the current US special envoy on North Korea, Stephen Bosworth, demanded to meet when he visited Pyongyang in December, rather than the North’s main nuclear negotiator Kim Kye-gwan: a more junior deputy foreign minister.

Or is Washington behind the curve? That Kim Yong-il 2 is the DPRK’s new foreign affairs head honcho seemed confirmed on February 23, when he turned up in Beijing and went right to the top: going straight into talks with President Hu Jintao and separately with Wang Jiarui. This flurry of activity suggests two possibilities. Either Kim Jong-il will soon visit China, as he is overdue to do; or North Korea may return to the nuclear Six Party Talks (6PT), which have not met in over a year. Or perhaps both, if we are especially fortunate.

If both Kim Yong-ils are now leading players, perhaps one of them could change his name? That is not a frivolous suggestion. Some DPRK officials do this, for no clear reason. Often the change is small, so this is not a case of deception. Thus Paek Nam-sun, DPRK foreign minister – meaning chief meeter and greeter rather than top negotiator – from 1998 until his death in 2007, was originally Paek Nam-jun. Ri Jong-hyok, who as vice-chairman of the Asia-Pacific Peace Committee (APPC) now handles relations with the South, was Ri Dong-hyok in the 1980s when this writer knew him as head of North Korea’s mission in Paris.

(For completeness, yet another Kim Yong-il was Kim Jong-il’s late half-brother. He died of liver cirrhosis in 2000 aged only 45 in Berlin, where he had a diplomatic posting tantamount to exile – as his elder brother Kim Pyong-il, the DPRK ambassador to Poland, still does.)

Jong and Yong both say sorry

The past month saw both Chairman and Premier Kim doing something almost unheard of in Pyongyang. Apparently they both said sorry, although some reports got the two muddled up.

On February 1 Rodong Sinmun, daily paper of the ruling Workers’ Party of Korea (WPK), reported Kim Jong-il as lamenting his failure to fulfil his late father Kim Il-sung’s pledge, to which he had also alluded shortly before on January 9, that all North Koreans would eat rice and meat soup (everyday fare for even the poorest South Korean, be it noted). This time Kim said: “What I should do now is feed the world’s greatest people with rice and let them eat their fill of bread and noodles. Let us all honour the oath we made before the Leader and help our people feed themselves without having to know broken rice [an inferior version]”.

Given Kim Jong-il’s own notoriety as gourmet and gourmand, his professed “compassion” for his less fortunate subjects’ deprivation may induce queasiness. Yet even this not-quite-apology glosses over the truth. Broken rice? They should be so lucky. As readers of Barbara Demick’s excellent and heartbreaking new book Nothing to Envy will know, rice of any kind – whole or broken – is a rare luxury for most North Koreans. In the late 1990s a million or so starved to death; even today most remain malnourished. One refugee who fled to China saw her first rice in years in the first house she came to – in a dog’s bowl. That is the true reality.

Worse, all this was and is avoidable: the result of stupid and vicious policies, not the natural disasters that the regime blames. The real cause was the government’s failure to adapt in the 1990s after Moscow abruptly pulled the plug on aid. This hurt other ex-Soviet client states too. Cuba went for tourism; Vietnam tried cautious reform; Mongolia sold minerals. North Korea, bizarrely, did nothing – except watch its old system break down and growth plunge.

In a speech at Kim Il-sung University in December 1996, when famine was seriously biting, Kim Jong-il lashed out at the WPK and uttered this petulant but very revealing whinge:

In this complex situation, I cannot solve all the problems while I have the duty of being in charge of practical economic projects as well as the overall economy, since I have to control important sectors such as the military and the party as well. If I concentrated only on the economy there would be irrecoverable damage to the revolution. The great leader told me when he was alive never to be involved in economic projects, just concentrate on the military and the party and leave economics to party functionaries. If I do delve into economics then I cannot run the party and the military effectively.

Evidently Bill Clinton’s famously apt watchword, which helped him win the presidency in 1992, had not breached North Korea’s thick walls and heads. It’s the economy, stupid! The paternal advice was dead wrong. (The full speech can be read on the much-missed Kimsoft website. Unsurprisingly it is not part of the DPRK’s official canon of the dear leader’s works, but the scholarly consensus is that it is genuine. A slightly different version appears here.)

Redenomination disaster

Mass starvation, you might hope, would prompt some soul-searching and fresh thinking. From mid-2002 North Korea did essay cautious market reforms, but recently it has tried to squash Pandora back in her box. The latest such crass effort, a currency redenomination that deliberately wiped out most people’s meagre savings, was discussed in December’s Update.

By all accounts this has backfired badly, sparking runaway inflation (which it was supposed to stanch) and even riots. Forced on the defensive, the regime has issued an unprecedented apology. This being North Korea, it has not done so publicly; there are limits. Nor, in 2010 as in 1996, is Kim Jong-il about to take the rap, despite some newswires confusing J with Y.

But reliable intelligence claims that on February 5 Premier Kim Yong-il called all leaders of neigbourhood groups (inminban) to Pyongyang. The lowest unit in the DPRK’s still tight system of socio-political control, each comprises 20-40 households. This suggests that over 10,000 people heard the premier say what no leader had ever said to them before: sorry. In his words: “I offer a sincere apology about the currency reform, as we pushed ahead with it without sufficient preparation and it caused a great pain to the people… We will do our best to stabilize people’s lives.” The audience’s reaction is not recorded.

The situation on the ground remains confused, but markets appear to be functioning again unhindered. Good Friends, a seemingly well-informed South Korean Buddhist NGO, said on February 18 that after examining a report on food shortages and conditions nationwide by the Office of Economic Policy Review, the WPK Central Committee issued an ‘Order for Absolutely No Regulation Regarding Foodstuffs’. All markets are to reopen as they were before recent government crackdowns, and under no circumstances must local authorities try to regulate food sales – “until central distribution is running smoothly.” There may be a sting in that tail, but for now this is a complete, humiliating government U-turn and climbdown.

This is an astonishing episode, which history may record as pivotal. If the leadership learns its lesson and finally accepts that the market economy is as ineluctable as gravity, then the DPRK might conceivably survive on a reconstituted economic base and social contract, like today’s China or Vietnam. But if Kim Jong-il (or whoever) keeps trying to square the circle, under the delusion that correct politics is a substitute for sound economics, there is no hope.

Sea shells

Relations with South Korea remain an odd blend of sabre-rattling and dialogue. Four times in the past month, starting on January 25 and most recently on February 19, the North has declared a series of no-sail zones for varied time periods. Some of these adjoin two ROK-held islands close to the Northern coast, Baengnyong and Daechong. For three days (January 27-29) the Korean People’s Army (KPA) fired volleys of artillery shells near the Northern Limit Line (NLL): the de facto western sea border since 1953, which the North rejects.

Though no shells actually crossed the NLL, on the first day the South called this provocative and fired back – but again only within its own waters south of the line. By late February, a Southern defence spokesman called the latest shelling “a routine situation that is part of the North’s winter military exercise”, adding that this may go on till the end of March. Routine or not, a report submitted to the ROK National Assembly’s Defence Committee on February 19 said Pyongyang has reinforced its military along the west coast of the peninsula and has strengthened military drills.

Kaesong and Kumgang remain unsettled

The shelling did not stop the Koreas talking about their two joint venture zones just north of the Demilitarised Zone (DMZ). But they got nowhere, beiing far apart on the agenda, format and venue for talks. On the Kaesong Industrial Complex (KIC) – see last month’s Update for more details – the North suggested that the South’s issues – it wants smoother cross-border passage – were best left to military-level talks, which in the past have handled issues relating to the border and security. The South agreed, proposing February 23 at the border village of Panmunjom: the venue for all military meetings hitherto. The North then counter-proposed March 2, at Kaesong; but on February 22 the South said it will insist on Panmunjom, rather than set the precedent of holding a military meeting inside North Korea. With both venue and agenda still in dispute, the chances of progress on the substantive issues looks remote.

Mount Kumgang tours remain suspended

Separately, South Korea with some misgivings accepted the North’s request for talks on resuming tours to the Mount Kumgang resort, suspended since a Southern tourist was shot dead there in July 2008. At the talks held in Kaesong on February 8, North Korea asked for tours to restart from April 1. It breezily declared that the South’s three conditions – a probe into the shooting, efforts to ensure no repetition, and a cast-iron safety guarantee – had been met. But as the North well knows, the South’s key demand is to send in its own investigating team – which the North resolutely refuses. The Northern side proposed continuing the talks on February 12, but the South declined unless the North accepts their three conditions first.

More arms are interdicted

UN sanctions imposed last June after North Korea’s second nuclear test seem to be biting. In February South Africa told the Security Council that in November it inspected a ship headed for the Congo Republic (Congo-Brazzaville). The French owners reported suspicions about cargo they took on in Malaysia from a Chinese vessel. Seizing the containers, South Africa found that what the manifest called “spare parts of bulldozer” were in fact tank components. The shipping agent, and likely origin, is North Korean. China said it will investigate its own vessel’s role in the affair. UN resolution 1874 bans almost all DPRK weapons exports.

More ambiguously, on February 11 Thailand dropped charges against the crew of a plane seized in December and found to contain 35 tonnes of weapons from North Korea, including five crates of Manpads (man-portable air defence systems) which terrorists can use to shoot down aircraft. Next day all five were put on a flight to Almaty. Four are Kazakhs, and their government had asked that they be sent home to be tried. It will be dismaying if they are not.

Posted in 2002 Economic reforms, Arms shipment, Cabinet, Fiscal & monetary policy, Food, General markets (FMR: Farmers Market), Illicit activities, International Department (KWP), Kaesong Industrial Complex (KIC), Military, Mt. Kumgang Tourist Special Zone, Special Economic Zones (Established before 2013), Worker's Party | Comments Closed

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 »

The Moneytocracy of North Korean Higher Education

Thursday, February 25th, 2010

Daily NK
Yoo Gwan Hee
2/25/2010

Bribery, corruption and overweening power are ubiquitous in many areas of North Korean society, and today’s universities are no different. Instead of cultivating the ability of outstanding individuals, simple materialism rules supreme, teaching that money is the solution to every problem.

Like almost everyone in North Korea outside the elite, the lives of university students changed considerably in the days of the “March of Tribulation.”

Until the early 1990s, the idea of a capable applicant being unable to pursue post-secondary education due to financial difficulties was unheard of. In those days, the regime offered scholarships of 15 won (specialized departments 25 won) to university students. Since the currency swap in 1992, the size of scholarships increased to 50 won, and after the July 1st Economic Management Reform Measure in 2002, they increased again to 900 won.

But the range of recipients decreased markedly. After the ‘March of Tribulation’ in the mid-1990s, scholarships were only offered to those students in central universities like Kim Il Sung University. Students in regional universities had no chance of receiving fiscal assistance.

Before the “March of Tribulation,” students took North Korea’s university entrance exam and successful applicants were selected based on their grades, as they are in most developed, equitable countries. However, as the economic situation worsened in the mid-1990s, those with the money or “background” began to be selected at the expense of better, but poorer, applicants.

Then, after the year 2000, the amount of bribery required began to depend upon a student’s academic record. For example, those students with a much lower score compared to the pass mark who wish to attend average universities have to pay a bribe of $500~600. For leading universities like Kim Il Sung University or Pyongyang School of Commerce, students have to pay between $2000~3000.

Needless to say, students from poor families could not and cannot afford the degree of support required by universities, and so most have to stop their education.

Therefore, since the “March of Tribulation,” students from poor families have lost the chance to attend university. In comparison, students from rich and powerful families attend just so as to secure a cushy job later on, and their school lives are naturally very comfortable. Universities are solely oriented around those with money.

Of course, costs do not stop with admission bribes. In North Korean universities, a quarter of the calendar year is spent on mobilization for public works, marketed as obtaining real-life experience. In such cases, students are mobilized against their wishes. However, those from a wealthy family can avoid such activities by submitting goods or funding to their university.

Regarding spring work in the fields, for example, Mr. Kim (22), who attended Hamheung University of Mathematics until 2007, recently explained to The Daily NK, “Wealthy families submit the necessary funds or goods to the university every year to be exempted from mobilization. In the case of the 2007 farm village support battle, those students who submitted a carton of good quality cigarettes just rested at home.”

Some university students enroll in the military during their studies; however, those with money who wish to join the Party can just buy their way in, and also reduce the period of their military service, with a one million won bribe.

Also, during their university lives, students are duty-bound to take part in 6-months of Local Reserve Force activities. However, if a student offers up $300, he or she can simply rest without interference for the whole time.

That this materialism is even prevalent in public education causes the offspring of wealthy families to believe in the power of money and only money. Skill isn’t cultivated, it is bought, and needless to say the performance of North Korean universities is in a downward spiral as a result.

Posted in Arduous March, Education | Comments Closed

Kim Jong-il admits being ‘heartbroken’ over North Korean diet

Monday, February 1st, 2010

According to the Telegraph:

Rodong Sinmun, the official newspaper of the ruling Communist Party, said Kim’s immediate ambition is to end his people’s dependence on corn for subsistence and to feed them rice and wheat products instead.

“I’m the most heartbroken by the fact that our people are still living on corn,” he was quoted as saying. “What I must do now is to feed them white rice, bread and noodles generously.”

The paper did not disclose when or where Kim’s remarks were made or how he intended to improve the diet of North Koreans, who have for years suffered food shortages and even starvation.

Kim also urged North Koreans to keep a vow made to his father, the late president Kim Il-Sung, to build a nation whose people do not even eat corn.

Last month Kim described “white rice and meat soups” as a long-cherished dream for North Koreans while admitting to failing to deliver an acceptable standard of living for the communist nation’s people.

North Korea has suffered severe food shortages since a famine in the 1990s killed hundreds of thousands people. At the time it was reported that parts of the population had resorted to eating grass.

A shock currency revaluation on Nov 30 reportedly played havoc on distribution networks, aggravating food shortages and sparking inflation.

Read the full article below:
Kim Jong-il admits being ‘heartbroken’ over diet of North Koreans
Telegraph
2/1/2010

Posted in 2012 Strong and Prosperous Nation (Kangsong Taeguk), Agriculture, Food | Comments Closed

Nicholas Eberstadt on the DPRK’s new monetary policy

Tuesday, January 12th, 2010

Nicholas Eberstadt has some interesting statistics in a Wall Street Journal op-ed this week:

For a variety of reasons—possibly including unintended reverberations from the past decade’s nuclear drama—the remonetization [of 2002] did not work well. Too much new money was chasing too few goods, sparking significant inflation. By November 2009, the North Korean won’s black-market value in dollars was barely 5% of the level when the 2002 measures were implemented, a depreciation averaging over 3% per month.

…

The speed and depth of the won’s resulting plunge has been dizzying. The nominal market price of rice is reportedly higher today than it was in November 2009, before currency reform. This would imply 100-fold inflation and then some in just over one month. The won-yuan exchange rate along the North Korea-China border has reportedly dropped by almost 50% over the past month, even after discounting for the 100-to-1 currency conversion. The government apparently has no confidence in its own currency move, and is now betting against it. News reports indicate that Pyongyang this month is issuing soldiers in its public security forces twice their nominal monthly pre-reform wages (a 20,000% raise in light of the currency conversion). If the government finances more wage hikes like this by running the printing presses, it will turn the currency into a toxic asset no one wants to hold.

…

The botched currency reform also has revealed how little North Korean decision-makers understand their own economy, much less the outside world. On a related note, the regime’s supposed heir apparent, Kim Jong Eun, was the mastermind behind the North Korean currency reform, according to South Korean intelligence. This may just be bad intelligence or disinformation. But if accurate, it raises disturbing questions about the judgment of the rising generation of North Korean leadership.

Read the full story here:
North Korean Money Troubles
Wall Street Journal
Nicholas Ebererstadt
1/11/10

Posted in 2002 Economic reforms, Banking, Finance, Fiscal & monetary policy, Food, Price liberalization | Comments Closed

DPRK Policy on Foreign Trade

Tuesday, January 5th, 2010

Foreign Trade (Naenara)
January, 2010

(An interview of a reporter of Foreign Trade of the DPRK with Sin On Rok, director of a bureau of the Ministry of Foreign Trade)

Question: I’d like to have a talk with you about the DPRK policy on foreign trade. Would you please tell me about the fundamental of its foreign trade policy?

Answer: The DPRK Law on Foreign Trade was adopted by the decision of the Standing Committee of the Supreme People’s Assembly in 1997. Article 2 of the law stipulates that it is a consistent policy of the DPRK to develop foreign trade.

The fundamental of its foreign trade policy is to consolidate the foundation of the independent national economy and, on this basis, to expand and develop trade relations with other countries.

This foundation provides a material guarantee for promoting foreign trade on the principles of complete independence and equality. If the developing countries, in particular, fail to conduct trade business based on their self-reliant national economy, they can neither construct independent structure of trade nor defend their sovereignty in the end.

From this point of view, the DPRK government has consistently maintained trade policy of developing foreign trade on the basis of the independent national economy and further consolidating its foundations through foreign trade.

In the past the government has developed heavy industry with machine building industry as its core, light industry and agriculture simultaneously in conformity to the actual conditions of the country and, relying on them, produced and exported goods that are highly competitive in international markets. And it has always ensured that foreign trade serves development of the economy and betterment of the people’s life.

Q: What is the principle pursued by the government in foreign trade relations?

A: The DPRK government employs the policy of maintaining the principles of independence, equality and mutual benefits, as well as credit-first principle in the relations of foreign trade.

The government has so far developed trade relations holding fast to these principles and given active support and assistance to the developing countries in their efforts to establish the fair international economic order.

It has put forward the credit-first policy in trade dealings and ensured that all the trading corporations keep credit in their transactions so as to create better climate for foreign trade of the country. It is making efforts to establish rigid discipline that corporations should ensure the superior quality of exports, keep delivery date and faithfully discharge contractual obligations like payment for imported goods.

Q: I think the issue of making foreign trade diversified and multifarious also assumes due importance in the foreign trade policy of the government.

A: You are right. Article 3 of the Foreign Trade Law stipulates that diversification and variegation of foreign trade constitute a basic way for wide-ranging trade. The State shall ensure to deal with different countries and corporations employing various forms and methods in foreign trade.

For the sake of diversification of foreign trade, we pay a primary attention to the neighbouring countries in developing economic exchange and cooperation including trade.

It is due to the geographical location and role of our country in the economic development of the Northeast Asia and the rest of the world.

And the government executes a policy of expanding the scope of foreign trade to all countries in Asia, Africa, Latin America and Europe in its effort to make foreign trade diversified.

Entering the new era, our country intensified the diversified economic exchange and trade transactions with EU member nations.

The EU top level delegation paid a visit to our country in 2001. The DPRK-EU symposium was held in Torino, Italy in March 2007 and the 3rd DPRK-EU economic symposium held in Pyongyang in October 2008. These events marked important occasions in the development of economic and trade relations between the DPRK and the European countries.

The DPRK government is also carrying out the policy of making foreign trade multifarious in keeping with the developing trend of international trade.

It puts a stress on processing trade on the basis of its economic potentialities and up-to-date processing technologies.

The government encourages local trading corporations to import raw materials and accessories and to process and assemble them for export in different sectors of the economy such as textile, clothing, machinery and facilities, rolling stocks and electronic goods.

We are channeling much effort into the export of technological products like software relying on the development of information industry of the country.

Transit trade and consignment trade are also in full swing.

Q: What is the highlight in the export policy of the government at present?

A: The key issue in the export policy is to improve export structure from the export of raw materials into that of processed goods.

The government makes efforts to give full play to the potentialities of existing export bases while building new ones in various sectors, increase the variety and volume of exports and upgrade their quality.

It defined the production bases of internationally competitive goods as strategic export industries, and is concentrating its investment on them and paying a close attention to their scientific and technological development.

The government takes some measures to encourage the export business of the corporations with a view to increasing export volume of the country.

It affords preferential treatments such as loaning from banks and supply of raw materials and power to those export bases and corporations which have cultivated new markets with new items of export or produced and exported hi-tech goods.

Besides, the government simplifies export procedures and upgrades services of the export-related institutions so as to carry on the smooth operation of export business of the country as a whole.

The DPRK government will continue to promote the impartial and reciprocal economic and trade relations with all countries on the principle of independence, mutual respect and equality.

and

DPRK Tariff System
Foreign Trade, Naenara
Kim Tong Hyok, University of the National Economics
January 2010

The tariff system in the DPRK contributes to protecting the independent national economy and improving people’s livelihood.

The basic aim of the tariff policy in our country is to apply either no or low tariff on materials and goods imported for the acceleration of economic construction and the betterment of people’s life and high tariff on goods that have been or can be produced at home.

First, the government builds a tariff barrier against the imports which can be produced in our country.

High tariff is imposed on such imports as the goods that the domestic factories and enterprises are now producing or have potentials to produce, the products that are not needed at present in economic sectors, and the goods that are of no direct use for enhancing people’s living standards so as to increase the domestic production capacity and raise the quality of the homemade articles to be competitive in the world markets.

Second, the government imposes low or no tariff on the imports which are in short supply or unable to produce at home, i.e. the latest machines and equipment, oil and crude rubber needed for consolidating the foundations of the independent national economy and some of daily necessities that are more profitable to import than to produce at home.

It is impossible for each country to produce by itself all things necessary for its economic construction and people’s life because its natural and economic conditions and the level of productive forces differ from those of others.

Third, the government holds the principle to introduce advanced technologies in executing tariff system.

It imposes no or low tariff on hi-tech products and preferential tariffs on the goods imported by foreign-invested enterprises for the purpose of introducing advanced science and technology.

Fourth, the government defined correct criteria for tariff on the imports and is properly applying them.

It stipulated appropriate criteria of assessing the price of each variety of the imports pursuant to the regulations for the implementation of the DPRK Customs Law and the provisions of the Customs Law, and is now applying them in keeping with the requirements of the developing reality.

Besides, the government has prepared the catalogues of export commodities and the tariff rate table in conformity to the provisions of GATT and exercised tariff system suitable to each phase of development of the national economy, thus further promoting foreign trade and preventing tax evasion and other commercial wrongdoings which exert negative influence upon international markets.

Today the DPRK tariff system makes a big contribution to the protection of the independent national economy and the development of foreign trade.

Posted in International trade, Law on Foreign Trade, Ministry of Foreign Trade | Comments Closed

Farmers Receive First Cash Since 2004

Thursday, December 24th, 2009

Daily NK
Jung Kwon Ho
12/24/2009

The North Korean authorities apparently started paying farmers as of the 16th, starting with Migok Collective Farm in Sariwon, North Hwanghae Province.

In North Korea, the amount of work each farmer does is calculated and expressed in a numerical value, which is called “labor grade (노력공수).” After the harvest has been gathered, the state’s requirement is handed over, and then farmers are distributed food according to their labor grade, while surplus cash is also supposed to be distributed dependent upon a farmer’s labor grade and the profits of the farm as a whole.

Around the time of the July 1st Economic Management Reform Measure in 2002, cash was distributed in this way, but between 2005 and 2008 there was nothing.

For office and factory workers, payment began on the 17th at approximately the level of the July 1st Economic Management Reform Measure.

A source from South Pyongan Province reported to The Daily NK on the 23rd, “From the 16th, they started delivering cash to those farms which fulfilled the state’s grain production plan. For other farms, which could not accomplish the state’s plan, the authorities gave a subsidy.”

Since some collective farms have received an unusual amount of cash, it has become the talk of the town. In the case of the Migok Collective Farm in Sariwon, an average of 150,000 won per farmer was paid in cash.

Kim Jong Il conducted an onsite inspection of Migok Collective Farm in October, and it is considered a model case because it exceeded its state production target. Hence the unusually generous payments.

Farmers working for the Ryongyeon Collective Farm, which also achieved the state’s plan, got around 100,000 won each.

Despite this apparent state generosity, the source pointed out, “This cash distribution covered only those farms which accomplished state production targets. Since this year’s farming went sour, there are less than ten farms that achieved their targets across the whole country.”

Collective farms which failed to achieve the state’s goals got just 5,000 won per worker.

“This cash distribution seems to be just a one-off measure to straighten out the confusion after the redenomination and to soothe farmers,” the source also asserted.

Regardless, the cash will slow the entry of food into the markets, the source pointed out, saying, “This cash distribution and subsidies will make food circulation difficult in the short term.”

“When farmers do not hold any cash in their hands, their grain flows into the markets. For the time being farmers will not sell rice and food in the market because they have enough pocket money. It causes rising food prices.”

Additionally, the North Korean authorities still have not announced state prices since the redenomination, and they continue to heavily regulate the market. Therefore, food traders are watching the market situation without selling any food.

The logical market principle, that when harvested grain circulates in the market food prices go down, may therefore not hold true this year, and vulnerable classes’ will become more food insecure as a result.

However, the authorities are trying to assure farmers that there will be continuous measures to give them further benefits.

According to the source, “more benefits for farmers” implies a revised grain procurement policy.

He explained, “Until now, the authorities purchased rice for 20 won per kilogram from the farm and sold it for 45 won to the people. However, from now on, the procurement price will be 44 won and supply price to workers and the people will be 18-20 won.“

Posted in 2002 Economic reforms, Agriculture, Labor conditions/wages | Comments Closed

North Korean Economy Watch