Slave to the Blog: Five Bad Pennies

December 3, 2015 6:45 AM

It's incorrect to say that North Korea never changes. But some depressing stories keep returning like bad pennies. Today I examine five of them.

I’ll start with fish. Or rather fishermen meeting untimely fates in pursuit of fish. The story is pretty straightforward: when North Korea gets into balance of payments trouble (like it appears to be now), under pressure from authorities to boost revenues, fishermen in dilapidated vessels start pursuing their catch further and further outside North Korean waters. So in the last few weeks we have been treated to stories from Japan of “ghost boats” (note the plural) crewed by decomposing bodies washing up on shore. The real danger is that some of these fishermen may cross the NLL triggering a military encounter. Fishing with dynamite might be safer.

Another hazardous occupation is logging in the Russian Far East. The basic problem is that the work is risky and the workers never see the lion’s share of the wages which are withheld by the government. Now Daily NK is reporting that a growing number of workers, particularly in construction, are deserting and are not being repatriated by the Russian authorities. The story claims that the relaxed treatment of the North Koreans is related to efforts by UN Secretary General Ban Ki-moon. But it could also be that in the Russian Far East, which is losing population, local officials are willing to turn a blind eye towards those willing to do hard work in logging, mining, and construction. According to the article, the North Koreans have tightened surveillance and intensified self-criticism sessions in response to the elevated desertion rates. For readers who might have missed it, Shane Smith and Vice Media produced an interesting documentary on the logging camps a few years back.

North Koreans are also being put to work in Political Prison Camp (kwanliso) No. 14, according to the Committee on Human Rights in North Korea (full disclosure: I’m on the Board). The conclusion is based on satellite imagery analysis conducted by the group in cooperation with Allsource Analysis, “a leading global provider of high-resolution earth imagery solutions.” According to the report, the camp, which is in a forested mountain range about 40 miles from Pyongyang, has an estimated population of 15,000 prisoners. According to the report they maintain agricultural fields, orchards, and livestock, as well as being forced to work in logging and the fabrication of wood products. The report says that they are also “dispatched as forced laborers at light industrial facilities and mines.” Comparing images taken at different times reveals the construction of new roads within the camp, suggesting sustained if not increased forced economic activity there.

And it’s not just the workers who are having trouble in North Korea: the capitalists are getting screwed too. One of the more interesting North Korean sagas in recent years has been the experience of the Egyptian cell phone service provider Orascom, possibly North Korea’s largest foreign investor. It launched a joint venture with the Ministry of Posts and Telecommunications, Cheo Technology or Koryolink, back in 2008. As noted in previous posts, the company has been unable to repatriate profits, and now faces competition from a rival provider established by the North Korean government. As I noted in an earlier post, the profits issue was sufficiently large (“material” is the word accountants use) that as a publicly traded company, Orascom could be required to acknowledge the situation in basic documentation filed with the Egyptian SEC. (A loophole in the law would seem to obviate the need to also refile in New York.)

Now the penny has dropped. According to Martyn Williams who has been all over this story, the government seems bent on forcing a merger between Koryolink and its upstart rival—a merger that would leave the government in control. In papers filed in Cairo last month, the company indicated that in management’s estimation the group had lost control over its Koryolink subsidiary.  The company's stock price is down nearly 60 percent this year, at least in part attributable to problems with the North Korean subsidiary.

Whatever one might think about Orascom, expropriating your most visible foreign investor, while claiming that you are open for business, does not seem like the brightest thing to do. As I wrote back in July, “It does not inspire confidence to abuse a company financially that brought in technology and built one of the few components of the country’s infrastructure that appears to meet 21st century standards by not agreeing to repatriation of profits at the official exchange rate and instead insisting on using a rate that one could get on a small transaction in a back alley in Hyesan. Reputation, credibility, and confidence are concepts that North Korea’s elderly communist apparatchiks seem to have trouble grasping. This situation really might amount to cutting off one’s nose to spite one’s face.” Don’t see any reason to re-evaluate that view.

Last month I wrote a post titled "Is North Korean food insecurity being hyped?" in which I used a comment by Kwon Tae-jin, formerly of the Korea Rural Economics Institute and now at the GS&J Institute,  that North Korea might be facing its greatest food shortage of the Kim Jong Un era, as the jumping off place to argue, that while bad, food security was not noticeably worse in 2015 than it had been on average for the previous five years. Now, according to the VOA, Kwon is arguing that the 70 percent reported drop in grain imports from China, together with stable prices, demonstrates that the supply is adequate, the market has confidence in the regime in Pyongyang, and the situation is "probably not as dire as many fear." Kwon knows more about North Korean agriculture than I do.  But, Lord, I almost got whiplash. In two weeks we went from the worst situation of the Kim Jong-un era to hunky dory. I'm waiting for some aid group to announce the 70 percent fall in imports--driven by North Korea's dire balance of payments situation (see dead fishermen above)--means that a significant grain deficit has emerged that must be filled or we face calamity.  Falling imports mean everything is ok. Or that things are going to hell in a hand-basket.

Does this add up to a wooden nickel?

https://www.youtube.com/watch?v=y0Fe1tQjB5U

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Marcus Noland Senior Research Staff

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