Taep’ung Investment Group Formally Dissolved

A 2010 meeting of borad members of the DPRK State Development Bank, linked to the Taep’ung International Investment Group. In this image are Jon Il Chun (R) and Ro Tu Chol (2nd R) (Photo: KCTV screengrab)

Yonhap News Agency reported and confirmed on 1 February (Friday) that the Korea Taep’ung International Investment Group has dissolved.  Taep’ung began as an energy provider selling oil and gas (via Sinu’iju) to the Korean People’s Army [KPA] and Korean Workers’ Party [KWP] Central Committee.  Its leading executive was Pak Chol Su, a Korean resident in China.  Through his sales of energy supplies to the party and army, Pak became part of the Pyongyang social scene and eventually developed close ties with senior KPA and KWP officials.  In 2006 Taep’ung was formally organized as one of the country’s direct foreign investment entities.  Until 2010 there was little reported about Taep’ung’s activities in the country.

In early 2010, Taep’ung was designated as a key investment entity of the DPRK through authorization by Kim Jong Il and the National Defense Commission.  On 20 January 2010, the Korea Taep’ung International Investment Group was formally incorporated and held a meeting of its 7 member board of directors in Pyongyang.  KWP Secretary and United Front Department Director Kim Yang Gon was appointed director-general of the board in his capacity as Chairman of the Asia-Pacific Peace Committee with Pak Chol Su appointed a deputy director-general of the board.  According to DPRK state media Taepu’ng was organized under the auspices of the DPRK National Defense Commission, the DPRK Cabinet and Ministry of Finance and the Korea Asia-Pacific Peace Committee.  Incorporated and organized alongside Taepu’ng’s expansion was the State Development Bank, which would be led by Jon Il Chun, a proxy for the National Defense Commission and a close aide to the late leader Kim Jong Il.  Jon, also (and currently) a deputy director of the KWP Finance and Accounting Department, was elevated to head the State Development Bank at the same time he was appointed to manage the powerful DPRK conglomerate Taeso’ng Group and as the key head of Office #39, lucrative entities earning foreign currency for the DPRK.  Taep’ung had attained such a flavor-of-the-week status  that one of its key KPA contacts appeared on an April 2010 military promotions list.

Despite several attempts, including the internal transfer of several state-owned enterprises, and a high profile trip by Jon Il Chun at the head of a large delegation of executives under the auspices of Taepu’ng, the company attained little to no foreign direct investment.  There were also unconfirmed  (and likely erroneous) rumors Taepu’ng became the business rival to another DPRK entity, reportedly  established as a competing venture by Gen. O Kuk Ryol.  According to Yonhap, Taep’ung “oversaw the now-suspended joint tourist program in Mount Kumgang on the eastern coast of North Korea” and  was dissolved along with “another extra-governmental organization in charge of trade promotion and foreign investment with its work believed to have been reassigned to the government’s Commission for Joint Venture and Investment.”  It appears that a lot of direct foreign investment has now been consolidated under the Joint Venture and Investment Commission [JVIC], which is under the direction of Ri Ryong Nam and Ri Chol, along with the heavy hand of the Ryo’ngdoja, Jang Song Taek.  There also became problems with Taepu’ng’s Chinese backer Pak Chol Su and it did not help Taepu’ng’s external activities to have the imprimatur of the National Defense Commission, which is subjected to numerous United Nations and unilateral sanctions.

Similarly Taepu’ng’s existence may have presented a fundamental obstacle, or proven the wrong entity, for progress in the development of Special Economic Trade Zones in Rajin-So’nbong (Raso’n) and Hwanggu’mp’yo’ng/Wihwa Islands.  Of course, one corporation is but a small obstruction to howeverUnited Nations Security Council reacts to the potential nuclear test.   And yet, development in Raso’n (despite what one might read in the general lit.) seems to making some progress, likely in anticipation of the thaw of Unggi Bay.  It remains to be seen if the upcoming nuclear detonation and its UNSC blowback will affect the activities and formation of various PRC-DPRK development working groups (anchored in China) in late December 2012, and the signing of additional and explicit agreements on infrastructure and design using both DPRK and Chinese entities (no one will use the term iron-clad, just yet).

On 23 January, Chinese media reported that the DPRK Government approved the opening of a Chinese commercial bank primarily to settle transactions in Raso’n.  The bank was founded and a ribbon cutting ceremony held on 18 January.  According to Hunchun Rexian “Chinese Commercial Bank was put together and founded by China Gold Trade Exchange (Dalian) Company Ltd. The bank’s primary business is renminbi settlement, handling letter of credit, bill of exchange, letter of guarantee, and guaranty for cross-border renminbi transactions, and offering savings, loans, banking, and other financial services. Chinese Commercial Bank was founded to conform with the needs of massive development of Sino- DPRK economic and trade at present as well as the needs of the “Outline of General Program for Joint Development and Joint Management of Naso’n Economic and Trade Zone As Well As Hwanggu’mp’yo’ng Economic Zone,” which was signed by China and the DPRK; it will act as a bridge and a bond in promoting and safeguarding Sino-DPRK economic and trade development.”   Hunchun (PRC) Vice Mayor Ren Puyu said that, ”Agreement on Joint Development and Joint Management of Raso’n Economic and Trade Zone” between the Chinese and the DPRK governments, and is the bridge and bond for serving Sino-DPRK financial cooperation and trade interactions; it will definitely play a positive role in promoting Sino-DPRK economic and trade interactions as well as economic prosperity in the future.”

Pregaming the 12th SPA’s 6th Session (revised)

Corrected to reflect the two inter-Korea special administrative regions in Kaeso’ng and Mt. Ku’mgang

The 12th Supreme People’s Assembly [SPA] will hold its sixth session on 25 September.  Ahead of the DPRK’s unicameral legislature convening an unusual second session during a given year, there are indications that the country will publicize modifications to current agricultural policies and expand special administrative zones.

There are rumors that the SPA session will ratify a new agricultural policy.  Citing reports from Reuters and the Associated Press, the BBC reports:

Reports of the possible changes came from both inside and outside North Korea.

Farmers in North Korea are currently required to hand over almost all of their production to the state, after keeping a portion for their families.

But two farm workers south of Pyongyang told the Associated Press (AP) news agency that new rules – allowing them to keep any surplus after a government quota had been met – would be implemented later this year.

“We expect a good harvest this year,” farmer O Yong Ae told AP. “I’m happy because we can keep the crops we worked so hard to grow.”

Reuters news agency also reported the plan, citing an unidentified source with ties to Beijing and Pyongyang.

“Peasants will have incentive to grow more food. They can keep and sell in the market about 30-50% of their harvest depending on the region,” the news agency quoted the source as saying.

No official announcement has been made but analysts see it as a sign of a potential change of direction under the country’s new leader, Kim Jong-un, who took power after the death of his father Kim Jong-il in December 2011.

On a personnel shift related to agricultural policy; prior to the 12th SPA’s 5th session in April 2012, DPRK Cabinet Vice Premier Kim Rak Hui (Kim Rak-hu’i; Kim Nak-hui) was quietly retired from her government position.  Kim spent most of her career as an agricultural official on local people’s committees and rural management committees; she was designated a national hero by Kim Il Sung for successfully administering food supplies during the Fatherland Liberation War (Korean War).  If reports about Kim Jong Un privately announcing a new agricultural policy in late June have any degree of accuracy, they were formulated weeks, if not months, in advance.  Kim Rak Hui’s retirement would have been necessary to undercut senior, internal opposition and remove a public figure who might be associated with the old policy.

The opening ceremony of the 8th Autumn Pyongyang International Trade Fair at the Three Revolutions Exhibition in Pyongyang on 24 September 2012 (Photo: KCNA)

View of the 8th Autumn Pyongyang Trade Fair at the Three Revolutions Exhibition in Pyongyang (Photo: KCNA)

Ahead of the 12th SPA’s 6th session on 24 September (Monday) DPRK state media featured several news items on agriculture and economic development.  The 8th Pyongyang Autumn Trade Fair opened at the Three Revolutions Exhibition in Pyongyang.  At the opening ceremony KCNA reported that “speakers said that the fair play a positively role in expanding the economic relations among the nations as well as in joint venture, investment induction and science and technology exchanges” and the country “will, in the future, too, continue to boost bilateral and multilateral cooperation with other countries and regions in economic trade on the principle of equality and mutual benefits.”

Bicycles produced by the Pyongyang Joint Venture Bicycle Factory on display at the Foodstuff and Daily Necessities Exhibition House in Pyongyang (Photo: KCNA)

KCNA reported that the Ministry of Foodstuffs and Daily Necessities Industry opened an exhibition in Pyongyang’s Sosong District.  The two-story exhibition facility showcases food products, candy, bicycles and cosmetics.  The exhibition’s manager, Sonu Myong Hui told KCNA: “The exhibition house was built to help raise competitiveness among factories under the Ministry of Foodstuff and Daily Necessities Industry and timely make products suitable to the consumers’ demand, as intended by leader Kim Jong Il who cared so much for the people’s livelihood in his lifetime.It also carries on commercial activities.”

Sonu Myong Hui, manager of the Foodstuffs and Damily Necessities Exhibition House in Pyongyang (Photo: KCNA)

KCNA also reported that Kangwo’n Province the “policy of the Workers’ Party of Korea on stepping up the building of a thriving nation with locally available raw materials and technology and by indigenous efforts through scientific and technological development is yielding good fruits.”  KCNA reported a series of developments in the agricultural sector, the production of fertilizers and livestock fodder and cement production.  According to KCNA, “officials and scientists and technicians are intensifying the scientific researches into the projects for reenergizing economy and improving people’s living standard after setting higher goals, not remaining self-complacent with their successes.”

Views of Special Administrative Regions/Economic Zones in the DPRK.  The top image includes two inter-Korean regions, denoted in purple.  Blue denotes a designated SAR/EZ currently under development. Red denotes an area currently reported to be under consideration for SAR/EZ designation. Green denotes an area previously designated an SAR (Photo: Google image)

There are rumors that the SPA will announce an expansion of special economic zones.  Currently, there are two economic zones in the DPRK: Raso’n (Rajin-So’nbong) in the country’s northeast and Hwanggu’mp’yo’ng-Wihwa Islands in the country’s northwest, in addition to the inter-Korean zones at Kaeso’ng Industrial Complex and the Mt. Ku’mggang area.

Tokyo Shimbun reported on 23 September (Sunday) that the DPRK is considering opening up additional economic zones in Namp’o, South P’yo’ngan Province, Haeju in South Hwanghae Province and Sinu’iju in North P’yo’ngan Province.  Tokyo Shimbun reported that “Namp’o has facilities such as a trade port, a refining plant and a shipbuilding yard. If the joint development of the city with foreign countries progresses and foreign investment in the city, which is adjacent to Pyongyang, increases, it may lead to economic reform of the entire North Korea. The joint development of Haeju with South Korea was studied in 2007. Meanwhile, Shinu’iju was designated as special administrative zone in 2002. As such, the development of the three cities was studied at an early period.”

Jang Song Taek speaks during a meeting of the DPRK-China Joint Guidance Commission (Photo: Xinhua)

Of these three options, the designation of Sinu’iju as a special administrative zone is a fait accompli.  The provincial capital of North P’yo’ngan received its designation in 2002 during the 10th Supreme People’s Assembly and appointed  a Chinese-Dutch businessman, Yang Bin, as chief executive.  However, to paraphrase Aidan Foster-Carter, those plans were not thought through and Yang Bin was subsequently arrested and incarcerated for tax evasion.  Hwanggu’mp’yo’ng is located southwest of Sinu’iju, and Wiwha located to the north with both islands situated in the Amnok (Yalu) River, geographically bookending the city.  If the development of the two islands attains any traction, DPRK policymakers must consider (and revise the requisite statutes) the re-establishment of Sinu’iju (well, at least those areas north and west of the mosquito net fence that bisects the city) as a special administrative zone.

The establishment of three additional zones was a topic of discussion when Jang Song Taek visited China in August.  Mr. Jang was directly involved in the policy process that granted special administrative status (in the form of a provincial-level city) to Namp’o in 2004, which it later lost.  Mr. Jang was similarly tied to discussions about developing Haeju in the early 2000s.  And yet, additional special administrative regions may be temporarily shelved until development proceeds sufficiently in Raso’n and Hwanggu’mp’yo’ng/Wihwa.  According to Tokyo Shimbun‘s report, Mr. Jang’s interlocutors in China “allegedly demanded that Pyongyang make legal preparations to create favorable conditions for corporate investment and introduce market mechanism. So, it is uncertain whether Chinese companies will make inroads and invest in the cities immediately after they are designated as special economic zones.”

Col. Gen. Pyon In Son (L) and VMar Hyon Yong Chol (R) (Photo: KCNA and KCNA-Yonhap)

The potential expansion of special administrative regions may have partially  contributed to two recent, senior appointments in the Korean People’s Army [KPA].  If the designation and development of Haeju is under serious consideration, it may have been part of the appointment of Col. Gen. Pyon In Son as commanding officer of IV Army Corps in August 2011.  Col. Gen. Pyon previously served as a Vice Minister of the People’s Armed Forces and visited China in 2010.  It is a standard practice to rotate general-grade officers from the KPA’s high command in Pyongyang to the corps command.  However, the central leadership may have found Col. Gen. Pyon’s predecessor at IV Corps, Gen. Kim Kyok Sik, more useful in Pyongyang (especially if a KPA housecleaning was under way).  Col. Gen. Pyon, having some experience interacting with senior Chinese military and political officials, may have been placed at IV Army Corps with the expectation that if Haeju were developed (with Chinese or even Korean partners) it would reduce any frictional interactions with KPA personnel stationed in the area.  Development of Hwanggu’mp’yo’ng and Wihwa Islands (and Sinu’iju) was most likely one of the reasons Hyon Yong Chol was named chief of the KPA General Staff.  Prior to his formal appointment this past July, VMar Hyon was commanding officer of VIII Army Corps, which is headquartered approximately 72 km (45 miles) east of Sinu’iju, with assets close to the city.

Pyongyang policy deliberations on expanding the number of special administrative regions have not been restricted to areas in the country’s west.  Choi Song Min reported in Daily NK  on 14 September that Ch’o'ngjin, North Hamgyo’ng’s provincial capital, was also under consideration for special status after the DPRK sold docking rights to Chinese companies:

North Korea recently sold 30-year operating rights to docks 3 & 4 at the port in Chongjin to Chinese firms, making it probable that the city will become part of a special economic zone (SEZ) in due course. If so, the move would actually represent the culmination of a plan drawn up almost ten years ago, under which Chongjin was divided into two regions, Chongjin and South Chongjin, in preparation.At the time, the tentatively planned SEZ area would have encompassed Sunam in the center of the city plus Pohang, Chungam and Sinam to the north, while putting Ranam and Songpyong districts outside the SEZ in South Chongjin.Therefore, a source from the city recalled on the 13th, “With opening in mind, they put in place plans to move provincial administrative agencies to Ranam District. They chose sites and finished building blueprints under which the provincial Party, provincial People’s Safety Ministry and Kim Il Sung statue from Pohang District and the province’s people’s committee from Sinam District would all move.”The source went on, “The people of Chongjin were excited then because they knew how much Rasun developed after opening. Those people living in Songpyong and Ranam tried hard to get their jobs and residences moved to the SEZ area in advance, which naturally inspired a security backlash.”Although its opening has not been an unbridled success, outsiders forget that until the early 1990s Rajin had been a county town in which life was hard even by North Korean standards. However, after it was designated a special economic zone by Kim Il Sung, roads and houses changed beyond recognition. One defector remembered, “The changes took place so fast that it seemed like a foreign city.”Indeed, many residents of Rajin SEZ famously sent food and material support to relatives in less fortunate areas throughout the famine of 1995-1997.However, the Chongjin SEZ plan presents considerable hurdles. One problem is that from a security standpoint there is not only the danger posed by foreign products and information, but also that the areas inside and outside the SEZ need to be physically separated.In Rajin’s case, not only were undesirable elements including family members of political prisoners and people detained in re-education camps forced to move out, but even people without jobs in the SEZ were told to move on.As subsequently proven by satellite images, “Rajin is surrounded by barbed wire, like an island within the land,” the source said. “The residents are kept away from the foreign tourists, who have access to the luxury hotel and its casino.”

DPRK Ambassador to Nigeria Jong Hak Se (Photo: Office of the President of Ghana)

 The 12th SPA’s 6th session might also find that the DPRK is not merely reconfiguring its economic relationship with China, but continues to branch out to other countries.  Ruth Tene of Leadership Online reports that nonresident DPRK Ambassador to Nigeria, Jong Hak Se, discussed his country providing technical assistance (most likely tunnel construction and personnel) with Nigeria’s Minister of Mines and Steel Development:

Nigeria and the Democratic Republic of Korea are set to partner on the development of solid minerals in the country.

To this effect, the Ambassador of the Asian country, Ambassador Jong Hak Se, has offered technical assistance for the development of the Solid minerals and Agricultural sectors in Nigeria

The ambassador said this when he paid a working visit to the Minister of Mines and Steel Development, Architect Musa Mohammed Sada, in Abuja, yesterday.

He said that the offer was for both the Federal and State governments as part of effort to enhance the development of the Steel sector.

Jong Hak Se maintained, “that Korea like Nigeria  was enriched  with lots of mineral resources and shared a vibrant solid minerals sector but differed in that while Nigeria sought to be one of the 20 most developed countries of the World by the year 2020, Korea  wants to be the most developed Country by 2020”.

The Minister, in his response, assured that the federal government has mapped out an agenda for economic development, job creation and economic empowerment for the only sector which had the greatest job generation potential

Ri Chol on China Trip with JST

Ri Chol (annontated), vice chairman of the Joint Venture and Investment Commission of the DPRK, is seen with Jang Song Taek (2nd L) at Beijing Airport on 13 August 2012. Ri is part of the 50-person delegation of the DPRK-China Joint Guidance Committee which arrived Monday to meet with Chinese officials (Photo: Yonhap)

Ri Chol, an executive officer of the Joint Venture and Investment Commission of the DPRK, was one of the 50 members of the DPRK-China Joint Guidance Committee who traveled to Beijing with Jang Song Taek (Chang So’ng-t’aek).  Among his former positions, Ri is the immediate past DPRK Ambassador to Switzerland and the UN Mission Geneva.  In those positions Ri conducted a number of interactions with the UN and international nongovernment organizations [NGO].  Ri was observed in February 2012 during Orascom CEO Naguib Sawiris’ arrival to the DPRK.  He also attended Kim Jong Il’s visit to the Kwangbok Supermarket, which was KJI’s last reported public appearance before his death in December 2011.  In 1980, Ri Chol was selected by Jang and KJI to work as a local diplomatic contact in Geneva when KJI’s eldest son, Kim Jong Nam (Kim Cho’ng-nam), moved to Europe with his maternal relatives to study at the International School of Geneva.  Promoted to ambassador in the late 1980s, Ri served in a similar capacity when KJI’s children with Ko Yong Hui (Ko Yo’ng-hu’i)–Kim Jong Chol (Kim Cho’ng-ch’o'l), Kim Jong Un (Kim Cho’ng-u’n) and Kim Yo Jong (Kim Yo’-cho’ng)–resided and attended school in Berne, Switzerland.  According to some accounts, current DPRK supreme leader Kim Jong Un dined with and spent some of his free time with Ri.

A 50 person delegation of the DPRK-China Joint Guidance Committee arrives at Beijing Airport on 13 August 2012 (Photo: Yonhap)

KJI Concerned About “Unrest” in Early February Over Money Crunch (revised 18 April)

Choson Ilbo, citing a story from Open Radio for NK, reports that Kim Jong Il was worried about public discontent at a meeting in early February.

At a meeting on Feb. 2 in which he received a briefing on the progress in the North’s project to earn dollars, Kim said, “If the most important thing is single-minded unity under current circumstances, public sentiment is the very basis of such a unity,” the radio quoted a high-level North Korean source as saying. “If this problem is solved, it will not be as difficult to earn foreign exchange as now,” he reportedly added.

His remarks suggested he, in fact, admitted that he has difficulty raising his own funds and that the North Korean people are agitated.

In early February, officials previously known to earn foreign currency for the regime in the Third Floor, took on a greater prominence in the country’s economic activities.  If this report on KJI’s state of mind is accurate, it may explain reports of the execution or incarceration of Pak Nam Gi, and one of the vice chairmen of the State Planning Commission.

KJI’s concerns about security were likely assuaged.  The Ministry of Public Security was upgraded, and directly subordinated to the National Defense Commission.  The chief of the State Security Department was given a military promotion.  While MPS was already on the fast track for the Supreme Commander’s affections, and U Tong Chuk’s promotion was not entirely unexpected, the lack of any major, and embarrassing, popular revolts may have facilitated, if not ensured, these institutional and career advancements.

KJI’s concerns about earning foreign currency may take more time.  Yonhap, citing sources in Beijing, reports that Office #39 (3rd Floor) deputy director (and KJI high school buddy) Jon Il Chun had traveled to China around 9 April.  He is also, concurrently, President of the State Development Bank and chief executive of DPRK Taephung International Investment Group, acting on behalf of the National Defense Commission.

Jon Il Chun was reportedly leading a delegation to Beijing to negotiate and attract investments in the country.  Mr. Jon was one of the foreign currency-earning technocrats KJI promoted to handle the economic fallout from the 2009 currency redenomination.

Meanwhile, Kyodo reports that the public face of the DPRK Taephung International Investment Group Pak Chol Su (whom one recent report noted does not sport a KJI badge) is talking up Rason, the country’s other ports and other infrastructure repair:

North Korea has launched a five-year, $120 billion infrastructure-building project in eight cities as part of a 10-year plan to rebuild the economy, a manager of a state-run investment group said Friday.

Pak Chol Su, chairman of the Korea Taepung International Investment Group, expressed hope companies from Japan, South Korea and other neighboring countries will invest in the development plan that began this year.

”We believe the plan will lead to the establishment of a Northeast Asian economic community” involving the two Koreas, China, Japan and Russia, Pak said in an interview with Kyodo News in Pyongyang.

Kim Jong Il conducts a field guidance tour of the renovated Hyangsan Hotel in North Pyongan Province in late January 2010. The official on the left is Han Kwang Sang, deputy director of the KWP Financial Planning Department. (Photo: KCNA).

Revaluation Reflux

Photo: Choson Sinbo

In the latest installment of “For the Love of Money“ Choson Sinbo features several stories about the DPRK’s “currency exchange” which may be the closest thing Pyongyang watchers get to an official announcement.  Choson Sinbo carries an interview with Cho So’ng-hyo’n, a senior official of the DPRK Central Ban and reports:  “Denying speculation that this currency exchange action is a step in the direction of a free-market economy, responsible official Cho So’ng-hyo’n stressed that socialist principles and order will be far more solidly cemented in the managing of the economy. He also expressed his opinion that the market’s role will gradually dwindle as the state’s economic capability is enhanced as more domestically-produced commodities are distributed through state-run networks for commerce.”

Photo: Choson Sinbo

Choson Sinbo also reports that prices in the DPRK will revert to July 2002 level.  Mr. Cho also remarked: “The market was utilized as a supplementary means based on the principle of socialist economic management. We believe that, as the capability of the state has strengthened, the role of the market–which has performed its function as a supplementary means–will gradually dwindle.”  Mr. Cho also reports that “that absolute majority of working people, including workers, farmers and office workers have expressed welcome and support saying that the state measure taken this time is most correct, and favorable reactions are being reported.”

Photo: Choson Sinbo

But are there really “favorable reactions?”  Asahi Shimbun citing Seoul-based sources with knowledge of “reports from west European countries’ diplomatic corps in Pyongyang, have also confirmed the existence of information about citizens having staged protests in several places of Pyongyang City. It appears that there have been incidents of some people rebelling against the North Korean authorities’ decision to exchange currency and some angry people protesting.”  There are also reports that some North Korean citizens had insider information prior to the currency exchange policy being announced.

Meanwhile, Choson Ilbo reports that KPA troops posted to the Ministry of Public Security remain on high alert for public protests against the currency exchange.  There are also reports that the recently expired won notes have been found defaced and discarded in garbage heaps outside cities in North and South Hamgyong, as well as outside Pyongsong, South Pyongan.  What’s more State Security Department KPA soldiers stationed along the DPRK-PRC border are under order to shoot North Korean citizens attempting cross the border.

Photo: Choson Sinbo

It is unlikely if public protests will reach a critical mass.  The DPRK internal security apparatus was placed on high alert prior to the announcement of the currency revaluation, and they present as more than willing to react aggressively.  That said, previous popular protests in communist regimes, such as Hungary and the Czech Republic/Slovakia only fomented when the central authorities implemented highly restrictive banking policies.