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From cash cow to moribund in a matter of months

Choi Song Min  |  2016-06-08 10:57

The author of this piece, Choi Song Min (pseudonym) is a defector who is a former high-ranking military cadre. He began to have doubts about the system when he listened to outside radio broadcasts while living in the North. Since 2012, he has worked at Daily NK, where he is a leading writer on the topics of fictions of the North Korean system and the North Korean human rights situation. In 2016, Mr. Choi will be writing a series aimed at providing readers with a detailed account, based on his own experiences, depicting the harsh truths of life for the North Korean people under a totalitarian system and the provocations and fearpolitik employed to sustain it.

Since coming into power, Kim Jong Un has expanded the use of enterprises in the restaurant industry to earn money for the regime by actively spreading the business to China, Vietnam, Cambodia, and further afield. However, following North Koreas latest nuclear test and long-range rocket launch, dwindling customer numbers have undermined a significant source of foreign-currency for the regime.

Office 39 of the Workers Party, widely regarded as a regime slush fund, is charged with earning foreign currency for the regime and operates the broader Daesong Group in overseeing Pyongyang-based establishments including the Changgwang Hotel, the Koryo Hotel, Okryugwan, Cheongnyugwan, and Cheongchungwan. In addition, most trading companies operate restaurants abroad, which funnel their profits back to Office 39. A headquarters of sorts has been established in Pyongyang to cull through and arrange for attractive women to work for three years at a time in the foreign restaurants.

The only applicants capable of passing the strict screening process are daughters and granddaughters of cadres in the central authorities and affiliated agencies. Normal applicants and those with overseas relatives are excluded from the applicant pool. Selected applicants are trained to cook, sing, dance, and entertain for six months at expert cooking universities and foreigner service organizations before being sent abroad to work.

After being sent abroad, the workers are screened and investigated by the relevant instructors. Not only do the young women have to work grueling 12-hour days, they are also forced to participate in study sessions. Accordingly, they have very little free time.

The wages are another problem. The Board of Labor assigns standard national laborer salaries, in foreign currencies. Including bonuses based on performance, the monthly wage is usually less than US $150. If we consider what North Korean cadres have said in the past, the regime earns $500 per person per day in these businesses. This means that the workers are taking in less than 1% of the profits that they help to generate.

The result is that the regime earns an average of $15,000 per worker per month. And the workers salary? A measley $150. The restaurants are thus clearly another thinly disguised loyalty fund contributing foreign-currency earning mechanism for the Kim Jong Un regime.

We know that restaurants in China end up contributing $200 million to the regime every year. However, if we consider that hundreds of their North Korean employees are taking such a low paycheck, it is likely that the earnings are actually much higher.

The author had a conversation with a top-level cadre in the Ministry of Industry in 2011. His daughter was working at the Okryugwan Restaurant branch in Beijing. Every vacation, she would take the money she had earned for the year (about $1000), and buy expensive Chinese watches, perfume, and expensive lingerie. The cadre sighed as he said this and explained that his daughter was preparing to get married.

A trading bank cadre informed the author that funds from the foreign restaurants get transferred directly to Office 39, so it is impossible to know the total revenue. The total yearly accounts are drawn up on a graph and the managers whose businesses are lagging behind are put in danger of being replaced.  That is why the competition has become so cutthroat. Managers will do anything to make their cut so they can give loyalty funds to the central authorities and survive another year.

As part of the recent sanctions effort, the South Korean government asked people to refrain from patronizing foreign restaurants that are run by the North Korean regime, contributing, among other reasons, to the mounting financial troubles facing many of these establishments and an unprecedented number of related defections to South Korea. While this author regrets the reality that this puts many people out of a job, taking into account the fact that the restaurants are such a moneymaking tool for the regime, this could actually be considered good news.

*Translated by Jonathan Corrado

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