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

Winds of Change Blowing Eastwards: From Burma to North Korea

The following was written by a Choson Exchange team member. Views reflect those of the team member, and does not represent the institutional position of Choson Exchange. We have had casual conversations on the changes taking place in Burma with some North Koreans. You can’t teach an old dog new tricks. Apparently, not true in Burma. While the winds of change in the Middle East have been largely mass movements invigorated by the idealistic passions of young vanguards, Burma’s gerontocracy has surprised many by their willingness to reinvent themselves and their moribund economy. The visit by Mrs Hillary Clinton, the highest ranking US State Department official to Burma in more than 50 years, has renewed hopes that Burma will continue to carry out progressive reforms to gain acceptance in the international community. Anticipation of change is in the air.

Old men can lead change

What does this mean for North Korea? First, the assumption that change must come from the youth, unencumbered by ideology and motivated by a better Western way of life, ought to be seriously reexamined. Old men in power can open up their country, if only because of self-interest to entrench themselves and their privileges. Thein Sein, currently 66 and the President of Burma, is hardly the poster boy for change. He spent his entire career as a member of the military junta responsible for the repression of pro-democratic forces. Just today, he signed a law to allow his people to peacefully protest in Burma. And all these volte-faces are taking place while Senior General Than Shwe, a man who ruled with absolute power and an iron fist till 1992, is still alive. Perhaps the international community should seriously consider sponsoring senior North Korean leaders to Burma to understand their rationale for voluntarily ceding and sharing power. This is likely to be a more effective prep talk than any democratic lecture or visit by former US Presidents. These old gentlemen may be your unlikely agents for change.

Initiating change from the top

Second, it is a good idea to initiate change from the top of the Bastille than from the streets. While their European counterparts like Nicolae Ceausescu tend to have their doors kicked down before going down with a bang, socialist dictators in Asia seem to better understand the true meaning of power, and often voluntarily open their doors to change. If change is inevitable, existing leaders might as well start learning to control change in a non-destabilizing way. This will allow the old dogs to be seen as agents for change and claim credit for bringing the fruits of economic progress to their people. It is ultimately in their political self-interest to legitimize their rule. A social compact with their people for economic growth and a higher standard of living can only better cement their power in the short-term. This is because the energies of the masses will be channeled towards hungry stomachs and material needs, rather than any abstract democratic ideals. If democratic change eventually catches up and takes power from them, it will be at best be an uncertain and long-drawn process (i.e. just look at China). By then, they will have comfortably retired in their graves. If the old gentlemen in Burma can give up their cherished Burmese Way of Socialism, surely the North Korean leaders should take a hard look at Juche again. The old gentlemen in North Korea should be confident in the knowledge that, by initiating economic changes today, they not only benefit themselves by stabilizing their regime, but also benefit their progenies by creating a more stable and rewarding economic system.

Fast and Furious Change

Third, when change comes, it will be fast and furious. It pays to be prepared and to have a ready agenda. Ever since the Burmese military junta orchestrated a transition to civilian government earlier this year, reforms and progressive announcements have been rolled out at a rhythmic pace. Within a year, the freeing of Aung Sung Suu Kyi from house arrest, ceasefire with the Shan State Army South and the latest lifting of a blanket ban on protests constitute a nice chronological flow on the political front. Positive signs have also been signaled on the business and economic front with talks of simplifying the FX system and reforms in investment law to give foreigners more control over their businesses. Senior North Korean leaders should watch Burma closely. Even if they are not interested in pushing for reforms today, they will be wise to start thinking through the agenda and timetable for economic and political change. One does not need to tell the master practitioners of power that it is better to dictate the terms of your agenda to others than vice versa. Also, elite North Koreans have studied overseas and understand how the capitalistic system operates, so the expertise and knowledge to actualize change is already there. If their Burmese counterparts can find it in their hearts to be young again, there is no reason why the old gentlemen in North Korea can’t start a bit of experimenting and share the joy of their cognac with their fellow countrymen.

Interview on Economic Training 2.0 in North Korea (Part 2)

This picks up from a previous blogpost. I was interviewed by a Korean journal focused on inter-Korean issues. I provided my opinion on how economic policy should evolve in North Korea, and what organizations like Choson Exchange must focus on to facilitate that transition. The interview was translated into Korean. I have included parts of the English transcript below: What are your thoughts on meeting North Koreans? What is interesting about how North Koreans think?

The generation gap in people's thinking is obvious and important. A young candidate we selected for our program in Singapore impressed our ex-Foreign Minister and former Managing Director of Temasek Holdings by asking why Singapore chose to hold assets under a sovereign wealth fund rather than privatizing those assets. Such an insightful question requires the ability to think about abstract differences in systems, and also reflected the generation gap in the way North Koreans over 50 years old think, versus someone in their 20s. While the people over 50s tend to stick to more "politically correct" answers, younger people in the program are able to ask tough and insightful questions.

North Korea's living standards are low. What is necessary for them to improve their living standards?

When Singaporean policymakers emphasize the Rule of Law in developing a competitive economic system, older North Koreans rebut by claiming that they already have investment laws in place guaranteed by their constitution - forgetting that laws are only as good as its implementation. North Korea focuses too much on hard infrastructure (e.g. roads, technology, equipment) as a solution to their development problems, and too little on soft infrastructure (e.g. good governance, rule of law, and informed economic or monetary policy). This is a major obstacle to long-term economic development or even to their short-term efforts to bring in investments.

See part 1 here.

Who Does Business in Rason?

When possible, we will try to profile companies and organizations we come across. This is our first. Jilin Tobacco Industry Co. Ltd. (JTICL)

When visiting North Korea or China, one is struck by the number of men who smoke -  the two countries have some of the highest rates in the world. In China, about 53% of men smoke. In North Korea it is a similar figure, despite efforts by the government to lower the smoking rate. As such, the tobacco industry is of huge significance in both countries and will undoubtably play a role in in the ever-expanding trade relations between the two countries.

Jilin Tobacco Industry is based in Changchun, where apparently they will soon have a shiny new building. They are a private-sector company, but in China the tobacco industry is not so simple. A State Tobacco Monopoly Administration exists, which oversees the China National Tobacco Company. This SOE controls all distribution channels and pricing mechanisms, but allows regional firms to  develop regional brands and fill orders, effectively outsourcing production. The two national organizations work closely with regional companies -  in the case of Jilin Tobacco, helping develop the Changbaishan brand, for example. They take a cut of the locally earned profits in the form of a tax or fee.

In 2008, the State Tobacco Monopoly Administration gave Jilin Tobacco permission to establish a joint venture with North Korea’s Taedong River Tobacco Co. Ltd. and Nason Shinhung Tobacco Co.

They now operate a factory in Rajin, which primarily produces cigarettes for export to countries including Qatar, Japan and Taiwan. The Rajin factory has 100 employees, a small percentage of Jilin’s total workforce of 5000, so it appears that some combination of concerns about infrastructure and political commitment have prevented rapid expansion of the Rajin operation.

The factory  also produces cigarettes for the local market, which I had the 'good fortune' to try.  It was harsher than KCNA rhetoric. A company representative then showed off Jilin’s top brand, which he proudly claims sells for over 10 dollars. The higher quality brands are made in China.

The rep told us that labor costs are cheap enough to warrant the current level of commitment. Expansion in the future was a possibility, he said, but did not know of any concrete plans. The imminent completion of the highway to China may facilitate more production of cigarettes for the Chinese market.

Interview on Economic Training 2.0 in North Korea (Part 1)

I was interviewed by a Korean journal focused on inter-Korean issues. I provided my opinion on how economic policy should evolve in North Korea, and what organizations like Choson Exchange must focus on to facilitate that transition. The interview was translated into Korean. I have included parts of the English transcript below: What are your current activities and what are you focused on?

Currently, we focus on training next-generation North Korean policymakers (under 40) in economics, business and law. Based on internal discussions and feedback from programs, we decided that we need to 'upgrade' to a training 2.0 model. General exposure to economic, business or legal theories are not helpful. Instead, we pursue a "consulting" relationship, where we work with NK partners to understand the economic problems they need to solve, and work with foreign experts to provide concrete solutions that can be communicated to our partners during our programs.

Can you introduce the primary activities of your organization?

It is an exciting time for us in North Korea, as there are a lot of new economic institutions or departments being set up that we think is worth working with, although progress is slow because of a lack of funding. In general, we work with North Koreans to identify specific economic or business challenges, and develop an agenda defining what they need to learn based on the issues. Based on this agenda, we provide workshops (e.g. fiscal strategy and taxation) in North Korea where 1 workshop leader is assigned to at most 8 North Koreans to facilitate discussions. We have also brought North Koreans to consult policymakers in Singapore, as North Koreans are very interested in Singapore's economic development.

Our longer-term strategy is to move to the training 2.0 model which I mentioned above. We identified two key problems with capacity building programs which we think is feasible to tackle:

First, the gap between training and implementation of knowledge must be made smaller. Instead of general discussions of economics or business, we now require NK institutions to prepare a specific agenda where they identify policies they think is feasible to review within a five year time frame. We can then focus training programs on these areas if we think the change will be positive for NK's economic development.

Second, there is also a lack of cross-institution communication in North Korea. As a result, institutions lack a common understanding of problems and a common economic strategy. What we need is to provide opportunities for these institutions to develop that common vision. An idea we are keen to explore was raised by a young North Korean who attended our program in Singapore. He suggested that North Korea create an economic strategy think tank.

(To be continued...)

Have Management Consultants Infiltrated North Korea?

McKinsey, BCG and Bain-type consultants have been involved with business training for North Koreans informally and in their private capacities through our programs. As more North Koreans dive into business and entrepreneurship, the transfer of data-driven analytics and modern management theories is increasingly important. On the other hand, corporate America and management consultants in particular are often (and perhaps unfairly) accused of speaking in jargon and buzzwords that confuse more than they illuminate, and it would be a shame to inflict such horror on North Koreans. To my surprise, a corporate buzzword has penetrated North Korean society. On November 4th this year, KCNA, North Korea's state-run news agency, reported on a Provincial "Innovators" meeting.

Pyongyangites Meet to Welcome Jagang Provincial Innovators Pyongyang, November 4 (KCNA) -- A Pyongyang mass meeting took place at the Pyongyang Indoor Stadium Friday to welcome officials, labor innovators, scientists and technicians from the Huichon Ryonha General Machinery Plant. … Those innovators set an example in every aspect including development and production of new products, economic management and improvement of production environment by fully displaying the Kanggye spirit, thus further glorifying the undying leadership feats of Kim Jong Il and strikingly proving again that science and technology guarantee a thriving nation, he said.

October Rason Trip Findings

In October 2011, John Kim, a board director of the Choson Exchange, visited the Rajin-Sonbong Special Economic Zone. The following is a summary of some of his findings based on site visits and talks with senior officials in the SEZ. An longer account of his travels and impressions will be available soon. This information helps elaborate on our report from August. Rajin Port

The Rajin Port employs 1400 workers. The Chinese have conducted feasibility tests regarding two new piers, but currently the port houses three piers with 9-9.5 meters draft. A 30,000 metric ton coal storage warehouse was built at Pier 1 by the Chinese, who moved 80,000 metric tons through the facility in five shipments from January to September. Pier two, largely dedicated to container shipment, is currently dormant and a Swiss company is currently using Pier 3 to ship manganese and talc out of the region. The Russians also have a 49 year lease agreement signed in 2008.

Oongsang Port

Oongsang Port exported Russian lumber until 1985, but remains largely quiet now except for the occasional fishing boat. The present draft of 7 meters constricts any major future activity, so the North Koreans hope to bring in over $100M to widen the draft to 9 meters. After Rajin Port activity surpasses capacity there, Oongsang Port will become the next regional hub for drybulk activity.

Sonbong Port

Originally opened in the early 70’s, the draft within the port is 7 meters, but a fully laden Very Large Crude Carrier containing 270,000 metric tons of oil can offload at an offshore facility further out at sea. Two pipes, 63 cm in diameter, run for 9km underground before reaching the storage facility at “Victory Petrochemical”, a simple refinery that was designed to refine crude and send oil products (gasoline, naphtha, jet fuel, diesel and fuel oil) back to the port for export. In addition to this two way flow, fuel oil also arrived sporadically at the port as part of aid packages from 1994 to 2008.

Sonbong Power

This power plant was originally designed to take fuel oil from Victory Petrochemical as feedstock and generate power to feed back to Victory. Since the refinery has been offline, Sonbong Power has at times provided electricity to the region, but with fuel oil prices close to $700/metric ton and current electricity prices at 6.5 eurocents/kwh, the economics of running the plant do not work leaving the 800 workers employed here largely idle.

Victory Oil Refinery

Literally translated as “Victory Chemical Plant”, this refinery was completed in 1973 with a 40,000bbl/day crude distillation unit that typically yields 40~50% residual fuel oil for an average crude feed. Investment into upgrading capacity in the international market has led to an eroding of margins for simple refineries like Victory. Currently the refinery is idle and would need over $500M in investment to become competitive.

Hye Song Trading Company

Mr Kim visited a Sewing Factory owned by Hye Song, which runs 8 such factories employing 2000 workers. Output is recorded for the entire year on a bulletin board at the front entrance of the company. All employees except the handyman were women.

Cell Phone use more prevalent

The number of cell phone users in the DPRK crossed 1 million earlier this year and one official commented that the overwhelming majority of urban households have at least one cell phone. This particular official had 4 phones for a household of 3. Foreigners are allowed to use cell phones on a different network, and users of the domestic and foreign network can not call each other.  All usage is prepaid.

Handset Type	Purchase Costs	Usage Costs
Local	1570-2200 RMB	250 minutes and 20 text messages, while each additional minute is charged at 60 NKW (about .1 RMB/min)
Foreigner	1800-2400 RMB	Does not include any free minutes and are charged at 2RMB/min

Banking System has room for growth

There are two banks in Rason, the Central Bank, which is focused on domestic transactions, and the Golden Triangle Bank, which is focused on foreign currency transactions. Transactions for goods and services are conducted almost entirely in cash, usually in RMB or NKW. Mechanisms for savings are credit have room for development. As banks take a fee to deposit and withdraw cash, merchants prefer to hold money in cash (usually RMB). Credit is also available almost exclusively through friends or family.

Bottlenecks

A number of issues require solving if Rason is serious about attracting large scale foreign investment. Among these are reliable access to travel visas, reasonable communications costs with the outside world, a more mature banking system with savings and credit mechanisms and favorable tax treatment with a consistent legal framework. The mere fact that Rason is experimenting with market reform is encouraging, and Mr Kim is optimistic about economic development in the region and the nation as a whole.

Presentation at Philips Exeter Academy

Managing Director Geoffrey will be making presentations in Boston in early November at Exeter and Harvard University in the Boston area. These will be off-the-record sessions. The Strange World of Pyongyang: Helping North Koreans Learn About Economics & Business and Learning How North Koreans Think Phillips Exeter Academy Assembly Talk 10.15am November 1, 2011

This will be a general introduction to what it is like doing fieldwork in North Korea and an attempt to dispel the common media trope of North Koreans as brainwashed unthinking automatons.

-------------------------------------------------- Assembly Speaker Gives Glimpse Inside North Korea

Some excerpts from coverage of the talk in Lion's Eye at Philips Exeter Academy:

"I want to focus on understanding how we look at North Korea. The main issue with North Korea is that it is a very poorly understood country. We still don't really know a lot about the country despite much having been written in the media."

With that opening, Geoffrey See – founder and managing director of Choson Exchange, a nonprofit focused on economics, business and legal training of young North Korean government officials – began his assembly talk. By drawing on his own experiences from multiple visits to Pyongyang over the last year, See was able to give PEA students a glimpse behind North Korea's shrouding curtain...

To close his talk, See left his audience with several questions: "If you believe North Korea is run by a single dictator and the country is not changing, is it possible to reach a negotiated solution to the nuclear crisis? On the other hand, if you believe North Korea is changing, that it is a more complex country, does that give you more options on how to effect positive change in the country?" See added by way of ending, "How we understand North Korea affects what kind of foreign policy solutions we put forth in trying to tackle issues such as human rights, economic development or the nuclear issue."