A Capitalist in North Korea

by Felix Abt

  … light hiking and a barbecue on the rocks!

  On the left, I glance down from the top of the TV Tower at a fantastic view of an amusement park called Kaeson Youth Park, which would soon undergo renovation. In 2010, I returned to see six new rides, including the iconic Viking ship, a vertical drop and a swing carousel common at Western carnivals (right). Every foreigner has an incentive to visit this place: A single roller coaster ride costs 50 Won, or few cents, when exchanged at the black market rate. Since my visit, the theme park has set up a Western-style fast food restaurant that sells, to name a few comfort foods, hamburgers and a Mexican Burrito stall. The Western meals certainly don’t hinder the massive popularity of this place: every day, some 5000 visitors, mainly children, young people and military personnel visit it.

  There were two more amusement parks in Pyongyang, both more Soviet-style and several decades old. At one of them, open on important holidays only, known as the Mangyongdae Fun Fair, even I didn’t have the courage, unlike the Koreans, to go on the looping roller coaster. But there have been other foreigners, braver than me, who tried. Even diplomats know how to have a good time. Because of a photograph spread around the Internet, Western journalists chided a British diplomat in 2012 for riding with North Korean officials on a roller coaster at the opening of a new amusement park.

  Despite the fun and laughter, Kim Jong Un scolded the groundskeepers at the Mangyongdae Fun Fair in 2012 for poor maintenance, a violation that, predictably, was published by the Korean Central News Agency. “Seeing the weeds grown in between pavement blocks in the compound of the funfair, he, with an irritated look, plucked them up one by one,” the mouthpiece wrote. Lately, in addition to declaring that he will bring more food for the people, the young reformer has been moving his country into new festive endeavors. A little more than half year after taking over, Kim Jong Un inaugurated the newly completed Rungra People’s Resort, which includes a water amusement park on Rungra, an islet in the middle of the Taedong River. In the tradition of Sea World, the area boasts a dolphinarium.

  Pictured, I take a break at a Buddhist temple at Mount Jongbang. Most foreign expatriates say there are no true monks in North Korea. Of course, I was not totally sure if this man was really following the path of the Buddha, but he acted humble enough to seem that way.

  Westerners tend to assume that, as far as hot springs go, Japan is the ultimate place to be. But North Korea is also home to some wonderful relaxing springs in Onchon, a town at the Western coast. The Ryonggang hot springs, as they’re called, are a one-hour car drive from Pyongyang and have been a soothing meeting point for a century. Japanese colonial administrators relaxed there already during the early 20th century, and today it is a special resort reserved for government officials, foreign guests, and tourists.

  Around the area, a welter of villas offers indoor tubs, a restaurant, a karaoke and a billiard room. North Korean doctors recommended the place to visit and explained to me that “the hot water is rich in bromine and radon, two elements that act as therapy for hypertension, arthritis and gastroenteric disorders, neuralgia and other diseases.”

  In summertime, it’s common for Koreans to go boating on the Taedong River; dignitaries, tourists and businesspeople can even enjoy a meal and wine along the waterway. Pictured here is the Indonesian ambassador (first on the right), the Vietnamese ambassador (third from right), another diplomat and me sailing on a restaurant cruise.

  In the absence of a surfeit of nightclubs and bars, foreigners in Pyongyang can enjoy bonding among the small number of expatriates. One popular hang-out was the RAC, the Random Access Club, a sort of tavern based at the World Food Program (WFP). It got its nickname because it was the only place in North Korea that WFP staff and other aid workers could “randomly” access without much government oversight. And, in a claim to fame, it was the only place in North Korea where foreigners could dance on the tables.

  Of course, foreigners do get bored, and many of them leave after a year or so. A lot of them miss the “sea, sex and sun,” which is in short supply in Pyongyang.

  Expatriates could visit bars in the strangest of places, like in the European Union building and the German embassy—a fun way of building international ties, possibly. After a few weeks or months in Pyongyang, the 400 or so expats knew each other inside out thanks to the stream of alcohol.

  For some foreigners, every day was party time. There was always something to celebrate: birthdays, the arrival of a new expat, the departure of an “old” expat, you name it. Aid workers had an average turnover of less than a year, because many of them got bored.

  When foreign delegations were in town, they met their Korean counterparts at embassies for dinners. In an informal atmosphere, foreigners and Koreans got much closer, a bond that sometimes achieved better results. Once, a Swedish industry delegation brought home complaints and suggestions to officials at the residence of the Swedish ambassador. They were more candid than during the government meetings and where officials were attentively listening and even acknowledging room for improvement of the business environment. As a representative of Swedish companies I was present there. Pictured is a dinner I attended with the leadership of the North Korean Red Cross Society at the residence of the German ambassador.

  There was no lack of entertainment for foreigners. Waitresses here put on a dancing show at the Health Club in the Diplomatic Village.

  Every February, the Vietnamese embassy threw a party on the Vietnamese New Year, known as Tet. The Vietnamese citizens and their spouses, like me, were always invited. Also in good company were the diplomats from their ideological ally Cuba, and their neighbors Cambodia and Laos. Here I had the pleasure of singing “Guantanamera” with the Cuban ambassador, his wife and staff.

  As an art lover, the fine painters of North Korea piqued my curiosity. They called their style “Juche-based” art, a style that they said was “national in form and socialist in content.” In my spare time, I enjoyed watching the artists paint lustrous landscapes, like at this park.

  My North Korean friend painted this piece using a medium of colored stone powders. Basically, he took different gemstones, and ground them into different colored powders, and then put the powders on the canvas. The entire lengthy process is done by hand and no artificial or synthetic colors are added. The colors also don’t lose their strong shine with time. It’s a technique common in North Korea that would be considered unique elsewhere.

  It takes months to finish one painting, and has a special meaning for the nation: Even though it was once called “Powder Painting”, Kim Il Sung changed this style to “Korean Jewel Painting” to point out that it was developed on the peninsula using precious Korean stones.

  Until some years ago Korean jewel paintings were made on rigid panels. At my request, the painters in Pyongyang made the paintings for the first time flexible, so they could be rolled up and shipped more easily. Along with other paintings, I exhibited rollable paintings like this one for the first time at the Nha Trang Sea Festival, at the coastal town in southern Vietnam in 2009.

  Rock ‘n Roll in North Korea? Why not?! One visiting businessman, to the left, dances Rock ‘n Roll at a building belonging to a large North Korean business group with a young woman who mastered it perfectly well. The older generation would dislike this display, so these dances are usually kept private. Still, younger people consider it as harmless as Mickey Mouse.

  North Korean art is indeed regime art, derived from the “Socialist Realism” of Stalin’s Soviet Union in the 1930s. But individual traits are reflected by each artist’s skill and sensitivity. The acclaimed “People’s Artist” Kim explained to me: “We want to show the positive side of the life to make people happy and enjoy our works.” His paintings showed indeed merrily dancing kids or a smiling farmer on a tractor in the fields, who he explained was a “hero of daily life.” Or, he said, another figure was a beautiful young woman, representing the “glorious future of Korea”.

  You wouldn’t find
avant-garde paintings like in South Korea; abstract expressionism would clash with socialist realism. Yet North Korean painters do not want to be limited by political reality, but use an impressive traditional repertoire. Most of their work is inspired by traditional Chinese paintings but move on. The motifs often entail flowers and birds in the countryside, as well as the so-called “four gentlemen:” bamboo, plum, chrysanthemum and orchid.

  The “Merited Painter” Han showed me his paintings, which included beautiful mountains with their peaks, a popular theme in rugged North Korea. He said, “We would love to show the beauty of our country to people all over the world. I would be happy if you could help us in doing so. If people abroad fall in love with our landscapes they may desire to visit our country and we could make friends with them.”

  I had found the dazzling aesthetics I was looking for—the talented North Korean artists who deserved to show their work to the world.

  1 http://www.kcna.co.jp/item/2001/200105/news05/23.htm

  2 http://www.spiegel.de/reise/europa/erstes-nordkoreanisches-restaurant-in-amsterdam-a-823278.html

  3 http://en.wikipedia.org/wiki/Myohyang-san

  PART III

  Chapter 13:

  The Price of Glory

  “The Age of Northeast Asia is fast approaching.” — Roh Moo-hyun, former South Korean president

  North Korean and foreign companies constantly feel the pressure of political accusations and sanctions directed at their businesses, even if the evidence is lacking. I remember how this hurt European fund managers who ran the Daedong Credit Bank joint venture, with their 70 percent share ownership.

  I knew and worked with the bank’s manager, Nigel Cowie, whom I appreciated for his competence and seriousness. The bank offered normal “high street” commercial bank transfers, savings and credit schemes in hard currency, and only to foreign groups and individuals doing business in the DPRK. It was also the first North Korean bank to introduce strict procedures against money laundering and counterfeiting.

  In February 2005, $25 million, a substantial part of which belonging to Daedong Credit Bank’s commercial customers such as British-American Tobacco (BAT), was frozen. About $2.6 million of that amount belonged to BAT. The U.S. Treasury Department called the Macau-based Banco Delta Asia, where the amount was deposited, a “primary money laundering concern” under the 2002 USA PATRIOT Act. Under the law, passed after the September 11 attacks, the government could cut off funding to groups that constitute a security risk.1

  Absurdly, the accusers did not have to substantiate the accusations; the onus, rather, fell on the Daedong Credit Bank to prove their innocence. They did, and the money was released more than a year later. But the economic and reputational damage had already been done.

  In August 2011, Nigel Cowie and his foreign colleagues looked like they were fed up with the screws getting so tight. They sold their shares to the Chinese “Nice Group,” and Cowie resigned as general manager. They declared in a press release that “the decision has been made easier by the general sanctions-laden environment in which financial business here is framed these days.”

  Nigel Cowie, above, is pictured explaining to foreign diplomats in Pyongyang what the sanctions meant in the big picture. Western media, with a few exceptions, did not publish the views of the foreign business community in North Korea such as Nigel Cowie.

  Unfortunately, Western embargoes did not target illegal activities, but hurt legitimate businesses and drove them underground. The sanctions were misguided, because the real criminals would have been using black market tricks on which sanctions had little effect. Even then, I am not aware of any instance in which the accusers produced any evidence of malfeasance.

  As merely one consequence of U.S. policies, large Western banks refuse to carry out any payment transfers from and to North Korea. This creates difficulties for a lawful business to receive money from foreign customers and to send money to overseas suppliers. Small banks in Macau, Mongolia, and Vietnam, for example, were visited by U.S. Treasury officials, who pressured them into ending their business relationships with North Korea. In 2012, one Vietnamese newspaper even reported that Vietnamese diplomats in Pyongyang had to fly to Beijing to receive their regular salary.

  Since all US dollar transfers pass through the United States, any payment in that currency from or to Pyongyang can be confiscated in the US. Banks dealing in US dollars refrain from doing business with North Korea, afraid of getting into even the slightest dispute with the U.S. treasury.

  Foreign banks are only a slice of the entire population of at-risk businesses. Under the sanction regime, pretty much any luxury or high-tech item—mobile phones, alcoholic drinks and French cheese—are hit. If the international community had exhaustively enforced the measures, all sorts of small shops and restaurants would have had to close during my time there.

  Another area of concern is “dual use” products, or anything that is used for both civilian and military purposes. These include chemicals needed for the processing of food items and of pharmaceuticals, which can also be used in chemical weapons.

  Around the world, most motorbikes and cars are made of aluminum alloy. But that compound is banned since it can also be used in ballistic missiles and gas centrifuges. Thankfully, most manufacturers continue to use technologies and materials from the 1960s, so that element of the sanctions hasn’t taken a toll. Non-privileged North Koreans would have to walk instead.

  Let’s take some more examples of allegations that were completely ungrounded in fact—and were even deposed of by other governments. The U.S. has launched a broadside attack on North Korea for supposedly faking U.S. dollar super notes and producing illegal drugs. Even if the allegations are to the slightest amount true, the supposed drug trade probably makes up a few dozen million dollars among the entire economy. Even with that caveat, the allegation makes little logical sense. Compare this amount with the trillions of dollars in wealth packed into the metals and minerals this small country possesses. North Korea could easily exploit these vast natural resources with Chinese help, and doesn’t need drug money.

  The renowned German bank note expert Klaus Bender, who is no friend of the North Korean regime, has explained why North Korea was not in a position to make fake super notes. Such an operation requires vast technological prowess. Pyongyang lacked the specific type of paper, chemicals, colors and machines to get the job done. More than 95 percent of bank printing machines are made in Switzerland, and their whereabouts are closely tracked around by the Swiss federal police force. This organization has the best experts in the world on bank note forgery, and it unmistakably rejected the U.S. allegations.2

  In July 2012, the UN Security Council released a report on sanctions, according to the AP news agency.3 AP wrote: “No violations involving nuclear, chemical or biological weapons or ballistic missiles were mentioned in the 74-page report to the Security Council committee monitoring sanctions, published Friday.” On the other hand, the document highlighted North Korea’s responsibility for illegal imported luxury goods included tobacco, bottles of sake, second-hand pianos and several second-hand Mercedes Benz cars. It is stunning that these would be considered serious crimes which the Security Council had to urgently address.

  I wondered why pianos are illegal. I visited a modern piano factory in Pyongyang, operated by a joint venture established in 1988 between North Korean and Austrian piano builders. The pianos have been exhibited at musical instruments exhibitions in Europe, and the Austrians have even been importing larger quantities of quality pianos made in Pyongyang for sale in Europe. They complained that the North Korean-made pianos were charged 4% import taxes by the European Union, whereas pianos from other countries were not subject to any such taxes.4

  Pyongyang is not a mafia state, and cornering a country is ethically more questionable than engagement. Foreigners engaging with North Koreans are change agents. The North Koreans are confronted with new ideas which they will observe and test, reject or adopt. As th
e French economist and writer Frédéric Bastiat once said: “When goods do not cross borders, armies will.”

  Market dearth

  Every so often I visited factories, cooperative farms, hospitals, and power plants all over North Korea. They were usually sitting in a dilapidated condition. The factories had outdated technology from the 1960s and 1970s and didn’t even get enough electricity, spare parts and raw materials. They also didn’t have the much-needed working capital, which was not allocated by the state, or not sufficiently built up through earnings from direct sales.

  Here was the problem, I found. Customers who placed processing orders, because they didn’t have cash and materials to process, did not only supply their own, for example, cloth, thread, buttons and zippers, but even had to pay for all electricity and fuel costs upfront. That’s a stark contrast to industry practices in, say, Sri Lanka and Vietnam, where a large part of the payment comes after the project is finished. By paying upfront, most businesspeople would assume they are taking on too much risk for these products in a lightly tested market.

  Yet the engineers from foreign companies, who I represented as an agent, were amazed by the relatively good quality of the products. It was even more dazzling that they were manufactured under the crushing weight of poverty and sanctions. We were also impressed by how clean and neatly kept the factories were, and how well the equipment which remained functional was maintained. Even when factories went idle on power cuts or material shortages, workers scurried to take care of repair work and cleaning. In short, everybody seemed eager to do their duties.