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Choson Exchange 2011 Annual Report

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On behalf of the Choson Exchange team, I would like to present our 2011 Annual Report. Our report covers the following areas: Plans for 2012, Activities & Feedback, Research, Communicating Our Work, Management, Financial Situation and a List of Media Coverage for 2011. Read our 2011 Annual Report here. -----------------------------------------------------------

Just 5 days before Kim Jong Il passed away, we had finalized our programs for 2012 with our North Korean partners. A few days after Kim Jong Il’s passing, we got in touch with our North Korean partners and they still expect us to proceed with programs for 2012. We see in this transition period an important opportunity to broaden the impact of our work through dialogue with an emerging generation of leaders. Our core mission remains the same, although we will need to expand fundraising as we ramp up our efforts for this critical period.

After reviewing previous and current programs, we decided that we will continue to focus on a rigorous selection process to pick exceptional young North Koreans for exceptional learning opportunities.

In addition, we intend to identify areas of potential policy changes in partnership with North Koreans and focus on training in those areas. This will allow us to bring training closer to actual implementation of knowledge. We also decided that a major long-term emphasis should be to build cross-institutional linkages and in developing institutions that can facilitate these linkages. This follows feedback from North Koreans who observed that economic-policies in North Korea can benefit greatly from greater communication and coordination among economic agencies.

Yours sincerely, Geoffrey See Managing Director at Choson Exchange

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.”

North Korean Partners are Online and In Touch

We would like to share the good news with all of our partners. We have been in touch some of our North Korean partners. Despite this period of mourning, they are expecting Choson Exchange to continue deepening the impact of our work in North Korea, and have requested that we update them on our plans for 2012. As I have argued at the East Asia Forum, I believe we should all see in the dramatic changes taking place in North Korea an opportunity to expand our impact and program depth, especially in ongoing program areas of economic strategy, financial sector and fiscal restructuring. Our team will be reviewing how we should reposition ourselves to capture opportunities on Dec 24, 2011.

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.

KCNA Cites Party Organs before National Defense Commission

In KCNA’s piece on Kim Jong Il’s passing, we note that in both the Korean and English versions, the order in which institutions are cited are as follows:

“The WPK Central Committee and Central Military Commission, DPRK National Defence Commission, Presidium of the Supreme People's Assembly and Cabinet released a notice on Saturday informing the WPK members, servicepersons and all other people of his passing away.” (KCNA December 19, 2011)

We wonder if this is something interesting indicating the role the NDC might play in this new political landscape. The National Defense Commission was Kim Jong Il’s institution of choice for managing the country. As most institutions did not communicate much with each other (stove-piping of bureaucracies), the NDC was central to decision-making. The NDC was never fully formalized and even until our last few trips to North Korea, it still seemed to lack a large bureaucracy supporting it. It is also often misunderstood as a military body, even though its membership is comprised of party and military elements.Kim Jong Eun is not on the NDC, while many of North Korea’s big names are (e.g. Jang Sung Taek). It will be interesting to see what happens to the NDC over time.

Monitoring TV Media After Kim Jong Il’s Death

Waking up to a big news story is always slightly surreal. Groping for coffee and trying to come to grips with what is going on can be tough. I’m ostensibly on holiday in the UK; the one advantage from being so far from the story was that the TV setup here is solid, with 16 news channels from a variety of countries. Modern TV News has it tougher, though. It has to try to be accurate and insightful, without compromising its highest principle: speed. In this hyper-connected world, getting information out fast is key and this goal is made difficult when reporting on news from North Korea – a media shy country, to say the least – in a week where so many journalists have just gone home for Christmas and KCNA’s announcement coming during the middle of the night in Washington.

With news organizations scrambling for insight at short notice, quality and consistency kind of get thrown under the bus. This is a general problem, but with a country like North Korea, you can say almost anything and having visited Pyongyang once seems to give enough credibility to be on TV.

Sky News had a rather lengthy discussion on how the world lost it’s greatest golfer, referring to a legendary round of golf by Kim Jong Il, in which it is claimed he shot 11 holes-in-one. No North Koreans to whom we’ve mentioned this story have heard of this feat. It is most likely one of those apocryphal tales that foreign media enjoy using as shorthand for “this country is nutso!”

The BBC, among other pundits, brought on Sue Lloyd Roberts, who made a (pretty bad) BBC special on North Korea a few years back. Proving you can say anything about North Korea – even if it is demonstrably false - she mentioned that refugees who make it to the South live in camps for two years to learn to adjust to life in a capitalist society. In fact, they are usually held for investigation for three months by intelligence services and then spend three more months in ‘hanawon’, a school-like training facility, before being settled around the country.

Lucy Williamson, a fine journalist, gave a good, cautious analysis, though couldn’t avoid looking as if she was at the end of a long, difficult day. Perhaps she was distressed at having to be put right after Lloyd Roberts’ commentary.

One of CNN's pundits said NK's short-range missile test is "unconnected" to Kim’s passing because that's what the South Korean government says. As if South Korea's primary concern isn't keeping international markets calm and investors sanguine. (On the other hand, Sky News conclusively called it a “warning missle”.)

CNN also gave our friend Andrei Lankov a few short seconds to explain what he has been studying his whole life and called him “Andrei Larkov” for his trouble.

In terms of tone, RT’s earlier reports seemed the most upbeat, with their reporter suggesting trains might soon go North from Dorasan Station. This was replaced by more apprehensive language later in the day. Japan’s NHK seemed the most concerned; more than Western news outlets it focused on the potential for instability. China’s CCTV decided largely to ignore the story, after a brief mention.

The nadir, unsurprisingly, came from Fox News, who had Donald Trump pontificating by phone about whether an Arab Spring could occur in North Korea.  It is generous to say that Trump’s understanding of Northeast Asia is limited in the extreme.

Overall, TV news struggled to decide whether Kim Jong Il’s death is a good thing, if there would be instability or not. “Will North Korea be more or less dangerous?” asked Sky News, without really answering the question.

It is hard for me to value most of what I saw today, though perhaps just through volume, some interviews and punditry were insightful. Mark Fitzpatrick gave an astute interview on Sky News, for example. If there is something good that comes out of the blur of shallow analysis, in the internet age, this bombardment of information may drive people to seek out more in-depth sources of information on North Korea. Perhaps this will cause a revolutionary upsurge in interest in the country’s future.

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.

Chart Focus: KCNA's 'Great Leap Forward' in Talking About Investments

People I met often seem surprised when I tell them that North Korea is interested in pulling in investments. I thought the following numbers (citations of the word "investment" in KCNA) would put things in perspective...

*This is not meant to be a rigorous analysis - we note that we did not take an in-depth look at the context investments were mentioned, and that 2011 changes might be driven by the general increase in KCNA articles *2011 figures exclude December

Source: www.nk-news.net