Night Watch

North Korea: The North Korean authorities have ordered the armed forces and civilians to attend three days of anti-aircraft and battle training exercises. The reason for the training, which runs from the 29th to the 31st, is unclear, but it may be a precaution against social unrest while senior officers are in Pyongyang.

Comment: North Korean sources say the training is much less rigid than that last spring, but it interferes with daily life for no apparent reason. Propaganda themes suggest Kim Jong Un remains concerned about the loyalty of the armed forces. Leadership concerns about loyalty are a perennial reason for inflicting hardship on the populace while the elite hold meetings in Pyongyang.

Development projects.The Daily NK published an article about North Korea's outstanding external debt as it influences Kim Jong Un's development strategy. The main point of the article is that the North's default on its external debt decades ago has deterred anyone from lending the North money or getting involved in joint ventures. Even the Chinese government warns its businessmen of the high risks of doing business with North Korea.

Every trading country knows North Korea is a deadbeat country that does not pay its bills. Its leaders evidently do not understand the concept of paying for what they need.

The impact of the North's longstanding low-to-nonexistent credit rating is that no foreign businesses can afford to take the risk of investing in North Korea because there is no certainty of any return on investment. This means that Kim's grandiose plans to open North Korea to foreign investment in 14 economic development zones apparently did not take into consideration that North Korea is well known as a black hole for investors.

Apparently no North Korean economists told Kim that up to $150 billion in outstanding debts must be paid before most countries will consider investing in North Korea, according to Daily NK. That figure is almost four times the North's Gross Domestic Product.

In short, prospects for successful investments in North Korea run afoul of communist economics. The North does not have nor wants a money economy. As a consequence, there is no way to place a fair market value on its products, many of which are quite good.

China: Update. In a statement published by the state-run Xinhua News Agency, for the first time Beijing police called the crash that killed five people and injured 40 a "rigorously planned, organized, premeditated, violent terrorist attack."

Night Watch

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