GoodFriends: Research Institute For North Korean Society


North Korea Today No. 426 October 26, 2011

[“Good Friends” aims to help the North Korean people from a humanistic point of view and publishes “North Korea Today” describing the way the North Korean people live as accurately as possible. We at Good Friends also hope to be a bridge between the North Korean people and the world.]
[Intro] North Korean Minerals Are Valuable Assets for South Korea
First Anniversary of Kim Jong-un’s Official Inception: Focus on Economics

Yes to Exporting Coals, but No to Exporting Management Right
Restricting Mining Is Easier Said Than Done
A Sudden Rise in Overseas Representative’s Tax Liability
Overseas Representative Frown on Arrogant Attitude of New Officials

[Intro] North Korean Minerals Are Valuable Assets for South Korea
It has been reported that many new economic policies have been proposed at the meeting of the Organization and Guidance Department held a year after Kim Jong-un, the current Vice-Chairman of the National Defense Commission, revealed himself to the world. Although the triple alliance between North Korea, China, and Russia will remain largely untouched, less extensive changes are to be made.

Strengthening regulation on foreign investments in mineral resources and exploiting the resources with North Korean technology is one of the proposed changes. The proposal would likely have stemmed from a growing concern that China may be overexploiting their mineral wealth and depleting it. But restricting foreign ownership or mineral rights will not bring about an immediate decline in exports, since the Party officials will be reluctant to give up such a lucrative enterprise. It is likely that the Central Party officials will not be easy to control.

It is truly a shame that the inter-Korean Economic Cooperation Project has been stopped short when we look at how North Korea’s mineral resources are being sold off at giveaway prices to foreign businesses. Mineral production is a project that is sure to benefit both North and South Korea; it must be partaken regardless of large investments that are needed for the infrastructure. It is imperative that we begin to work toward a cooperative measure with North Korea.

First Anniversary of Kim Jong-un’s Official Inception : Focus on Economics
October 10th of this year, which was North Korea’s Party’s Foundation Day, had a special meaning, since it also happened to be the first anniversary of military commissioner Kim Jong-un’s official inception to the Party. Military commissioner Kim was elected Vice-Chairman of the Central Party Military Commission at the 3rd Party Representative’s Conference held on the 28th of September last year, and inspected the troops at the official Review during the 65th Anniversary of the Party’s Foundation on October 10. This year there were no special external festivities, but internally there was a concentrated discussion on economic policy that would best suit a new leadership program. One Central Party executive said, “Subjects under discussion included an evaluation of this past year and future strategies. Diplomatically, a strengthened political, military and economic cooperation with China and Russia, and especially the alliance with China were highly valued above all else. Even in the times of the Great Leader the North Korean – Chinese relationship was never this close – this is how much the Party’s perception and evaluation of China has transformed since then. In various areas of Commerce, as well as of Trade, Industry, Sport and Health etc., the administrative sectors of the Party are actively making progress, for example by dispatching ambassadors to China and Russia to execute market research,” and essentially confirmed the North Korea – China – Russia triadic alliance and peace negotiations will remain untainted into the future. Since things were not working out with the United States government, he claimed there was no choice but to concentrate on diplomatic priorities with China and Russia to achieve a stabilization of the system and economic recovery.

“For our Republic, the current situation where the whole country is suffering from poverty and economic hardship as well as the international financial crisis leaves only expansion into the Chinese market as the only solution for survival. However there is strong concern about a complete reliance on China. We think participating in a six-party summit to achieve international cooperation and seek economic coordination with the international community will best expedite our nation’s economic recovery. It is only because people who can make proposals to the supreme leadership are so limited that we cannot seek public opinions on this issue; those who are well acquainted with diplomatic affairs, while they do assert that a North Korea- China –Russia alliance is basically the only ‘solution’, warn we must not completely rely on it. They say that we must deviate from a Pyongyang-centered foreign trade, to allow each city, prefecture of each region to make foreign expansion freely, and thereby take steps to resolving this economic hardship.” Such opinions are understood to be at loggerheads with those of the party leadership.

Yes to Exporting Coals, but No to Exporting Management Right
During the economic policy meeting held on the one-year anniversary of the official debut of Kim Jung-un, concerns over the public’s increased dependence on trade with China were expressed. Although it was acknowledged that a strong trade alliance between North Korea and China was unavoidable reality, a voice was raised to discuss a cutback on China’s aggressive investment on North Korea’s natural mineral resources.

This year’s trade dependency on China was over 80 percent as it was a year before. Minerals – coal, iron ore, and zinc – were the highest exported items to China. Few members of North Korean Cabinet expressed their worries on the sweeping of natural mineral resources by China. Citing an economists’ statement, “all natural resources will be dried up within a few decades if North Korea continuously sells its natural resources as raw materials to China at cheap prices,” the Cabinet members stated that the China’s encroachment had to stop before too late.

A Central Party official who attended the meeting said, “For years, we have had no choices but selling our natural resources to China to overcome economic difficulties and severe food shortages. However, at this meeting, many of us shared an opinion that we cannot keep on selling the resources until there is nothing left to be sold. We must not ignore the scary potential that the whole nation can be besieged by China if we continue to sell our natural resources as we have been doing thus far. Fundamentally, without natural resources, how will our future generations survive? Regarding all these, we agreed that we should produce goods, instead of relying on imported Chinese goods, and sell them at cheaper prices than those of China.”

The aforementioned party official’s statement implied that the North Korean Government’s intention to select Chinese investments on mineral mines in the future. A senior party official at Pyongyang also alluded to the similar ambiance as above. In his statement, the official said, “Due to the limited economic capacity, we were not able to develop mineral mines by ourselves. Unfortunately, this led to sales of the management right of our mines to foreign countries. So far, a huge amount of natural resources have exited North Korea bound for China at cheap prices. Needless to say, a serious concern over the continuous depletion of North Korean natural resources by China was raised by party members.

Furthermore, a voice of criticism was heard. According to the dissenter, the economic relief by trading so much coal and other raw minerals with China was not delivered as it was expected. As a matter of fact, we even sold coal for government agencies’ power plants to China to purchase food. However, we have not been able to solve the food crisis even with this effort. Therefore, there were plenty of similar opinions saying that we should export mined coal and other minerals to China instead of mining rights. Also, we should invest in the development of domestic technologies and economic capabilities so that we could process the raw materials and sell them at higher prices.”

Restricting Mining Is Easier Said Than Done
The incentive to impose restrictions on foreign investments and mining concessions was spurred on by the futility of selling off resources to China, which has not resolved the economic situation nor has it offered a long term solution to the failing economy. However, being more selective about Chinese investments is easier said than done. With economic sanctions continuously imposed on North Korea, unchanging international affairs, and worsening inter- Korean relations, North Korea would have nowhere else to turn. What would fill the economic void created by the absence of Chinese investments? The military, the party, and the cabinet do not have a reason to give up their way of earning easy money. It is likely that the interests of higher ranking leaders will conflict with those of the officials in charge of the infrastructure.

A Sudden Rise in Overseas Representative’s Tax Liability
The Central Party decided in a cabinet meeting that the funding supplied by ore and coal should be paid by raising the Overseas Representative’s tax liability from now on. The decision intends to increase the tax from $20,000 to $30,000. Overseas Representative officers have been astonished by the news. The general understanding among the officers is that they are repeatedly challenged by the rise in tax even before the chaos caused by the recent harsh inspections calms down. They do not think that that the new $30,000 liability makes any sense at all given that the requirement to provide 500,000 tons of food to the government is moving at a snail’s pace, although its due date is delayed by one month from September to October. One official lamented the situation by saying that “I can only smirk at the situation because the government raised the tax liability by $10,000 when I couldn’t even pay for the original amount of $20,000.

On one hand, the government frequently put us under inspection to see how much we keep money set aside, and on the other hand, it keeps raising the amount of tax liability; I don’t see how I can handle this tax liability. Now, every department has been paralyzed by severe inspection, and given that, how can I make money? I barely paid 4,500 Yuan for loyalty funds for the Party Foundation Day, and this tax liability is getting more demanding. When asked whether there was any significant difference since Kim Jong-un’s introduction as the Vice-Chairman of the Central Military Commission’s official one year ago, he answered, “In the past, Overseas Representatives prioritized political assignments; even when they could not make enough money to pay the tax, they would still be rewarded for successes on political assignments. Nowadays, however, the government only cares about receiving money. The government will not recognize political accomplishments if the tax isn’t paid.” The government is putting emphasis on the economic success over political success. Many think, however, that even with the government’s shift in their priority in consideration, its raise on tax liability is unrealistic especially after the slowing down of international trades caused by the recent harsh inspection. Some officials even say that “this time it is not going to be a problem that can be solved by replacing just a few people.”

Overseas Representative Frown on Arrogant Attitude of New Officials
The officials at Overseas Representative have understandably thrown out complaints about the colleagues who were newly deployed to their offices, such as a deputy restaurant manager who was naturally sent by the Security department. An increasing number of people openly rebuke new colleagues, saying “I can’t stand the new deputy restaurant manager. He is such an arrogant and impudent person. It is obvious that his connection to the new administration brought him to the position despite his lack of skills and experience. He despises everybody else.” Another official said, “I can’t stand him, either. He seems to think he is the great patriot our country needs. I think our country would collapse if someone like him made it to a higher position.”

An official who briefly visited Pyongyang said, “Old colleagues, myself included, rebuke new colleagues (behind themselves,) naming them one by one. I try not to make them upset; however, for fear of retaliation by using their authority to inspect me. Whenever they shoot a suspicious eye at us and treat us like criminals, (presuming we are guilty of inappropriate behavior), I am close to confronting them out of anger.”

The official also talked about Pyongyang’s food situation that has worsened enough to shock him, saying “I came to see (realize) why my family in Pyongyang asked me to send rice instead of money during the last spring hardship season. The rice price in Pyongyang soared to 2,900 won per kg. My family was right to tell me they could not get rice with the money I could have sent to them.” He felt sorry for his family members, who were not fed enough and lost much of their weight. Though hardly pressed to complete food procurement task, he was fortunate to feed himself without difficulty while working overseas.

He added that “It is absurd to expect overseas workers to be loyal to our country while treating them as criminals. (Presuming that they are guilty of inappropriate behavior) We are not asking for recognition (appreciation) of our contribution to our country. My hope is that the newly deployed people lacking knowledge and experience do not despise predecessor or those who has thus far worked overseas without legitimate reason. They will realize how difficult it would be to save face of the higher level officials by completing tasks assigned to them and, at the same time, to feed their family as well.


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