In recent years, April 15th, “The Day of the Sun,” the birthday of Kim Il Sung, has changed, with the annual “special distribution” amounting to little more than two or three kilograms of grain, three or four eggs and a bottle of liquor (500ml).
In days gone by, The Day of the Sun saw almost everyone eating roasted pig and sharing alcohol, but this is now told as an old story of the times “when the Supreme Leader was alive.” As the economic crisis has dragged on, distribution on The Day of the Sun has slowly withered away.
However, “special presents” given to high-level officials on the Day of the Sun are still glamorous. Officials from the Central Committee (holding ranks higher than Chief Secretary of the Provincial Committee of the Party) receive a basic gift of things like high quality fabrics, the highest quality domestic liquor and a number of pheasants.
These special presents are mostly prepared using “loyalty funds” accumulated throughout the year by foreign currency earning units.
In the era of Military-first politics, the burden of providing loyalty funds has grown heavier and heavier for these foreign currency earning units. Nowhere is this more true than in the military, which shouts that it is “guarding the General with our guns” and dares not lose out to the Party or others in the race for loyalty.
For example, like others, the foreign currency generating arm of North Korean Air Command (No. 564 Unit of the Chosun People’s Army) gathers loyalty funds on four major national holidays; February 16th, Kim Jong Il’s birthday; April 15th, Kim Il Sung’s birthday; September 9th, Foundation Day of the North Korean regime; and October 10th, Establishment Day of the Chosun Workers’ Party. In the Air Command case, funds are gathered from nine bases and, under them, two further local branches.
Each is nominally charged with generating capital for the purposes of managing the Air Command through the year, however, they concentrate harder on raising money for submission to Kim Jong Il. Failure to fulfill their official “mission” may represent an internal issue for the Air Command, but failure to generate sufficient loyalty funds for Kim can create a much larger “political problem,” i.e. charges of failing to resolve the concerns of the leader in a timely manner.
Of course, the North Korean Air Force suffers ongoing, serious shortages of fuel, tires, parts, rations and clothing for soldiers; shortages which, needless to say, are not unconnected with the dominance of this supposedly secondary mission.
The Air Command foreign currency arm raises more than $1 million per year. Based on this amount, it can be assumed that the entire North Korean military raises tens of millions of dollars per year.
North Korean Air Command collects loyalty funds of between $10,000 and $20,000 from each branch base and local office per year. This is over and above the annual target for each base, generally between $70,000 and $100,000. To achieve these targets, the Bureau of General Staff of the Ministry of the People’s Armed Forces grants approximately four kinds of permit to trade to each base. Depending on the type of permit, the base is permitted to raise foreign currency by selling things such as agricultural products, ores or wood, much of which goes to China.
The North Korean authorities would like foreign currency earners to export third level processed goods; however, bases tend to sell primary goods instead due mainly to a lack of capital and technology for processing. Often, trees are sold as logs or planks, whereas with the addition of technology they could be made into plywood, which would be more profitable, or into furniture, which would be better still. Of course, the truth is that North Korean foreign currency earning units can only manage the simple things, so they tend to generate a mere 30% of their targets.
In the case of coastal bases, fishes like Pollack and Atka mackerel are exported alongside octopus, clams, sea urchin and sea cucumber. In order for such a base to earn $100,000, it needs to have a factory, refrigerator, and freezer. It also needs to maintain three or four ships of more than 200hp, and around 20 with more than 30hp, to gather the goods and provide oxygen to divers. More often than not, the cost of oil is their biggest problem.
Exporting gold, silver, bronze, molybdenum or other metal ores to China, another important currency earner, is no easy task either. North Korea produces a ton of molybdenum for around $200 and sells it for around $650 to Chinese traders. When transportation and tariffs are added in, the profit per ton is just $200.
Therefore, if North Korea exports 200 tons of molybdenum to China, a profit of about $40,000 is made. Selling 200 tons to China, on the assumption that the enterprise went entirely to plan, would take a minimum of eight months. Therefore, earning $20,000 per year in loyalty funds alongside the basic target is no easy task.
As a result, many bases eventually turn to illegal activities like selling “ice” (methamphetamines) instead. This has strengthened the culture of bribery in the National Security Agency and the People’s Safety Ministry, which must both be paid to turn a blind eye to such illegal practices. Currently, about half the staff in an average branch office is engaged in the drug industry.
As a member of a base, every individual is supposed to generate approximately $3,500 per year. However, the money generated by five or six base members from drug sales can, for example, provide food for the 120 workers and coal for the heating during the winter season, and still leave enough to provide a kilogram and some of pork, three kilograms of candy and two liters of cooking oil per household on each of the four major national holidays.
Just for example, the Sinheung Trade Company, operating under the National Security Agency, generates its loyalty funds from 13 bases and 6 local offices through this method. Sinheung Trade Company is said to earn an estimated $0.4 million for Kim Jong Il annually.
Meanwhile, Guard Command, the military unit in charge of escorting Kim Jong Il around the country, also has a foreign currency earning unit called “Dongyang Company.” Dongyang Company annually submits an estimated $0.3 million on Kim Jong Il’s birthday.
