North Korea military asserts command over nation's economy

By Blaine Harden
Tuesday, November 3, 2009

SEOUL -- North Korea's military, whose nuclear program vexes the Obama administration, has grabbed nearly complete command of the nation's state-run economy and staked out a lucrative new trade in mineral sales to China to make money for its supreme commander, Kim Jong Il.

As it deepens its dominance over nearly every aspect of daily life, the Korean People's Army is also deploying soldiers to take first dibs on all food harvested in the isolated, chronically hungry country, according to the latest assessments of analysts.

The army has earned hundreds of millions of dollars selling missiles and weapons to Iran, Pakistan, Syria and other nations. But its two nuclear tests, the most recent of which occurred in May, have triggered U.N. sanctions that are now choking off arms sales. So the army has come up with a new business model, taking over the management of state trading companies to rapidly increase sales of coal, iron ore and other minerals to China, according to trade data and analysts.

The potential profits are eye-popping: China is one of the world's most voracious consumers of raw materials, and North Korea's mineral reserves are worth $5.94 trillion, according to an estimate by South Korea's Ministry of Unification. China has been critical of North Korea's nuclear program and missile tests, but it also has vastly increased its economic ties with Kim's government.

Kim is increasingly creaming off a significant slice of Chinese mineral revenue to fund his nuclear program and to buy the loyalty of elites, according to "North Korea, Inc.," a recent report by the United States Institute of Peace, a Washington-based group funded by the U.S. Congress.

The report echoes the views of North Korean analysts in South Korea, Japan and the United States, who say the military has elbowed out other ministries and the Korean Workers' Party to take control of exports that earn hard currency. The military is also sending trucks to state farms to haul away as much as a quarter of the annual harvest for its soldiers, analysts say.

"The military is by far the largest, most capable and most efficient organization in North Korea, and Kim Jong Il is making maximum use of it," said Lim Eul-chul of the Institute for Far Eastern Studies in Seoul.

North Korea is perhaps the world's most secretive and repressive state, but it makes no attempt to hide the ubiquitous role the military plays in the daily lives of the country's 23.5 million people. Soldiers dig clams and launch missiles, pick apples and build irrigation canals, market mushrooms and supervise the export of knockoff Nintendo games. They also guard the country's 3,000 cooperative farms, and help themselves to scarce food in a hungry country.

"The army is the people, the state and the party," the government has declared. All references to the word "communism" were removed this year from the North Korean constitution. They were replaced with the word "songun," which means "military first."

Defectors and outside experts agree that "military first" is a literal description of how the economy works, how citizens are forced to organize their lives and how Kim remains powerful -- and wealthy.

Chinese cash cow

North Korea is the most militarized state on earth, according to the Strategic Studies Institute, a research arm of the U.S. Army War College. With 1.19 million troops on active duty, about 5 percent of the country's population is in uniform -- compared with about 0.5 percent in the United States. Conscription is universal; men serve 10 years and women seven. An additional 4.7 million people serve in the army reserve for much of their adult lives.

The government devotes about a third of its budget to military spending, according to South Korean and Western estimates. The United States allocates 4 to 5 percent of government spending to the military. The army is also front-loaded for war, with more than 70 percent of its fighting forces and firepower positioned within 60 miles of the border that separates the two Koreas.

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