The economic situation in North Korea By Timo Schmitz, Journalist

Transcription

1 The economic situation in North Korea By Timo Schmitz, Journalist North Korea has many ups and downs in its economic history that are interesting to analyze deeper. It starts in the 1950s after the Korean War when both Koreas were devasted. North Korea however recovered much sooner than their Southern neighbor. An advantage in the construction of its economy was the existence of a partly healthy infrastructure. In the Korean War many bridges were destroyed, but the roads and railway system however can be traced back to the Japanese occupation. North Korea increased its infrastructure and started to build up a concrete city Pyongyang. The city itself was just like a small village until the early 1900s, although it was one of two capitals during feudal reign in past-time Korea. Pyongyang itself being a small town was almost fully destroyed in the Korean War. After the establishment of the DPRK, the villages beside Pyongyang grew together and became city districts. Pyongyang grew rapidly, and so did its economy. Other cities that were completely destroyed in the Korean War were built up again, but now modernized, such as Sinuiju, the capital of North Pyongan Province. The living standard in North Korea was much better than in the South until the mid-1960s, when North Korean economy suddenly started to stagnate. In the 1980s, the situation recovered however and the DPRK soon was able to compete with its Southern counterpart again. In at about 1985, the power transfered slowly from Kim Ilsung to Kim Jong-il, as Kim Il-sung himself was already in his 70s and prepared the power transfer. However, he continued guiding the country, especially in case he was not too happy with what his son did. And therefore, the country could still keep in balance. After Kim Ilsung s death in 1994, Kim Jong-il had to go through the traditional mourning period. In traditional Korea, a son had to mourn for his father for three years, and so Kim Jong-il went a bit into the background, although not disappearing in politics, of course. In 1997, after finishing his mourning period, he overtook the country s power and decided to make Songun policy the state policy. Being a military fanatic, Kim Jong-il invested everything in his army. The Songun policy meaning military first -policy was introduced to privilege everything that had to do with military. Here comes the important point: His father Kim Il-sung always had food savings since North Korea is geographically situated in an area where vast storms destroy coastal area harvests, such as in Hwanghae the breadbasket of North Korea. As the centre of North Korea is very rocky, most of the high-quality agriculture has to take place in coastal areas. Therefore, the savings that were taken from the surplus in good years, were used to compensate bad years. However, Kim Jong-il focused on his military striking out the

2 Timo Schmitz: The economic situation in North Korea -2- costs for savings. One year later, in 1998, first signs of a famine started that totally broke out in With the help of foreign aid and money from South Korea, the North could start to modernize its industrial branch, the agricultural recovery however took time until 2002/03. During the famine, a phenomena arised that was completely unknown before: the so called kochebi. During the Kim Il-sung period housing and a guarantee for a living standard had been supplied by the state. As Kim Jong-il used all money destined for social activities for his huge military project, poor people now lost everything 1. These homeless people, mostly children, now wandered around the country to eat anything they could find, even waste. That s how the name kochebi became popular, as it is derived from Russian kochevnik meaning nomad. In 2002, several economic reforms and the establishment of the Sinuiju Special Administrative Zone, which was designed to test capitalism, were meant to change the country. Although the zone was de facto abolished after the governor, a Chinese-Dutch businessman had been arrested in China due to tax evasion, several small private enterprises were allowed, such as mobile snack bars on railway stations or little private shops on marketplaces in all over the country. The economy in North Korea was recovering that quickly that the living standard now started to rise continuously, so that people could even effort cars and North Korea started to produce its own cars. Even private-owned cars were allowed and the number of kochebi was sinking. Until 2007/08, there were almost no kochebis anymore, although the economic situation, which was growing, has been unsteady, since almost all economic branches favored military production. But also building new houses, better electricity and civil industry was moving forward. Even a mobile phone network covering the whole country and a country-wide internal network was constructed and built. The country however did not invest too much in other technologies, such as computers. Foreign media however continued to report a bad image about North Korea showing old images taken during the famine, making people believe that the citizens were still poor. Videos taken by tourists and journalists sometimes even secret footages clearly show that the economic situation in fact was unsteady but growing and developing. Especially the Pyongan provinces, including Pyongyang and Nampo, the Hwanghae provinces and Kangwon province were developing and conditions were quite good, while the Hamgyong provinces, Ryanggang and Chagang province still were partly far underdeveloped, and production conditions still were bad, however kochebi were rare. Kim Jong-il was about to address the development problems in Hamgyong and Ryanggang, but he died before a major change could take place. There was a great mourning for Kim Jong-il in many parts of the population,

3 Timo Schmitz: The economic situation in North Korea -3- and the reason seems too evident. Under his successor Kim Jong-un, the situation started to worsen rapidly. In spring 2012, I discovered a mass migration on tourist videos. Contacting Koreans I wanted to know whether anything happened. I was told that these people are in search for work. At the same time, I heard that a drought in late 2011 led to provision problems that were still small. But they were about to grow, since there was a huge national event planned for Kim Ilsung s 100 th birthday in This meant, that all grain was taken by the government quickly to supply the capital and its visitors. Pyongyang has a population about 3 million, there are rumors that the city was constructed for even more people, up to 9 million. I suggest, however, that the city was only constructed for 6 million people, since a lot of the city s area consists of parks, amusement sites, industry complexes as well as the leader s private amusement sites and other sites for sponsoring the government, such as the film studios. I assume that during a time when no event takes place, and therefore only 3 million people reside in Pyongyang, the food supply is only ensured by hair. During an event especially such a large event, where up to 500,000 people from all over the country, plus foreign guests and tourists come to the city the food supply seems not to be ensured anymore and therefore food from other provinces was taken to the capital. It was expected that the situation would recover after the event, but this did not happen. Malnutrition was reported from Hwanghae. Since there is a large power struggle in the government that even seems to affect the economic planning, several problems such as misplanning, corruption and discrimination of social classes lead to such a bad situation that a new starvation broke out in late 2013 and then a mass starvation started in The leadership however does not care about this problems. Since early 2013, new kochebis were reported. Their number was rising in late 2013, but since 2014 kochebis can be found again in all over the country. This time it is even worse. Soldiers are malnourished and therefore they steal the food of the even poor citizens on the streets. The Japanese-based information paper Rimjingang presented first new images on the situation in January A photo taken from Rodong Sinmun (the worker s newspaper), was shown on Rimjingang s website showing a commemorative photo with Kim Jong-un and a military unit. It can be clearly seen that most of the soldiers were malnourished and that their condition looked really bad 2. Rimjingang also reported about the new kochebis 3. Several new incidents seem to occur recently. Rimjingang reported that the government issued new 5,000 won bills which led to a mass panic as many people fear a money crisis, as it occured in The introduction of the new bill was also confirmed by my contacts,

4 Timo Schmitz: The economic situation in North Korea -4- explaining that the image of Kim Il-sung is missing now 6. Although there are many theories why the image is missing, I assume that Kim Jong-un removed his grandfather s face from the bill to remove his legacy and influence that he still has on its people s mind. While the word communism was already dropped out of the constitution in 2009 under Kim Jong-il, the constitution was revised again in 2012 under Kim Jong-un and the well-known Juche philosophy is mostly removed. Kim Jong-un, however, wants to continue the military-first policy and therefore spreads placing Kim Jong-il portraits in North Korea. The extreme militarization leads to an extreme negligence of the citizens. This leads to illegal trade, such as electronical goods (notebooks, computers, mobile phones), as well as CDs, DVDs and video games containing copied material, mostly Chinese or South Korean music or movies. Illegal stores and even underground house trading (as Rimjingang recently reported) 7 also occurs. In North Korea housing and the right to live in an apartment is guaranteed by the state. Therefore the majority of all houses are state property, belonging to the social collective unit. As such, selling, renting, and collecting any kind of financial reward on such properties is forbidden. However, in recent years, the state is no longer able to supply houses to fill the people s demands 8. The underground housing market started during the 1999 famine as many people needed money and therefore the sale of houses offered a much-needed source of emergency capital 9. As the houses are in state-property, it is not the apartment itself that is sold, but the certificate which guarantees the right to live in the apartment. For this reason, the housing trade in North Korea is based on the trading of an 'occupancy certificate' 10. This explains how it was possible that people became homeless. As they had nothing to eat anymore and costs for everything was exploding, they traded with their right to live in their apartment (a right that no-one can expel, according to the system, as it is a basic right since the government has the duty to grant apartments to the citizens). However, there is not only underground trading in dark channels but a kind of more official trading. The Rimjingang article states that besides the government housing policy, some state institutions are selling apartments or single-family houses as a means of earning money 11. It seems however, that even if the apartment or house is sold, it remains in state property 12. There are many births in North Korea and many families are big and even growing and therefore bigger houses or at least new houses are needed since the population is growing. Currently, there are almost no new state-run housing projects [...] underway. Because of this, the residential occupancy rights of residences allocated at the time when the socialist distribution system was functioning are also up for sale 13.

5 Timo Schmitz: The economic situation in North Korea -5- As more houses are demanded, the values of houses and apartments are rising, as Rimjingang reporters found out: In the 1990s, a high-class apartment in Pyongyang and other large cities was known as the '10,000 dollar apartment'. Now the cost of these urban dwellings has ballooned to almost ten times the original '10,000 dollar' price tag 14. Construction engineers, workers at construction sites and many others (forced and volunteer 15 ) are not jobless anyways. So what are they doing recently? Rimjingang also has an answer for this: In recent years, the North Korean authorities have been forging ahead with largescale construction campaigns such as the Masikryong Ski Resort and Munsu Water Park in a bid to further demonstrate the greatness of Kim Jong-un 16. Houses that have some features also have a higher value and there it goes back to the economic question, since some houses have authorized private garden which permits cultivating products for market as a source of extra income 17. Anything that is grown in those gardens can be sold and people can keep the money without taxes. Having a house with a garden guarantees a steady income. Sometimes, there are small fields next to houses, between houses and even between houses and the streets growing vegetables. I was reported that people in villages grow these vegetables together and in case someone needs them, anyone just takes them. This part of private village collectivization seemed to work between 2007 and However, since starvation broke out, it is not clear whether this public gardens are still in use. So let s take a small look on market prices as reported from last year (2014). As of July, the price of white rice that previously sat at 4,000-5,000 North Korean won per 1kg, shot up nationally to 6,000 won kg of potatoes however was priced at 400 North Korean Won, which is actually very cheap for North Korea 19. Rimjingang underground reporter believes that the price of the same amount of potatoes [in urban areas] will double due to additional transportation costs 20. The price for salt was 800 Won, according to the Rimjingang reporter, adding that even 800 won is not especially cheap for ordinary people 21. Many people in border areas use to pay in Chinese Renminbi, and prices on the market table are even written in both, North Korean Won and Chinese Renminbi, which also demonstrates that the Chinese currency is openly circulated in North Korean society 22. Many markets also accept US-Dollars or Euros. The price table also shows, that Chinese rice was cheaper than the domestic North Korean rice 23. No one really knows how the economic situation in the country is developing recently. The unemployment rate between 2002 and 2012 has been always at around 4 % 24 which shows that there is enough work to do in the country. However, working conditions and progress

6 Timo Schmitz: The economic situation in North Korea -6- cannot be counted with this number. The conditions within DPRK seem to be very extreme. While some provinces and counties deliver quite good conditions, other provinces or counties have quite poor conditions. Workers on construction sites are always sent through the country, where they are needed. It is reported that some of them sleep in tents next to the sites. While the last years promised a hope for further progress and development, most hope is currently smashed as Kim Jong-un s economic failures kicked the country back into conditions that were experienced for the last time 15 years ago. It is difficult to assume how long it will take this time for the economy to recover. Notes: 1. As a result, Kim Jong-il introduced a class sytem in which he categorized its citizens into politically reliable and politically unreliable. People that were part of the party or had relatives related to the party, military members and families that had members serving in the military were regarded as reliable, while people of the working class and kochebi families were classified as unreliable, since the government fears that they could defect as they won t be loyal to the Kim s family. The class system is active since 2000 and no one really knows how many categories exist. If someone wants to get a job, higher education or want to become a party member, as well as wishing to travel to foreign countries, permission depends on how the state classified them. 2. Paek Chang-ryong: Kim Jong-un's Starving Soldiers - "Just a spoonful of oil for me..." A soldier pleads for grace, Rimjingang/ AsiaPress, , retrieved on 3. Paek Chang-ryong: More Kotchebi Homeless Children Under the Kim Jong-un Regime, Rimjingang/ AsiaPress, , retrieved on 4. Paek Chang-ryong, Kang Ji-won, Ishimaru Jiro: Kim Il-sung s Image Gone from New North Korean 5,000 won Bill, Rimjingang/ AsiaPress, , retrieved on

7 Timo Schmitz: The economic situation in North Korea In 2009, the North Korean finance minister issued new bank notes. The exchange rate which was set led to the result that many people lost their savings. It is asumed that it was a sabotage act to strengthen sentiments against Kim Jong-il. North Korean minister Pak Nam-gi was executed for damaging the economy. Although some people regard the execution to be a pawn sacrifice, Pak was responsible for the monetary reform and some assume a conspiracy which was led by Pak. 6. Rimjingang mentions this fact, too. 7. Park Chan-u, Paek Chang-ryong, Lee Chaek (ed.): Growing Illegal Housing Market in North Korea, Rimjingang/ AsiaPress, , retrieved on 8. ibid. 9. ibid. 10. ibid. 11. ibid. 12. The Rimjingang article also gives clear hints, supporting this claim. 13. Park/ Paek/ Lee, ibid. 15. To some people it might seem odd that people do hard work on construction sites volunteerly, but people volunteer on these construction sites to get some food or money as an income to feed their families. Since jobs are rare recently, people take any job they can get. 16. Park/ Paek/ Lee, ibid. 18. Paek Chang-ryong: Price of Rice in North Korea Soars as Rural Dwellers Prepare for Winter, Rimjingang/ AsiaPress, , retrieved on 19. ibid. 20. ibid. 21. ibid. 22. ibid. 23. Compare the table in Paek

8 Timo Schmitz: The economic situation in North Korea Statista: Arbeitslosenquote Nordkorea, retrieved on Although all links were carefully chosen, I do not have any influence on their content. Therefore, I cannot take any responsibility in case that illegal or obscene content appears on those sites, in the future. The opinions stated on those websites, do not have to reflect the author s opinions and thoughts. Timo Schmitz. Published on 05 January