DPRK-US Agreement Does Not Reflect Significant Policy Change (Yet)

With the news that North Korea has agreed to halt uranium enrichment and allow inspectors into the country to verify its nuclear activities, we are probably going to hear from pundits making claims about Central Military Commission Vice-Chairman Kim Jong Eun’s role in this decision and whether it marks a sea change in the North Korean leadership. What I would like to emphasize is that this deal was negotiated before the National Defense Commission Chairman Kim Jong Il passed away. While there was some pushback on the amount of food aid and the composition of food aid, the announced details for aid do not mark a major shift from initial positions (based off US assessment of North Korean needs), although it does indicate some concessions from North Korea’s Ministry of Foreign Affairs which was supposedly angling for a larger amount of aid.

As such, I don’t think we can at this point draw any strong conclusions as to whether Kim Jong Eun’s leadership will indicate a significant policy shift from before, but rather, conciliatory measures seem in line with ongoing trends from 2011 which emphasized economic development and standard of living over traditional security themes.

There could still be significant changes down the line, but we believe people will start mistakenly attributing North Korean policy trends emerging in 2011 that were not covered by the media as changes implemented in 2012 because of a new leadership.

Teaching business skills in the Hermit Kingdom

We were profiled in the Korean Herald:

Teaching business principles to communists in the world’s most isolated state may seem a thankless task, but for the NGO’s founder Geoffrey See it can engage the so-called Hermit Kingdom in a constructive and a-political way.

State-run enterprises are already working to attract international business and foreign investment in joint ventures. With infrastructure investment in areas such as the Raseon special economic zone, there is a thirst for commercial knowledge there like never before.

“The old generation in North Korea has very little incentive to experiment,” Abrahamian said. “This is true in any country ― younger generations tend to be open to new ideas. There’s definitely that sense in North Korea too, the young people are more interested in broader way of doing things. In that sense North Korea is going to change.”

While North Korean startups tend to be smaller branches of state enterprises, Abrahamian explained that the growing number of joint ventures with international companies has created the need of better understanding of how to manage assets and resolve disputes. Seminar attendees have asked for help in setting up ventures from chicken restaurants to a spa resort, areas that can prove lucrative if they can position themselves at the top of a state-run venture.

“The last couple of years have seen a bit of a shift in North Korea so there is more of a focus on economic issues,” he said.

“You are seeing some developments at their special economic zones in the far north, there have been positive developments there, they revised laws regarding foreign firms operating in North Korea last year and we can see the international trade numbers soaring upwards especially vis--vis the Chinese.”

Read more here...

Op-Ed: Commercial Life in North Korea

An op-ed on commercial life in North Korea by Geoffrey at 38North, a publication at John Hopkins SAIS. On one training trip to North Korea this year with Choson Exchange, I enjoyed less-than-tasty fried chicken washed down with copious amounts of beer with North Koreans at a joint venture fast food restaurant. On the rooftop, chickens ran around in what might be the only locally-sourced fast food restaurant in the world. Outside, traffic was definitely up from what I remembered from a visit four years ago—just as the many visitor reports to Pyongyang have been claiming throughout the past year. Inside, the North Koreans I was with would eventually try to convince me to help them set up a spa and restaurant.

Two parallel and somewhat conflicting narratives of North Korea have emerged over the past year. Visitors to Pyongyang point to the progression of major construction projects, increasing traffic on the city’s previously empty streets and more well-stocked shops as signs of prosperity. Elsewhere, humanitarian agencies and North Korean government officials warn of a deteriorating food situation. While officials solicit aid overseas, enterprising North Koreans are seeking capital to fund new businesses particularly in the service and resource sector...

Read more at http://38north.org/2012/01/gsee013112/

Upcoming Presentations in February – Washington DC and Boston

Geoffrey See, Managing Director at Choson Exchange, will be speaking at the following events in February: Closed-door event on developments in North Korea February 6, Monday, 2-4pm Organized by John Hopkins SAIS and National Committee on North Korea At the Berstein-Offit Building at SAIS (1717 Massachusetts Avenue NW), Room 736

We will discuss North Korea’s developing investment agencies and competition among these agencies.

Panel on Social Entrepreneurship in Asia Harvard 2012 Conference - Cross-Cultural Connections: Weaving New Roads February 19, Sunday Organized by the Harvard Project on Asian & International Relations

We will discuss our approach to operating a social enterprise in the highly challenging North Korea space.

Panel on Creating the Right Business Environment for Social Enterprise Social Enterprise Conference at Harvard February 26, Sunday Organized by Harvard Business School and Harvard Kennedy School of Government

We will discuss the challenges of working with multiple government partners on an incredibly sensitive and politicized issue.

Please check back for updates.

DPRK's 2012 Joint Editorial - More Songun or Less?

KCNA New Year

North Korea’s top three newspapers - Rodong Shinmun (Worker’s Newspaper), Joson Inmingun (Korean People’s Army) and Chongnyon Jonwi (Youth Vanguard), published this year’s Joint New Year Editorial on, well, New Year’s Day. Equally unsurprising was the dominant theme of the editorial, which was titled: "Glorify This Year 2012 as a Year of Proud Victory, a Year When an Era of Prosperity is Unfolding, True to the Instructions of the Great General Kim Jong Il."

Catchy titles aside, linking the government’s policies and campaigns for 2012 to the plans laid out by Kim Jong Il is kind of a no-brainer. It emphasizes that the ideas of Kim Jong Il are the inheritance of the new government. With less than a fortnight between the announcement of Kim’s death and the New Year, the editorial was understandably less specific than many in previous years, in terms of setting out goals and strategies. No doubt, the editorial that had been carefully prepared weeks in advance was scrapped and a new one hurriedly crafted after Kim’s passing.

It’s main role then, was to emphasize the statements made and signals sent since the 19th of December - that things would not be changing, that everyone agrees on the successor, that it is business as usual in North Korea.

The first quarter of the article serves entirely to laud Kim Jong Il’s achievements, before it swiftly transitions to the issue of succession and Kim Jong Un’s leadership. “The dear respected Kim Jong Un,” it states, “is precisely the great Kim Jong Il.”

The immediate need for those in change of managing the succession is for the DPRK’s citizens and for international actors to perceive ideological and administrative congruence with what has come before.

As such, the editorial references light industry and quality of life far less than last year. (a good summary is here)

Those themes had begun in earnest two years ago and can be see as part of the initial attempts to wean the DPRK off Songun (military-first) and onto a program more focused on economic progress. This year, such statements are still present:

“The flames of Hamnam for great innovation should flare up more fiercely in the sectors of light industry and agriculture, the leading sectors for the building of a thriving country.”

However, for the sake of continuity, the greater emphasis was on phrases like: “the Korean People’s Army is the pillar and main force of the Songun revolution and the vanguard in the building of a thriving nation.”

At the same time, there remain hints that Songun is not going to be the long term focus of the new government and that the ‘weaning off’ is going to continue in the near future. The terms “Juche” and “Songun” were used in equal measure (though to be fair, one of the “Juches” was in the date). We will probably hear more and more about Juche and slightly less about Songun in the coming year.

Another hint of the balance between the military and Party lies in this statement:

“True to the intention of our Party, which set this year for the KPA as a year for the people, it should make devoted efforts to bring their happiness into full bloom, thus implementing with credit Kim Jong Il's idea of army-people unity.”

So the military’s legitimacy is exogenous: it comes, ultimately, from the party.

A quick caveat – this isn’t by any means attempting to claim that militarism in North Korea is going to be abandoned. It is and will remain one of the most militarized societies in history. Even in the North Korean context, however, the balance between the military and other influential organizations is important. As much as maintaining continuity with the balance Kim Jong Il struck –military first - is important for the new leadership, there are many who want to nudge the balance back towards what it was under Kim Il Sung. We shall have to wait and see the degree to which this takes place in the next year or two.

On another note, the exhortation that “sports should be encouraged further by enhancing social interest in physical culture and sports and making them part of people's every day life and habit” is good news for those of us who would like to see ultimate frisbee develop in the DPRK.

The Key Question

Andray points out that calls of instability in North Korea following Kim Jong Il's passing were overblown in 38North, a publication of John Hopkins SAIS. Stability is the word on everyone’s lips, from diplomats, to cable news pundits, to the man on the street. But when headlines shout, “Concerns over stability on Korean peninsula,” what do they mean?

Stability in North Korean society is almost a given, at this point. Transfixed as we are by the cultishness of Kim Jong Il’s North Korea, we often miss the fact that the Kims are just one node in a broad social and political structure. “Just” might be understating it: Kim Jong Il was the most important component of that structure and his son, Kim Jong Un, appears set to now occupy a similar, if necessarily diminished, echo of that role.

While it remains to be seen how far that transfer of legitimacy and practical control can be taken, what is clear now is that the rest of the system developed under Kim Jong Il remains entirely intact...

Read more at 38North.

Why World Should Watch Rason

An op-ed by Andray Abrahamian, Executive Director at Choson Exchange and John Kim, a former commodities trader at Goldman Sachs. Read more at the Diplomat.

The alignment of simultaneous commitment from North Korea, China, and Russia sets the scene for a North Korean special economic zone with higher chances of success than perhaps ever before. However, interest and desire may not necessarily translate into results without knowledge of markets and how to create a stable investment environment. After a recent tour of his 200MW fuel oil powered generation facility, the President of Songbong Power, Rhee Kang Chul, expressed that the reason for his plant's inactivity and the subsequent blackouts in the region was the rise in feedstock costs. When asked about mechanisms for electricity pricing, Rhee responded that the government had set power prices at 6.5 euro cents/kwh, but he couldn’t provide further details on how the number was arrived at and when it might change again. Though Rhee was clearly an expert on the technical aspects of power generation, he hadn’t had the chance to consider that potential investors, after getting comfortable with country risk, would have little clarity on the revenue side of their equation. When this was expressed to the Vice Mayor of Rason, he replied, “We can change the price of electricity here. Rason is not under the same restrictions as the rest of the country.”

Reform and stability in North Korea

An Op-Ed in the Korea Times on the factors driving stability in North Korea

On the day following the announcement of Kim Jong-il’s death the KOSPI dropped 3.6 percent and news outlets around the world sternly talked of instability and uncertainty on the Korean Peninsula.

The major worry is that political infighting behind the scenes will become uncontainable, degrading the government’s ability to maintain its control over society. This could then lead to some sort of military conflict. There are several reasons why this is unlikely in the near to medium term.

Kim’s death is of great importance, but we tend to become overly transfixed by the personality-cult aspect of North Korea’s system. This is hardly unsurprising, for two reasons. First, it is as pervasive as it is iconic.

As Westerners, it takes us back to the bygone era of the Cold War, occupying an emotional space that other contemporary dictatorships do not. Its images dominate North Korean public spaces, media, pop-culture and education to a degree that is unmatched.

Second, it is an image that they want us to see. When Western media or tourists go to Pyongyang, they see little other than the “single-hearted unity” that supposedly drives North Korean society.

Kim was the most important part of North Korea’s ruling system, but at the end of the day he was just one component of it. More important than the son he has left behind is the ruling structure that continues. This is one that includes competing factions of elites in various organizations, crossing boundaries of state, party and military institutions...

Read more at the Korea Times

North Korea: new opportunities in a post-Kim Jong-il landscape

The following is an op-ed in the East Asia Forum on the opportunities and openings we should try to create in the post-KJI political landscape.

My team was finalising our 2012 program plans for North Korea exchanges — preparing to implement workshops on fiscal strategy and financial sector development, as well as discussing the potential of an economic think tank comprised of policy makers — and in close contact with our local partners shortly before Kim Jong-il’s passing. These were all very interesting ideas because our North Korean partners were driving them, rather than us. Now, programs will be delayed and disrupted.

More broadly, we expect an immediate and short-term lockdown in North Korea with restrictions on travel and communications as authorities move to stabilise the situation in preparation for mourning. While some pundits rushed to proclaim the likelihood of instability and provocations, it is more likely that North Korean elites will try to present images of a united front in the short-term despite any backroom manoeuvrings.

We should also watch to see whether Kim Jong-un undertakes a trip to China at some point after the mourning period. Given that China is North Korea’s most important partner, who leads and who goes on this trip will say a lot about North Korea’s political order. A trip by North Korea’s next leader will also indicate that the internal situation has stabilised, and that the leader is confident a coup will not take place in his absence.

The changing political landscape will provide new opportunities to explore innovative policy options. The hope is that policy makers will also react to this situation not just defensively, but proactively, identifying opportunities in the medium term to encourage sensible and outward-looking economic policies in North Korea. In the longer run, this will support the livelihoods and aspirations of the 30 million North Koreans who want better living standards and greater interaction with the outside world...

Read more at the East Asia Forum.

Kim Jong Il Passes Away - 5 Key Questions from Now to April 2012

Geoffrey is a Director at Choson Exchange, a non-profit focused on economics, business and legal training in North Korea. Contact him at Geoffrey.see@chosonexchange.org or Andray Abrahamian, Director, External and Media Relations at andray.abra@chosonexchange.org

5 days ago, our team was talking to our North Korean partners about economic policy training programs. 3 days ago, Kim Jong Il was shown visiting a music center in North Korean whose co-owner is a friend of ours. Today, Kim Jong Il was announced to have passed away. Some initial thoughts of ours for the period between now and April 2012 (a key milestone):

What Should We Expect in the Coming Weeks?

• Expect a short-term and immediate lockdown in North Korea with restrictions on travel and communications as authorities move to stabilize the situation in preparation for mourning. • While many are proclaiming instability and provocations as the next phase, the immediate situation at this point will mainly be images of sobbing North Koreans as elites attempt to present a unified front to external parties even if internally things are very different. • Watch for the funeral committee – the order on the list has significance in terms of people’s political position in this immediate period (but will matter a lot less as the political situation evolves over the year).

What will the political re-ordering look like?

• Factional re-ordering will happen behind the scenes. This process will create winners and losers. • Most pundits believe that Kim Jong Eun has not had enough time to prepare to lead, but so far, it appears that a protocol is in place with KCNA rapidly identifying Kim Jong Eun as the rallying point for the nation in its announcement, and a funeral community organized with Kim Jong Eun as its head. • We should be keeping an eye out for the individual movements such as the immediate roles North Korea’s power couple Jang Sung Taek and Kim Kyong Hui take. • At the institutional level, we should be keeping an eye out for the role of the National Defense Commission in the medium term as this is the governing institution Kim Jong Il put in place and it delineated the chain of command in a country where most institutions do not communicate horizontally with each other.

When (or If )Kim Jong Eun Will Make His Trip to China?

• Watch out for a potential Kim Jong Eun trip to China at some point after the mourning period is over. This trip will be important for several reasons. • China is North Korea’s most important sponsor and who leads and who goes on this trip will say a lot about the political order in North Korea. • A trip by North Korea’s next leader will indicate that the internal situation has stabilized and that the leader is confident enough that a coup will not take place in his absence.

How Will North Korea Become “Strong and Prosperous” Now?

• Keep in mind that North Korea propaganda calls 2012 the year they will become a “strong and prosperous” nation – this official transition is planned for April 2012 when Kim Il Sung celebrates his 100th birthday, setting a somewhat hard deadline for North Korea for mourning as it strives to present a unified front and an upbeat message by that time period. • This is particularly important as Kim Jong Eun is presented as drawing legitimacy more from Kim Il Sung than Kim Jong Il. • This will push North Korea to reach out to a variety of countries as it attempts to present developments in external relations as part of an upbeat message for April.

What Are the Next Steps?

• Even if North Korea is more active in reaching out, it could also paradoxically be harder to reach an agreement (especially one that is adhered to) while the internal situation is in flux. • But it is important for countries to reach out early and aggressively with variety of programs and opportunities to offer a new generation of leadership an “open path” to positive change. • It will also be easier for leaders in the US and South Korea to reach an agreement with North Korea unburdened by the presence of Kim Jong Il.