N. Korea restores office managing leader’s funds

North Korea has revived “Hall No. 38” under the ruling Workers’ Party, the private coffer of leader Kim Jong Il through its foreign currency earnings.

The North is also confirmed to have reshuffled the party and its administrative system to establish a organization conducive to handing over power to heir apparent Kim Jong Un, including the establishment of a state film agency.

○ Hall No. 38 reopened

According to “North Korea’s power structure chart for 2011” as announced by the South Korean Unification Ministry Monday, the North has spun off anew Hall No. 38, which had been run as an integrated agency with “Hall No. 39” from two years ago, as an independent office. Hall No. 38 earned dollars through trade and hotel operations and managed the money as the Kim family’s private funds.

The hall was merged in 2009 with Hall No. 39, which raises foreign currency through the production of “super notes (counterfeit 100-dollar bills)” and arms sales.

A ministry official in Seoul said, “We have received strong intelligence since the middle of last year that Hall No. 38 is operating independently,” adding, “After the merger of the two agencies with different functions and character, Pyongyang apparently judged that the merger failed to bring about the envisioned efficiency and thus revived the agency into its original form.”

“The North has made the move in a bid to overcome a severe shortage of foreign currency.”

Who will lead Hall No. 38 remains unknown. Hall No. 39 is headed by Jon Il Chun, known as the chief manager of Kim Jong Il’s slush funds, and the office directly operates financial institutions, including Koryo Bank, production plants such as Daesong Tire Plant, and more than 100 companies.

Hall No. 39 was named by the U.S. government last year to the new U.S. list of organizations subject to sanctions, and has reportedly faced severe restrictions in external activity.

○ Preparation to help successor build achievements

The North has also established a film agency within the Workers` Party, thus increasing the number of professional divisions within the party to 20. On the new division, whose character and functions have yet to be defined, one analyst said, “This measure is designed to enable Kim Jong Un to build up his achievements and win recognition in the culture and art field through movies like Kim Jong Il did in the past.”

In the same context, Pyongyang seems to have taken the action to significantly increase investment in the culture and art field last year, including the expansion of the National Theater on top of expanding the movie sector and establishment of a performing arts facility at Hyangsan Hotel.

In the Workers’ Party organizational structure, the Central Military Committee, which is described as an agency on par with the Central Committee until last year, was reshuffled as an agency under the Central Committee. Seoul said the structure was changed to reflect the new and specific hierarchical structure between the two committees under the revised Workers’ Party constitution as announced by Pyongyang last year.

○ Pyongyang halved in size

The North’s Korean Central Almanac confirmed that the North ameliorated the southern Pyongyang suburban counties of Kangnam, Chunghwa and Sangwon and Seungho District into administrative areas under North Hwanghae Province, thus more than halving the size of the capital.

As a result, Pyongyang’s size was reduced 57 percent and its population was cut by half a million.

A South Korean Unification Ministry official said, “Chances are high that the North took the inevitable move to ease the burden stemming from special benefits offered to Pyongyang residents,” adding, “The measure is seen as a strategy of selection and focus for Pyongyang.”

The North also expanded the number of its administrative regions from 11 metropolitan cities and provinces to 12 by elevating the port city of Nampo, which was under the jurisdiction of South Pyongan Province, to the level of a special city.

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