Daily NKQuestions or comments about this article? Contact us at [email protected] Rethinking policy on NK in the Kim Jong Un era By Daily NK – 2015.09.02 3:18pm Tracking the “unidentified yellow substance” being dried out near the Yongbyon Nuclear Center Facebook Twitter RELATED ARTICLESMORE FROM AUTHOR Analysis & Opinion Foundation of the North Korean Economy:Supply and Demand of Foreign CurrencyIf you include the tremendous amounts sentby South Korea during the Kim Jong Il era (over USD 7 billion since Kim DaeJung’s Presidency) and consider the myriad legal and illegal methods ofgarnering foreign currency that the regime uses to keep their accounts flush,the Kim dynasty has secured billions in what basically amounts to a slush fund.This money has been poured into maintaining the lavish lifestyle of the regime,pursuing developments on their ballistic missile program, cementing theregime’s longevity, and purchasing luxury items as gifts for the purpose ofbribing underlings. Kim Jong Il officially declared that simplybeing on the throne in Pyongyang was sufficient for commanding respect andmaintaining order over North Korea’s 24 million subjects, but the truth is thathe invested in gifts and kickbacks to his advisers and champions to purchasethat loyalty. Forget displays of military strength andprovocation, you can see the regime’s power by simply looking at the businessadvantages conferred to the authorities. Top officials can see strip shows, beentertained by traditional korean ga-yo music with wild dances, attend lavishbanquets, and more. These kinds of events and services are consideredunspeakably lavish and imprudent when viewed from the prudish, conservativeoutlook the regime encourages for its normal residents. But the power elite inPyongyang can commit such contradictions with a smile on their face. Such isthe potency of the regime. Kim Jong Un’s core supporting class is aminority of the population but they serve as the core of his political machine.The power elite of Pyongyang are expanding their grip by doling out privilegesto their supporters. The desire gratification business inPyongyang is in bloom. Men and women now hope to live well, eat well, dresswell, and revel in their opulence. Party loyalty can make such desires a realityfor the upper crust. Demand is up for luxury apartments, pizza,cafe lattes, amusement parks, fashion based on the cosmopolitan looks of SouthKorea’s K Pop stars, private educations, and even room rentals for premaritalrelations. To satisfy this demand, foreign currency is necessary. There is a pronounced trickle down effect.The upper class’s demand for the aforementioned goods and services resulting inlegal and illegal exports, foreign remittances, foreign sources of aid, and thedistribution and sale of imports. Of course, processing, distribution, andretail done at the local level by ordinary residents does not cross NorthKorea’s physical borders into the outside world. But it’s no exaggeration tosay that the source of most of the country’s economic activity comes fromforeign currency pulled in from trade and aid.80% of goods for sale at the jangmadang(markets), are said to originate from China. From thisperspective, it’s easy to see that the success of North Korea’s economy ishinged upon interaction with foreign entities and the foreign cash that suchinteractions bring in. In a 2013 publication from the UnificationPolicy Research Institute, analyst Jang Hyeong Soo said, “The total amount offoreign currency thus far accumulated by North Korea is not a modest amount,despite the fact that there are tremendous expenditures and deficits in certainsectors.” In the 22 years from 1991 to 2012, NorthKorea’s economy managed to bring in approximately $17.9 billion more than itexported, amounting to a significant deficit in terms of goods trade with theinternational community. If we look specifically at the supply and demand forforeign currency in North Korea, out of this $17.9 billion, $5.1 billion(excluding South Korean sources) came in the form of international aid andfunds provided for purposes such as encouraging “denuclearization.” Looking atNorth Korea’s oil and coal trade with China over the course of the same period,North Korea maintained a profit of about $4.8 billion. Trade with South Korea brought in a profitof approximately $4 billion during this time. Cooperative ventures includeprojects like the Kaesong Industrial Park and the Geumgang tourism center. Ifwe include Chinese tourist visits, foreign cash remittances, and shippingcharges, North Korea’s service industries netted a handsome profit of $3.9billion in those 22 years. Overseas restaurants and other projects, such asproviding manual labor for overseas logging and mining companies, brought inabout $1.3 billion. Illegal weapons and other illicit sources of trade amountedto approximately $600 million each, amounting to North Korea’s smallest sourcesof foreign cash. If you add up all the different kinds of illicit and illegalsources of income for the regime, we get a total surplus of about $2.8 billionover those 22 years. Jang Hyeong Soo believes it is prudent topause the discussion here in order to contemplate an important consideration.Most estimates indicate that smuggling operations between North Korea and Chinarepresent a deficit for North Korea. However North Korea’s illegal overseassale of gold bullion more or less balances out that amount. On the whole, NorthKorea has been able to accumulate ample stacks of foreign cash that has beenpumped in through the methods described above. “This accumulated cash hasserved as the unofficial source of money used for market trading even at thelocal level in North Korea. This has opened North Korea’s economy up to avulnerability. The works can be gummed up when liquid supplies of foreign cashexperience sudden changes or become unavailable. However, the foreign cashearned at the government level has been sufficient to continue investing in thedevelopment of ballistic launch capabilities for nuclear projects,” Jang HyeongSoo explained. Meanwhile, Jang Hyeong Soo also notes thatthe meteoric increase in cell phone availability and usage that began inPyongyang reveals the regime’s intent to rake in foreign cash from anothersource: its own residents. The residents’ contribution is not meager. Forprospective cellular customers, the path to their object of desire is paved inforeign currency. That’s because you need foreign currency to buy the phone andthen you’ll need more foreign cash to pay for the service. The registration feeis $140 and the minimum price for a new phone in 2012 was an average of $300.The production cost is about $80. If we use those figures, and consider thattwo million people signed up for cell service from 2008-2012, that means theregime netted a profit of $280 million in registration fees and $440million in phone sales. In four years, the total amount of foreign cash movedfrom residents’ hands to the regime comes to about $720 million from phonesalone. This kind of figure reflects the relative ease at which North Korea isable to extract foreign cash from various sources. According to data from the Korea TradeInvestment Promotion Agency [KOTRA], North Korea brings in about $230 millionin foreign currency per year. The Korea Development Institute [KDI] puts thatnumber at $440 million per year. Of course, a significant portion of this ($7billion) was the result of Kim Dae Jung’s summit meeting with Kim Jong Il. Illegal remittances and profits from Kaesong Industrial park are prime examplesof foreign cash sources made possible by the Sunshine Policy. However, NorthKorea’s shelling of the Cheonan ship, which killed 46 South Korean sailors,prompted President Lee Myeong Bak to enact the May 24 Measures. These economicsanctions aimed to apply political pressure by isolating the North’s economy.But exports for minerals and manpower sharply increased since then, which gavethe North an opportunity to compensate for the losses they suffered when theylost the cooperation of South Korea. In conclusion, through their desiresatisfaction businesses and market activities, Pyongyang has been able tocontinually secure enough streams of inflowing foreign currency to keep themafloat. In many ways, foreign currency sources can even be looked at as thefoundation of the North’s economy. The Possibility that the Bribery-MarketEconomy System will Expand The following conditions serve as potentialconstraining factors for the North’s Bribery-Market Economy: 1). EconomicFeatures, 2). Structural Features, and 3). Political Features. First, we shall turn our attention toeconomic factors. The economy’s expansion will continue to depend uponsteady streams of foreign cash. The regime and the ruling elite, along withsupporters in organizational roles from the middle class, and normal residentsare all involved in the earning and spending of foreign cash. However, Kim JongUn is going to try to continue limiting and controlling the flow of said funds.For example, the purge of Jang Song Thaek, who had amassed a fortune of 80million euro. We can also look at the cell phone industry as a prime example ofhow the regime relocates foreign cash into regime coffers. If we exclude thewide scale smuggling operations at the Sino-NK border, there are no majorforeign currency operation in the country that the regime does not have controlover. Now we will turn our attention tostructural factors. Through its industries, the North simply attempts to uselarge scale domestic production for the sake of creating short term profits.This is done at the expense of longer term enterprises. The profits of longerterm enterprises could be reinvested in infra projects and other services forresidents. The regime’s short term profiteering is done at the expense ofordinary residents. There are now about 20 Special Economic Zones (SEZs) inNorth Korea. But progress and development has been stalled at most of them. Theproblem with these SEZs is that they lack roads and electricity, and the regimeis turning to outside investors to develop these aspects for them. As long asthe country continues to rely on Chinese products and invest in short termmoney making schemes instead of long term investments, there is no way thatthey will be able to break the cycle and begin developing their owninfrastructure. Last of all, we look to political factors.To understand present conditions, it’s necessary to take a slight detour to thepast in order to look at Kim Jong Il’s reign. During the tenure of South KoreanPresidents Kim Dae Jung and Roh Moo Hyun, Kim Jong Il believed he could veryquickly improve and develop infra projects through Southern assistance. Inlooking to improve his nation’s economy, Kim Jong Il did not merely wantfactories from the South, he also wanted energy solutions, railways, streets,medicine, and educational training as part of a holistic attempt to revitalizethe North’s social infra. Even worse, through the six party talks, he was onthe path to receiving even more international aid. But Kim Jong Il made aconscious decision to prioritize nuclear developments over and above the welfareof his people. He chose to solidify his political foundations at the expense ofall North Koreans. The real reason that the Kim dynastycontinually disregards making improvements to the living standards of itspeople is because even though North Korea is regarded as a very poor nation andthe people suffer as a result, the regime is satisfied as long as those inpower can maintain their authority through the use of totalitarian tactics suchas political prisons, incrimination based on guilt by association, severepunishments for minor offenses, and brainwashing propaganda. Kim Jong Il canfocus merely on the welfare of his support circle in Pyongyang, as they serveas his limbs in doing his bidding. Even if Kim Jong Il had sincerely wished toraise the standard of living, he would have been too late. The relationshipbetween structural components of the the economy and his political base wouldhave made those sort of improvements unlikely. That means that short of atransition to a market economy, progress on this front is very difficult. Butby missing opportunities for incremental economic reforms, we saw the economyswallow up portions of Kim Jong Il’s political base. For this very reason wesaw Kim Jong Il be satisfied to use Kaesong Industrial Park merely as a meansto receive wage payments in foreign currency instead of benefiting from theeconomic model in order to learn about market economies and grow organic NorthKorean enterprises. In the absence of strong North Korean enterprises, Kim JongIl turned to foreign currency earning schemes to make up the difference. To putit simply, Kim Jong Il was satisfied with using the bare minimum to accomplishhis political supremacy. However, the situation has changedsignificantly since Kim Jong Un came to power. As portrayed by North KoreaConfidential authors Daniel Tudor and James Pearson, North Korea’s sociallandscape has undergone significant changes. Following the Arduous March, afamine in the mid 1990s that killed hundreds of thousands, ordinary residentsresorted to capitalist methods in order to make a living. With theconsolidation and increased importance of public markets came exposure toforeign ideas through South Korean soap operas and other television programs,movies, DVDs, USBs, and Micro SDs. As a result, most North Koreans began toturn their back on the tedious and propaganda infused Pyongyang films and mediathey were used to in favor of South Korean classics like, “Gyeo-ul Yeon-ga,”(Winter Sonata) and, “Ching-gu,” (Friend). Additionally, when the StateDistribution System failed to deliver food to residents, loyalty to the regimeeroded congruently. Though it was customary to view such banned foreign filmsalone in the beginning, people gradually came to watch with friends and family.These days, a little bribe can get North Koreans out of many of their problems. Witnessing the surging popularity of“entertainment-rich capitalist culture,” North Korea attempted to compete bycreating a schedule of programs that imitated Korean Wave media products fromthe South. For example, North Korea’s Korean Central Television aired moviesfrom England and America. At a popular New Year’s concert in 2013, theMoranbong band unveiled dance routines and music reminiscent of cabaret. Butthe most memorable aspect of this event was when a Mickey Mouse character tookthe stage while an animated video of missiles striking America played on ascreen in the background. The spectacle was unique indeed. While simultaneouslystriking and attacking Imperialist America, a canonical American image wasbeing accepted into the cultural fabric of North Korea. So, while these sorts of Korean Wave andinternational cultural phenomena were being accepted into the heart of NorthKorean culture, Kim Jong Il continued to propagandize about how North Koreawould emerge as a strong and prosperous nation in 2012. Even if there was nopractical possibility of this happening, the regime was determined to slap thattitle on the nation by 2012. Aside from an intercontinental ballistic missilelaunch at the end of 2012 and a nuclear test at the beginning of 2013, there islittle to no evidence that North Korea has any characteristics of a great andprosperous nation. The regime became unable to deny or ignorethe presence and importance of the jangmadang. The ruling elite themselves havea preference for Korean Wave and international media. Therefore, it is againsttheir interest to block the smuggling of foreign media in any systematic way.Between the jangmadang, foreign media, and the desire satisfaction businessesdeveloped to cater to the wealthy and connected Pyongyang upper crust, NorthKorea was forced to become accustomed to this unblockable “trilemma.” Sick ofhearing about myths and fabrications surrounding the Kim dynasty, ordinaryresidents have grown tired of propaganda. This trend is particularly strongwith those who grew up after the 1990s, when faith and loyalty in the regimereached an all time low following the suspension of the public distribution (ration)system. For this generation, survival and desires are more important thanloyalty. Success and money are more important than ideology. We understand that there are manymotivations and goals for the changes that the Kim Jong Un regime is beginningto institute. First, a premium is being placed on the desire satisfactionbusinesses that cater to the Pyongyang elite. Foreigners witnessing thelifestyles of these Pyongyang-ites (or Pyonghattanites as they are sometimesreferred to) might be fooled into thinking that North Korea’s economy isbooming. Next, the regime collects on bribery systems surrounding thesebusinesses, which gives them an additional way to suck up and monopolize theirhold on the nation’s limited stocks of foreign currency. North Korea’s societyis becoming increasingly polarized. The regime needs to keep their supportersat the top and prevent the emerging market class from garnering too much sway.To put it simply, Kim Jong Un is going to have to institute a plethora ofchanges in order to maintain the status quo. But there are no guarantees that we willsee continued change in North Korea. Actually, the potential for the oppositetrend to emerge is a bit higher. In order to gain a tighter control of theforeign currency, Kim Jong Un will likely continue to revitalize Pyongyang andkeep his compadres in riches. This will inspire the middle class to give bribesand pledge loyalty to the regime in order to break into the coveted innercircle. Under such a system, the vast majority of normal residents willcontinue to live a persecuted existence, defined by toil and scraping by, allso that the regime can maintain its power. The Mysterious Future of the Kim JongUn Regime and a Paradigm Shift in Inter-Korean Relations However, the collaboration between thebribery-based market system and the Kim Jong Un regime’s political base willnot be a lasting union. First of all, whether they are a brainchild of Kim JongUn himself or a product of his leadership team, the crazy acceleration ofpolitical purges, reshuffling, and appointments is not a good start on the pathto becoming a prosperous nation. Generals’ stars have been plucked, Kim JongUn’s uncle Jang Song Thaek has been executed, defense minister Hyon Yong Chol, was executed for “dozing off at a meeting.” Although suchmaneuvers are meant to project strength, these episodes highlight the regime’sinstability. North Korea has collected the triple crown of decrepitude bynabbing the number one ranking on the corruption index and last place rankingsfor democracy and political legitimacy. Expecting economic progress in suchturbulent times in pure nonsense. In July, the Korean press did a report on topNorth Korean generals living in exile abroad. With the continuation of Kim JongUn’s lunacy, we can expect to see this cycle of bringing in new leadership andkicking out the old continue. The influx of Korean Wave and foreignculture into North Korea’s borders is unlikely to stop anytime soon.Particularly Pyongyang, but also perhaps other regions, will begin clamoringfor an uptick in the availability of desire satisfaction services. In point offact, right now Chongjin’s women have more fashion freedom than theircounterparts in Pyongyang. These girls regard even Ri Sol Ju as a stodgy andconservative dresser. The first region to stop receiving rations from thegovernment during the 1990s famine was North Hamgyong Province, which islocated near the Chinese border. Many in this province are the friends andfamily members of defectors. People from this region use cell phones on Chinesenetworks to exchange information with the outside world. Moreover, the regionsnear the ceasefire line in the south have easy access to South Koreantelevision and radio broadcasts. With the right gear, it’s possible to get infoin real time from South Korea. Therefore, these regions are heavily subject tothe winds of change. Winds that are eroding Kim Jong Un’s political legitimacy. More than anything else, Kim Jong Un’snuclear tests and developments are a threat to the peace and stability of allNortheast Asia. This makes for a complicated political environment andmotivates South Korea to partner up with America for the placement of missiledefense and retribution systems. But in totalitarian North Korea, Kim Jong Unhas no choice but to launch missiles in the Western Sea or near the DMZ. SouthKorea is discouraged from developing its own nuclear capabilities by theworld’s powers, so a conflict in the region could easily escalate in a dominoeffect. In this type of atmosphere, there are many who hold the position thatin order to equalize the balance of power, South Korea needs to develop nuclearweapons of its own. Supporters of this position are likely to multiply. The KimDynasty labored for 30 years to secure nuclear abilities and gain thecorrespondent tactical advantage. It’s hard to estimate what would happen ifNorth Korea were actually to fire a nuclear missile, but it is probable thatthe regime would not be able to exist for very much longer after the fact. This is the point where South Korea shouldseriously reconsider their policy agenda. Thus far, most of South Korea’sinteractions with the North have begun with the premise that the North requiresvast amounts of economic aid. The left wants to move forward with symbolicgestures, exchanges, and reconciliation: in the model of Kim Dae Jung’sSunshine model. The right favors economic assistance on the condition of nucleardisarmament. President Park’s July 1st, 2015 suggestion that steps towardsnuclear disarmament be traded for infra development in North Korea’s SEZscertainly fits within the conservative party’s mold. But these tactics havecontinually failed in the past and we have no expectation that things willchange for the better in the future. Once the North gets rid of their nuclearcapabilities, they know that the South and the world at large will be able tosimply ignore them. In this light, North Korea really does notneed our economic assistance at the moment. As we have seen from Jang HyeongSoo’s paper, the North is skilled at bringing in and retaining foreigncurrency, which it can use to put out any economic fires should they arise. Thereal explanation for their economic depravity is hidden within the nature ofthe regime itself. The upper elite feed off the misery and suffering of thecommon citizens. Without this oppression, they would not long be able to retaintheir positions of authority. For these reasons, North Korea has an incentiveto continue antagonistic behaviors on the world stage in order to getattention. South Korean presidents have a one term (five year) limit, whichgives them little time to make progress in the face of such antagonism. NorthKorea is the only winner in this game of chicken, of provocation and aidsolicitation. That’s why South Korea’s policies have been so inept at dealingwith the Kim Dynasty up to this point. South Korea should respond in kind to theNorth’s antagonistic behaviors. South Korea needs to continue the legal andlarge scale introduction of foreign ideas and information into North Koreawhile simultaneously pressuring the regime to disarm their nukes. It’s time tostop looking at the North as a little brother in need of economic assistance.Now is the time to look for the regime’s breaking point in order to stop thehorrors that they regularly commit on their people in order to retain theirauthority. The time has come for a fundamental shift in policies regardingNorth Korea. Considering the fact that the North will never willingly throwaway their nuclear capabilities, the South needs to develop a system ofpolitical and military counter measures in tandem with a new diplomaticapproach.*Views expressed in Guest Columns do not necessarily reflect those of Daily NK Is Nuclear Peace with North Korea Possible? SHARE Analysis & Opinion Pence Cartoon: “KOR-US Karaoke” Analysis & Opinion Analysis & Opinion
RelatedSchool Gardens in Manchester to Establish Compost Heaps RelatedSchool Gardens in Manchester to Establish Compost Heaps School Gardens in Manchester to Establish Compost Heaps EducationFebruary 2, 2009 Advertisements RelatedSchool Gardens in Manchester to Establish Compost Heaps FacebookTwitterWhatsAppEmail School gardens in Manchester are to begin establishing compost heaps as part of the requirement to maintain a school garden under the Jamaica 4-H Clubs School Garden Programme.At a meeting of the Manchester 4-H Clubs Advisory Council held on Thursday (Jan. 29) at the Rural Agricultural Development Authority (RADA) Office in Mandeville, Jamaica 4-H Clubs Parish Development Officer, Malonia Harper informed that, “we are in the process of discussing the establishment of compost heaps as a project in the schools in Manchester. We will be sourcing the books and other materials. We have gotten commitments for the vermin-compost aspects as we will be getting training through Caribbean Agricultural and Research institute (CARDI)”.Composting recycles organic household and yard and waste such as fruits, vegetables, yard clippings, and manure into a useful humus-like soil end product called compost. This in turn permits the return of needed organic matter and nutrients into the food chain, and reduces the amount of “green” waste going into landfills.Worm composting or vermin-composting is a method of recycling organic household and yard waste by using the Red Wriggler worms in a container. Food waste and moistened bedding are added, and the worms and micro-organisms eventually convert them to rich compost. The worms then excrete a soil rich-nutrient material called worm casting, which is added to soil to create a healthy growing environment for plants.