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NORTH KOREA NEWSLETTER NO. 223 (August 16, 2012)

N. Korea Virtually Ditched Planned Economy, State Rationing: Report

SEOUL (Yonhap) -- North Korea virtually ditched its planned economy system and state rationing recently and inaugurated freer management policies under the new regime of Kim Jong-un, a news report said on Aug. 9.

   "Lecture meetings have been held since Aug. 6 for each labor group, political cell and factory in regard of the introduction of a new economy management system," Washington-based Radio Free Asia (RFA) quoted from a source based in Ryanggang Province in northern Korea. "During the lectures, details of the new economic management system were released."

   The source also said the regime dispatched lecturers to each workers' organization across the country to brief them on the newly-introduced policies, RFA said.

   Internally called the "June 28 new economic management system," the set of new policies center on ending the country's previously tight assignment of output and scrapping government rationing to let each production unit support itself, a sharp turnaround from the North's strictly managed production and rationing so far, RFA reported, quoting sources.

   Kim Jong-un secretly instructed officials to draw up the new plan on June 28 and ranking officials have been notified of the change since early July, the new outlet said.

   "Factories and companies were made to independently produce and set prices and sales methods without state plans," the Ryanggang Province source said in the report. "It means virtually abandoning a planned economy."

   Individuals are still not allowed to establish firms on their own and the state will continue to appoint or sack factory or company managers.

   RFA also quoted another source who said that according to the new system, the state takes 70 percent of what is produced from farmland while the remaining 30 percent goes to farmers. Currently, the state allocates agricultural output and takes all the harvest.

   The radio said the North did not clarify exactly when the new system goes into effect, only indicating it starts "from now on," possibly for fear of unexpected inflation and other side effects the change could bring.

   The North's regime continues to widely publicize its retention of other socialistic policies such as free education and free health care, promoting the new economic plan as its own socialistic idea, independent of outside influence, according to RFA.

   North Korea could possibly have adopted a experimental trial of economic reform on some parts of the country, Seoul's Unification Ministry said in response to the report.

   "(But) We did not think the reform measure is being implemented nationwide," a ministry official said.


N. Korea Troubled by Rising Rice Prices, Currency Depreciation

SEOUL (Yonhap) -- North Korea has been plagued by rising rice prices and the falling value of its currency since the inauguration of its young leader Kim Jong-un, a government source in Seoul said on Aug. 9, an apparent reflection of the northerners' anxieties over the inexperienced son of former leader Kim Jong-il.

   Prices of official market-traded rice, a staple for Koreans, have increased sharply, while the North Korean won has taken a dive since Kim Jong-il died suddenly last December, the source said.

   Last September, one kilogram of rice cost an estimated 2,400-2,500 won, while one U.S. dollar changed hands for up to 3,000 North Korean won, according to the source.

   The news of Kim's death in December, however, brought the price of rice as high as 4,500 won, while the value of the won against the U.S. dollar plunged to the 5,000 won level in late 2011, he said.

   The prices normalized somewhat in February before shooting up again around June, he noted.

   Experts said the price gains reflect North Koreans' unrelenting jitters over the untested Kim Jong-un regime, as well as unsatisfactory reforms in the ailing North Korean economy.

   The widely-known failure of the North's currency reform attempts in 2009 only raised the appeal of foreign currency vis-a-vis the local note, experts indicated.

   Further weighed down by severe damage from recent floods, the North may see a continuing rise in the price of rice, as well as falls in its currency value in the future, they said.


China Donates U.S.$1 Million to Aid Flood Victims in North Korea

HONG KONG (Yonhap) -- China has donated U.S.$1 million to aid victims in flood-ravaged North Korea, a U.N. agency said on Aug. 10, indicating China continues to support the socialist state.

   The World Food Program (WFP) said the Chinese government has contributed the cash to a total amount of emergency food aid worth $18 million sent to flood-hit areas in the southern part of North Korea.

   Tropical storms and subsequent floods swept through the North in July, leaving at least 88 people dead and more than 60,000 homeless as well as destroying farmland, according to the WFP.

   The aid came after the North filed a request for emergency aid this week, and the U.N. Resident Coordinator's Office in Pyongyang called for immediate assistance after an on-site investigation.

   The WFP said it will ensure that the aid is being made effectively and transparently by monitoring the entire process.

   Cash donations North Korea has received will be used to buy corn, sugar, vegetables and other materials from inexpensive, yet quality resources, the aid group said.

   China has been North Korea's closest ally and a key source of foreign currency income.

   In 1961, the two countries signed the Sino-North Korean Mutual Aid and Cooperation Friendship Treaty, whereby China pledged to immediately render military and other assistance to its secretive ally.

   Meanwhile, South Korea's unification ministry said a week ago that it is not considering offering aid to the North, though its stance is to help vulnerable North Koreans on purely humanitarian grounds if necessary.

   Seoul severed almost all ties with Pyongyang in 2010 after the sinking of a South Korean warship blamed on North Korea and the North's shelling of a border island that killed 50 people last year.


N. Korea's Economic Reform May Take Effect in October: Report

SEOUL (Yonhap) -- North Korea is likely to put its new economic reform policies into action in early October, a news report said on Aug. 10.

   The new policies, tentatively called the "June 28 new economy management system," may take effect from early October, Washington-based Radio Free Asia (RFA) reported Friday.

   "I have heard rumors here and there that the regime adopted a new economic measure and an official told me that the time this measure will take effect will be early October," RFA quoted a North Korean surnamed Kim in Pyongyang as having said.

   Kim said he was not aware of the details of the reform but it is likely to be mainly aimed at introducing market prices in place of state-determined prices, RFA reported.

   The latest reform attempts mirror the country's similar reformist efforts in 2002, when wages and rice prices were sharply lifted to match market levels.

   Increased bill issuance following the wage and rice price hikes triggered severe inflation, causing the reform drive to fail.

   Some North Korean citizens are worried about the coming changes due to bitter memories of the botched 2002 measures, RFA quoted Kim as saying.

   With the forthcoming introduction of the reform, North Korea is tightening its grip on border security and stepping up public security efforts, North Korean watchers said.

   Analysts said the new measures may herald tangible changes in the reclusive country.

   The new measures seem to be an updated and revised version of the 2002 reform drive, Lim Kang-taeg, a senior researcher at the Korea Institute for National Unification, said. "It looks like North Korea attempts to resolve its economic problems within its own frame by tightening the regime's control of the economic issues and improving productivity," Kim said.

   Without more dramatic reforms, the North may only repeat the failure of the 2002 reform. Thus "the latest policy change is likely to be bigger in scale than the July 1 measure in 2002," said Lee Yong-hoon, an analyst at SK Research Institute.

   It is too early to forecast results as the details of the reform have yet to be known, other analysts said.

   South Korea is closely watching North Korea's actions to rejuvenate its citizens' livelihoods, said the spokesman for Seoul's Unification Ministry, which handles inter-Korean issues.

   "The (Seoul) government is aware of North Korea's discussion and consideration over various changes in the economic sector since the launch of the new leadership," spokesman Kim Hyung-suk said in a press briefing. What specific measures the North has taken have not been confirmed, the spokesman said.

   "The Seoul government hopes the North will make a good choice and take action in a way it quells the global communities' concerns, including the nuclear issue, and improves the welfare of its people," he said.


N. Korea, U.S. Had Informal New York Meeting in July: Sources

WASHINGTON (Yonhap) -- Senior North Korean and U.S. diplomats had at least one informal meeting in New York in July to check each other's position after months-long dormancy in their nuclear talks, sources in Washington said on Aug. 11.

   However, there was no breakthrough from the meeting between Clifford Hart, the U.S. special envoy for the six-party talks, and Han Song-ryol, North Korea's deputy ambassador to the United Nations, with neither side deviating from their previous stance, added the sources.

   "I know that there was informal contact recently between North Korea and the U.S., although no exact date is available," an informed diplomatic source told Yonhap News Agency. "But (the outcome) was no more than checking each other's position."

   The source said the so-called New York channel is virtually the only communication channel between Pyongyang and Washington and it is always open in a sense.

   Representatives from the U.S. and North Korea exchange messages over phone or through face-to-face contact if needed, the source said.

   Japan's Kyodo News Service also reported earlier in the day that Hart and Han met in July at North Korea's U.N. representative office in New York.

   In the meeting, North Korea criticized the U.S. for suspending a plan to ship 240,000 tons of food aid, Kyodo said, quoting its own sources "familiar with bilateral ties."

   The U.S. reiterated that it was Pyongyang which broke the Feb. 29 deal with a long-range rocket launch in April, according to Kyodo.

   Under the agreement reached in high-level talks, Pyongyang agreed to impose a moratorium on some of its nuclear and missile activities in return for the resumption of food assistance.

   The July meeting would mark the first known contact between the two sides since North Korea's most recent rocket launch.

   The U.S. neither confirms nor denies any specific contact with North Korea through the New York channel.

   In a highly unusual move, the State Department disclosed at a daily press briefing in December that its official had a phone conversation with his North Korean counterpart in New York soon after the secretive regime announced the death of leader Kim Jong-il.

   Another source told Yonhap that such a New York channel contact itself is not special and it would be difficult for Pyongyang and Washington to resume formal dialogue before the U.S. presidential elections in early November.

   "I think North Korea knows the circumstances and it is now trying to collect bargaining chips to prepare for negotiations next year," the source said.


N. Korea, Japan to Hold Talks in August over Remains Repatriating

TOKYO (Yonhap) -- North Korea will hold inter-governmental talks with Japan later this month to discuss repatriating remains of Japanese citizens buried in the North, Japan said on Aug. 14.

   The repatriation talks, the first of their kind in four years, will be held in Beijing on Aug. 29, according to the Japanese government.

   The planned talks come after the Red Crosses of the two countries met in Beijing earlier this month in preparations for the government-level meeting.

   The talks will deal with the North's repatriation of remains of Japanese nationals who have died and been buried in the reclusive country.

   North Korea is also expected to appeal for economic aid including food assistance during the talks.

   About 30,000 Japanese citizens are estimated to have died and been buried in North Korea after they did not return home following Japan's defeat in World War II and its ejection from the Korean Peninsula.


North Korea Expected to Complete New Reactor in 2013: Report

WASHINGTON (Yonhap) -- North Korea seems to be on course to complete the construction of a new light-water reactor in its main nuclear complex in 2013, a U.S. think tank said on Aug. 14 after analysis of satellite imagery.

   A set of photos taken in May and June by commercial satellite shows cranes, a rectangular steel structure of considerable height and two metal beams, according to the Institute for Science and International Security (ISIS), based in Washington.

   "New construction material has been placed on and near the reactor building," David Albright and Robert Avagyan with ISIS said in their report.

   Although it has yet to be covered with the dome, they added, other major external work on the reactor appears to be "complete with most of the activity occurring inside the reactor building."

   "The images were assessed for ISIS by a reactor expert. He estimated that the reactor could be completed in the second half of 2013," they said.

   In May, the U.S.-Korea Institute at Johns Hopkins School of Advanced International Studies issued its own assessment of satellite imagery of the secretive nation's nuclear site in Yongbyon, about 60 miles north of Pyongyang.

   It reported progress in North Korea's work on the new reactor, first revealed to the outside world in 2010.

   But the institute said, "Overall, it may take another 1-2 years before the new facility becomes operational."

   "Regardless of problems with its missiles and uncertainty about another nuclear test, the North is plowing ahead with this reactor, a key part of Pyongyang's strategy to expand its nuclear weapons arsenal," Joel Wit, a visiting fellow at the institute, wrote on his blog, 38 North, at that time.