Research and Analysis on the DPRK Leadership
Kyodo News reported on 18 October (Thursday) that Office #38, a unit of the Korean Workers’ Party [KWP] Finance and Accounting Department which managed some of Kim Jong Il’s cash holdings, was a eliminated as part of a consolidation of the country’s foreign currency-generating activities under the DPRK Cabinet. Kyodo News reported that “was part of efforts by the leadership of Kim Jong Un to streamline entities that earn foreign currency by conducting economic activity such as trade and development of natural resources” and “the move was also intended to revitalize the economy and improve people’s living standard by increasing the role of the Cabinet.” Ownership of companies previously part of Office #38 has migrated to the Moranbong Bureau, an entity of the DPRK Cabinet. According to Kyodo “the management division of a Pyongyang restaurant conducting business in China and Southeast Asia, for example, has been transferred from Office 38, which oversaw transactions involving hotels, restaurants, foreign currency shops and trade to the newly established entity called ‘Moranbong Bureau’ that some say belongs to the Cabinet.”
Office #38 was formally established under the KWP Central Committee Secretariat’s Finance and Accounting Department in the mid-1980s by the department’s director Ro Myong Gun (No Myo’ng-kun). It was part of the Third Floor, a group of central party sections (units) and offices which supplied Kim Jong Il with information, money and household items, and linked directly to his Personal Secretariat. The names Third Floor and Office #38 (i.e., Room 38) derive from their original locations in the KWP Central Committee #1 Office Building (KJI’s headquarters from the 1970s until his death in 2011).
With a staff of accountants, bookkeepers and security guards, it controlled a network of holding companies which owned and operated hotels and restaurants located in the DPRK and other Asian countries, as well as various stores and factories located in the country. Between 20 and 30% of the revenue generated was turned over in cash (US Dollars, Euros) to Kim Jong Il, who would use it to pay his personal staff or dispense to members of his family, close aides and other senior DPRK officials (as gifts). Office #38 was the not only central party unit responsible for managing KJI or Kim family financial assets or subsidizing his private life, but it was a key organization with regard to the technical and logistical administration of KJI’s money within the DPRK. Office #38 personnel also escorted KJI’s fourth wife Ko Yong Hui (Ko Yo’ng-hu’i) and current supreme leader Kim Jong Un (Kim Cho’ng-u’n) when they traveled abroad in the early 1990s, as well as Kim Jong Chol (Kim Cho’ng-ch’o’l) when he visited Singapore in February 2011.
Daily management of Office #38 has divided between Kim Tong Un (Kim To’ng-u’n) and Han Kwang Sang. Previously director of Office #39 (also rumored to have been under a consolidation and migration process), Kim Tong Un was subjected to travel sanctions by the European Union in 2009 and replaced by Jon Il Chun (Cho’n Il-ch’un) in early 2010. Kim was not dismissed from office, but transferred to Office #38. In February 2010 Han Kwang Sang was appointed a deputy director of the Finance and Accounting Department, and appeared with Kim Jong Il on a tour of the renovated Hyangsan Hotel. It is likely Han was brought in to manage the Kim Jong Un portfolio in Office #38 and supervise the transfer of companies under Office #38 to the DPRK Cabinet. Based on recent DPRK state media activity, neither Kim Tong Un nor Han Kwang Sang, has been dismissed from office. Migrating most of Office #38’s responsibilities to other party and government entities conforms to a general trend in the organizations of the core leadership. Since 2009, elements of Office #39, Office #35 (intelligence briefs) and KJI’s Personal Secretariat have been folded into the DPRK Government, the National Defense Commission [NDC] and the Guard Command during the transition from KJI to KJU.
The DPRK has recently started to heavily promote tourism in the country to China and the number of western tourists visiting the DPRK is as high as it has ever been. Considering that a lot of businesses managed by Office #38 were part of the hospitality and restaurant sector in the DPRK, migrating control and management from Office #38 to the DPRK Cabinet mitigates the sanctimonious contention that traveling to the country “props up the regime.” It is likely these management changes were one factor in the closure of the Pyongyang Restaurant in Amsterdam in September. It is also possible that these recent changes were one reason** Kim Kyong Hui (who owns several restaurants in and out of the country) did not appear in DPRK state media for a month.
**And also shopping for baby clothes.