AFP reports that “South Korean officials said … they have found harmful bacteria in a French baby formula product and vowed to step up tests on future shipments.”
Archive for February 2009
Of Fools and Their Money, Part 2: Orascom Deal Starts to Sour
That Orascom’s big new investment in North Korea would fail has always been predictable, but it was always incomprehensible how Orascom’s business model centered around introducing the one thing with the most potential to destabilize the regime’s hold on power: a mobile phone network.
Not surprisingly, Orascom and the North Korean regime are already at odds over Orascom’s plan to pass out 100,000 free phones to generate a base of bill-paying subscribers. Instead, the regime is selling them for $235 apiece, a price very few North Koreans can afford. This is lethal for Orascom’s potential to make a profit on its phone venture, which was — again, incomprehensibly — the lynchpin of Orascom’s North Korea investment strategy. Orascom apparently made all its other investments in the North, including its reconstruction of the Ryugyong Hotel, conditional on the phone concession:
Although North Korea reluctantly launched the mobile phone services, it has devised mechanisms to still maintain the stability of the regime. For this reason, North Korea provided Orascom with a frequency different from what is now used in China and South Korea. This allows North Korean officials to ferret out illegal mobile phone usage in the border areas. In addition, North Korea charges high prices for registration for the service, and has announced that it cannot guarantee full service until it equips itself with complete and fully functioning wiretapping system. For this reason, Orascom’s telecommunication business in North Korea may face bleak future. [Open Radio for N. Korea]
Why did Orascom think it would be allowed to introduce a mobile phone network into the world’s most isolated society, where owning a mobile phone is punishable by a prison term? (Recall the rumors that the 2004 Ryongchon explosion was an assassination attempt on Kim Jong Il, triggered by a mobile phone.) Possibly because of its long-term relationship with North Korea in a series of joint ventures in construction and banking. Yet those investments were different in very important ways: they were carried out outside North Korea, and did not require a relaxation of the regime’s control over the movement of information between its subjects.
Succession Rumors Spread Inside North Korea
There may or may not be any truth to rumors that third son Kim Jong Un will the figurehead successor to His Porcine Majesty, but word seems to have spread inside the kingdom:
The source said, “People who have secretly been listening to South Korean radio seem to be circulating these stories but the Party in Pyongyang has not issued a special decree about it. Many people have an interest in the successor issue, so the rumors have been spreading even more rapidly.
According to the source, the rumor began to circulate in mid-January. This coincides with the issuance of a related report from South Korea. [Daily NK]
The Daily NK sees significance in the regime’s lackluster efforts to tamp the rumors down:
The source said, “A majority of the people heard then for the first time the fact that the General (Kim Jong Il) even has a third son! After hearing the rumor, most people were unmoved, questioning whether a third-generation of Kims would continue to rule.
The North Korean authorities have shown awareness of the circulation of these rumors, but have not implemented anything as a consequence. This is quite a different situation than the strict prohibition of the spread of rumors regarding Kim Jong Il’s sickness, as given in “People’s Unit” lectures at the time.
It’s interesting that the regime isn’t more aggressive about this in light of Jong Un’s illegitimacy and how that contradicts the state’s Confucian morality, and its attribution of that morality to Kim Jong Il. The most interesting point, of course, is that the regime lacks the ability to keep rumors like this out of North Korea today. It’s doubtful that Sunshine-era engagement allowed rumors like these to reach the provinces. Instead, it was most likely illegal border crossers, smugglers, and banned cell phones. As with economic change, political change will come from the bottom up, not from the top down.
Prof. Sung Yoon Lee in the Asia Wall Street Journal
One of the most consistently perceptive commentators on dealing with North Korea is Professor Sung-Yoon Lee, an adjunct assistant professor of international politics at the Fletcher School of Law and Diplomacy at Tufts University. By a very interesting coincidence, Stephen Bosworth, the next North Korea Special Envoy, is the Dean there. If Bosworth tolerates views this much at odds with his own, we can certainly hope he’s open-minded enough to take some good advice from Prof. Lee — if not initially, then after it occurs to him that the North Koreans are playing him. This one is a must-read, and it’s hard to single out one graf to quote, but the article is built around five basic points. Here is one that Bosworth should read, and re-read:
Third, in North Korea one finds the most extreme and pervasive manifestation of the cult of personality ever. Pyongyang’s mausoleum for the elder Kim reportedly cost $890 million to build, while hundreds of thousands died from starvation. The deification of the leadership is inseparably tied to the regime’s vigorous pursuit of nuclear status. Nuclear extortion accords the man whom his people call the “Great General” an aura of legitimacy and lends even fantastic slogans like “building a powerful and prosperous state” a semblance of credibility. Meaningful concessions will therefore not be forthcoming from this “omnipotent” leader of the world’s most militarized society unless he is forced to make them. [Prof. Sung-Yoon Lee, Asia Wall Street Journal]
I wonder how long it will take for Bosworth to figure this out. The North Koreans’ brazenness at playing the Bush Administration should be lesson enough, but at a minimum, the Obama Administration will feel obligated to give “diplomacy” another chance on its own watch. I suspect that after six months to a year of trying to squeeze something useful out of Agreed Framework 2.0, we’ll start to see rumors of an Agreed Framework 3.0, which is exactly what the North Koreans want. Implicit in the new deal-making will be that North Korea will keep the many concessions it won from the Clinton and Bush Administrations, and demand new concessions in exchange for the same things they’d promised Chris Hill and Robert Einhorn before.
Seoul to Open New Refugee Center by 2012
On its face, this announcement is both interesting, and perhaps, understated:
The Ministry of Justice announced on Wednesday plans to build a retreat for refugees in Gyeonggi Province, aiming to open it in 2012. The ministry secured funds of W260 million in this year’s budget to design the facility, and is reportedly negotiating with the Ministry of Public Administration and Security for an appropriate site. [Chosun Ilbo]
Nowhere in the article does it say that the new center will be either primarily or partially for North Korean refugees, yet there are reasons to infer that it will be. First, South Korea has no great appreciation for ethnic and cultural diversity. Second, President Lee seems to have a sense of special responsibility to North Koreans, an increasing number of whom are crowded into immigration detention centers in Thailand. Third, the processing/deprogramming center at Hanawon is beyond capacity. Fourth, the number of new arrivals from the North continues to grow.
The failure to bring up the topic of North Korean refugees is understandable, given the North’s tendency toward bellicose reactions to such things. The administration is trying to get a new Unification Minister confirmed in spite of a withering attack by pro-appeasement lawmakers in the South, and probably doesn’t want to be seen as provoking the North.
Rice Prices Fall in Remote N. Korean Provinces
That’s good news, because those are the areas the government generally disfavors in its food distribution planning.
According to a source in North Korea, rice prices in Pyongyang, Pyonsung, Nampo, Sin-ui-ju, Hyesan, and Chunjin fell sharply in mid-January.
The rice price in Pyongyang at the end of January was 1700~1800 Won per 1 kg (the price used to be 2000-2100 Won), the price in Pyonsung and Sincheon was 1700won (the price used to be 2100 Won), and the price in Sin-ui-ju was 1660 Won (the price used to be 2000 Won). Additionally, the rice price in Hyesan at the end of January was 1800 Won (the price used to be 2000~2500won at the end of November), and the price in Chungjin was 1800~1900 Won (the price used to be 2000~2500won in the beginning of January). On average, prices dropped by 300~400 Won in mid-January.
However, this number only takes into account the nominal price. Considered along with the 10-20% rise of exchange rate between North Korean Won and Yuan, the plummet in North Korean rice price is even more drastic than it seems. [Open Radio for N. Korea]
Open radio reports that the price drop is related to a relatively good harvest going on sale for the first time, increased food imports, and rumors of more American food aid. Because the military’s warehouses are reportedly full, the people may be less worried that the regime will confiscate the food that might otherwise feed them. Apparently, the regime became worried enough about food supplies for the military to convert some of its hard currency earnings to something other than Hennessey:
At the end of December 2008, the North Korean government issued internal instructions to convert foreign currency, earned with foreign exports, to food stocks.
For instance, in Shin-ui-ju, coal is generally exported to China at about $65 per ton, but the money earned through this transaction is converted to rice, and brought back to North Korea. An export of about 7.5 tons of coal can bring in 1 ton of rice.
The first shipment of about 500 tons of Chinese rice acquired in this way arrived at the Port of Shin-ui-ju around January 8-9 of this year. Currently, exports are continually being converted into rice. After hearing this news, the townspeople of Shin-ui-ju hoped that rice prices might decline.
The companies involved in conversion transactions are generally subsidiaries of the Coal Industry Department. Military-related entities, such as the Ministry of the People’s Armed Forces (The 54th Department of Intensive Tradig Company), the Second Economic Commission (Ryong Ak San Trading Company), the Border Guards (Eun Pa San Trading Company), as well as special entities under the Central Party (the 88th Reung Ra Company) are all organizations that convert exports into rice using this method.
This rice is stocked up as emergency stockpiles, and not sold on the market to sell for the citizens. It seems that these activities aim to increase military food stocks in preparation for heightened tension between the North and the South. [Open Radio for N. Korea]
The lesson here is that the North Korean regime is much more capable of managing the internal food supply than many of us earthlings give it credit for. The dire predictions that North Koreans would starve without South Korean aid and fertilizer have been refuted, and whatever American food aid actually arrived was of modest quantity. Yet there’s little question that a large part of the 2007 harvest was destroyed by flooding. What made the difference? Chinese aid may be part of the answer, but another part appears to be a shift in priorities. Open dissent began breaking out, soldiers were going hungry, military morale suffered, and soldiers descended like locusts on the farms near their garrisons. The regime was troubled enough by these unsustainable trends to shift some of its cash toward the purchase of food.
It’s also reasonable to believe that remittances from North Korean exiles in the South have drawn in more food imports. Food price fluctuations in North Korea have been driven, in large part, by rumors in the last year. Last spring, rice prices skyrocketed over fears of a renewed famine. Although some areas appear to have suffered hunger-related deaths, the toll was probably small by North Korean standards.
Open Radio also provides this excellent graph, and its own analysis of what drives food prices. One thing I quickly noted is that even with the fall in prices, prices are still much higher than they were two years ago. It may be that that’s the result of “natural” inflation as the command economy distinegrates and people learn to survive sources other than state rations, but Open Radio alleges that price fluctuations are more the result of the regime’s attempts to control the market than anything else:
Since 2005, there have been 4 occasions of sudden rise in the North Korean rice price (See Graph 1). These four incidents are directly connected to the North Korean market control policy. The sharp rise in rice price in October 2005 was influenced by the government’s announcement of its plan to return to the old food ration system. In May 2006, the government took control of the market under the pretext of rice planting and drove the rice price higher. In August 2007, when several campaigns to control the market were taking place under the banner of “Defeat of Unsocialism”, the rice price dramatically increased. Lastly, in April 2008, the rice price unprecedented jumped to 4,000 Won for 1kg of rice. During this period, policies that limit the age of women dealers in the market place were implemented.
However, absent government market control, North Korean rice price have remained steady regardless of the international sactions. For example, from July to October 2006 when North Korean nuclear experiment and missile launch took place, food price was kept stable even after the United Nations sanction. [Open Radio for N. Korea]
Recent reports suggest that the regime’s efforts to stamp out private markets have been a failure.
Open Radio for North Korea broadcasts “unofficial” news into the North. The founder of Open Radio is an interesting, charismatic, and enigmatic figure who adopted the name Young Howard, and whom I’ve met and spoken with on several occasions. Much like Kyonggi Province Governor Kim Moon-Soo (pt. 1, pt. 2), Young is a former leftist who (tells me he) was jailed by the previous right-wing South Korean dictatorship. Open Radio only started its English language online reporting recently, so I can’t speak much for their cred yet. On the other hand, if this prediction comes true, that cred will take a great leap forward.
You can contribute to Open Radio, or even buy ads, here.
20% of Arriving N. Korean Refugees Need Psychological Treatment
It’s because of statistics like these that no one should underestimate the difficulty of Korean reunification:
The most common ailments among North Korean refugees are dental disease followed by tuberculosis, according to Hanawon, the government-run institution for North Korean refugees. [....]
Some 20 percent of inmates also need psychological treatment after leaving the institution, Hanawon said. Many also still owe money to brokers who arranged their defection to the South and experience discrimination.
Here’s this week’s “we are one” moment:
Park Sun-yo (42) told the news agency her broker took W7 million (US$1=W1,404), leaving her penniless. She added she pretended to be an ethnic Korean from China to get a job in a restaurant since South Koreans dislike North Korean refugees. Kim Eun-hee (33) said she came to the South in the belief that it was a paradise, but South Koreans treat her as a foreigner. She says her salary of W800,000 a month in a paper factory is far less than what others there earn. [Chosun Ilbo, via Relief Web]
An astounding 50% of Hanawon’s budget is spent on … resettlement funds? education? food? new clothing? None of these. The correct answer is … dental work, because so many of the refugees’ molars have fallen out from malnutrition.
Stephen Bosworth, Formerly Ambassador to S. Korea, to Be New Asia Assistant Secretary N. Korea Special Envoy
One of the legitimate complaints about Bush’s Korea policy that Democrats actually made was that one man cannot simultaneously be an Assistant Secretary for all of East Asia and a de facto special envoy to North Korea. The Special Envoy post looks to be going to Kurt Campbell, and now, it looks like the East Asia A/S post will go to former U.S. Ambassador to Seoul Stephen Bosworth, who was in Pyongyang recently displaying his prowess at forcing the North Koreans to refrain from international extortion.
Steel yourself for some distressing diplomatic comedy.
Update: Or, maybe it’s the other way around. The Chosun Ilbo piece linked above says Bosworth will be the new Asia A/S, but this CNN report says Bosworth will take the Special Envoy job, which may or may not mean that Campbell will be A/S. What? The Chosun Ilbo wrong? Say it aint so! The reader who forwarded the CNN link thinks it’s actually correct, and he’s in a position to know. And so, by the way, is Daniel Drezner, who reports that the Special Envoy post will be part-time.
Thank God for small favors.
For a man with such an impressive acadmic background, Bosworth certainly seems to be a slow learner:
Nevertheless, Bosworth, who declined a request for an interview, appears to believe that by reengaging North Korea the United States can reach a better agreement. He wrote in Newsweek magazine last year that North Korea wants “more than anything” a friendly relationship with the United States. [Boston Globe]
I could excuse him for believing that … if he’s been serving on a sequestered jury for the last 20 years. Thanks again to the reader who forwarded this information.
Missile Extortion Goes On, Gates Hints at Taepodong Shootdown, Worthlessness of U.N. Again on Display
Chinese fishing vessels have vanished from the region of the Yellow Sea near the Northern Limit Line, which means that the North may be preparing to test a few short-range missiles. The North’s preparations to test a long-range Taepodong II also continue. The likely launch site now looks to be Musudan-ri on the East coast, not the new West coast site I published images of here. According to the Chosun Ilbo, the missile has now arrived at the launch site.
Secretary of State Clinton, in Asia this week, delivered this iron writ of deterrence against an act that would be a flagrant violation of two (ho hum) U.N. Security Council Resolutions:
“We are hopeful that some of the behaviour that we have seen coming from North Korea in the last few weeks is not a precursor of any action that would up the ante or threaten the stability and peace and security of the neighbours in the region,” Clinton told reporters in Washington on Tuesday. [Reuters, via IHT]
Defense Secretary Robert Gates did better at a press conference in Washington, when he was asked about options if the North Korean missile were launched in our direction:
When asked if the U.S. military is prepared to shoot down the North’s missile if it’s fired toward U.S. territory, he said doing so is “an option. “I certainly intend to make sure that my colleagues – the secretary of state, national security adviser, president and vice president – understand what our capabilities are, and that that’s an option out there should … we deem it necessary. [Joongang Ilbo]
South Korea’s reaction has been refreshingly serious. In addition to being on alert for any military provocations, it’s trying to mend its relations with America and moving cautiously toward increasing its diplomatic cooperation with Japan, its emotional enemy and natural ally.
“Cooperation among Japan, South Korea and the United States is crucial to resolving the North Korea issue,” Nakasone said in a joint press conference. “When U.S. Secretary of State Hillary Clinton visits Japan and South Korea, we will coordinate how to forge cooperation among the three countries based on what was discussed in the meeting today. [Joongang Ilbo]
Its Foreign Minister is also threatening to impose sanctions if the North actually goes through with the test:
“Such a behavior by North Korea will lead only to its isolation,” the minister said in his monthly press briefing. If North Korea fires the missile, Yu said, it would constitute a clear breach of U.N. resolutions 1795 and 1718, adopted after the communist nation’s missile and nuclear tests in 2006.
“I would like to use this opportunity to say again that given the the vast sanctions …(conducting a launch) is anything but in the interest of North Korea,” he said. [Yonhap]
The actual resolutions are 1695 and 1718, but Yu has the general idea right. Those resolutions would, in theory, allow for some stiff sanctions against the palace economy, if anyone ever implemented them. Even so, it’s a glorious thing to see adults in charge again in South Korea, at least with respect to its foreign policy.
안주 Links for 12 February 2009
U.S. AND ROK DEFENSE PLANNERS have finally gotten around to updating OPLAN 5027, the plan for the defense of the ROK in case of a North Korean invasion. That contingency seems rather unlikely today.
FOR THE THOUSANDTH TIME ….
The DPRK was compelled to take an option for nuclear development which required huge funds, manpower and a lot of time. This was an inevitable security measure for self-defence taken to cope with the situation where the U.S. singled out the DPRK as a target of the former’s preemptive nuclear attack and pursued ceaseless moves to start a nuclear war against it.
Frankly speaking, it was none other than the U.S. that drove the DPRK to nuclear weaponization. [KCNA]
THIS SEEMS A LITTLE OVER THE TOP: A columnist calls the Lee Administration “psychopaths” over the deaths at Yongsan, and the Hankyoreh prints it:
Psychopaths have no soul. They do not feel anything, like other people’s pain, sadness or hopes. Gang killed people as though they were insects, feeling no conscience at all. The Lee administration as well was thoroughly insensitive to the sadness and pain of the surviving family members of those killed in the Yongsan tragedy. [The Hankyoreh]
And with that, the Hanky moves one step closer to KCNA. Correct me if I’m wrong, but wasn’t it the squatters themselves who started the fatal fire by throwing paint thinner all over the place? Any excuse that leads to the foregone conclusion will do, I guess.
