BUSINESS REPORT OF THE CHOSEN TRADING CORPORATION

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP82-00457R007300010004-0
• Release Decision: RIPPUB
• Original Classification: C
• Document Page Count: 16
• Document Creation Date: December 14, 2016
• Document Release Date: February 26, 2001
• Sequence Number: 4
• Publication Date: April 27, 1951
• Content Type: REPORT

. iri L.
',c,vLASSIFICATiON
Approved For Rqefpgppytg*LRQ,F'82-004?7A09739p
INFORMATION REPORT co No
COUNTRY Korea
SUBJECT Business Report of the Choeen Trading Corporation
2
PLACE 5X1A
ACQUIREL
DATE OF
- 25X1A
INFO.
STATE
ARMY
25X1A
oAfg uSfl. 27 &pa 51
NO. OF PAGES "Lk
NO. OF ENCLS.
(LISTED BELOW
SUPPLEMENT TO
REPORT NO. 25X1X
The Chosen Trading Corporation initiated its work ie 1949 under the moet diffi-
cult circumstances. In addition to the continued lack of capital because of
old company debts, the policy of utilizing foreign capitAl, and the 'ar.eter ss-
tern adopted to exploit the ;Ione Kong trade route reeelted in excess imports,
which not only obstructed the acquisition of foreiea capital in Fon: :ene be'c,
also brow-ht difficulties in the conduct of trade on an indeprindentbas-_s,, Ter-
ther, the Tt,E SO NWAN (j: ez )(company vessel) met with disaster in the
development of the Horth China route) and comrade ..:ON Hycing-ki ( 4 )s
former Trade Department head, wes responsible for certain failures in spite
of these setbacks, however, the Corporation succeeded in straightening out the
company capital, establishing a bridgehead in Uong :ong adequate for :;orth
Noreen needs, acquiring a legal route to Japan, and establishine the :Ierth C.Lina
route. The placing of the Corporation on a solid foundation was made possible
through government protection In particular, the president expressed his ap-
preciation to vice-president Th6ng-su ie el) and other resporeible
persons in overseas offices and special agents for their soleedid work
The followine is an outline of the Corporation import and export entererises
Export of eovernment-alloted goods 918, 636,000 won
Export of company-purchased goods 370, 75e0000 won
Goode re-wported _2?)-12WW won
fetal 1016271 171s00E-eor
The total expenditures incurred in exports amounted to 210,257s00,* won) se tt
the grand total cane to 10572,428,000 won. This is 1L8.8 percent of the voleee
envisaged in the plan for 1949. Wen without considerine the fall in gel/erne
ment prices in /949, it signifies a growth of 245.4 Percent over the exeort cost
rice of 1948.
Pollowing is a breakdown of the volume of exports hendled lev eeeh hrnno.!)*
Sinuiju 5.2 percent
'Domestic
CLASSIFICATION CONFI T/AL
?
NSRB DISYRI liTION
XORLEI 1
Bonne
No Cha
ff,KDa a Mad
Lesass. hangs/ To; TS S 0
HR 7/.2
cr ct 1 C.. fr.Drn
to
41e%
IDftlettkaillg Oa
73_6
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ENTRAL TELLIGENOE AGENCr
Ohongjin 17.7 percent
I;anhung 13.4
The breakdown of exports by districts
Wonsan
Chitnampo
larayan4:-,
is as follows:
percent
53.4
2.2
1948
1949
Percentage as
compared with 1948
_ . . _ _ _ _
flong Kong
36.4
77,2
? 328.2
China ?
28.2
14,1.
77.0
South T.orea
22.4
3.8
26.7
Japan
1,8
0,2
19.6
Domestic disposal
11.2
447
64.4
The above breakdovin shows
to be taken in 1950.
the shift in trade area in 1949 nnd
'T ".
The ro11owin7 is a breakdown of xportt by
Dil
Cotton. yarn
Dolen-c)(ads
Leather leather :oods
Paper
Chemical products
oodstuffs
1.5 percent
LO
36
0i4
0?2
90
3.2
commodity:
71-edica1 products
Colored. metals
Hub'oer nroduets 0
l_e_ctric appliances 0,1
Grains no
cc,C
Soybean cake 22.7
-arine products 23.0
in6icates the
pereant
nOTIY%'
In 1942, comical products topned the list with 37.3 percent, followed by marine
prpdncts ';dth 28,6 percent, medical producto with 16.1 percent and soybean cake
6 percent, flowever, in 1949, marine products topped the list with 23 per-
cent, followed by soybean cake with 22.7 percent, grains with 22.2 paccent and
nhemical products with 9.3 percent. In 1948, the principal commodity of export
was chemical products, especially chemical fertilizer, while in 19)}2, marine pro-
ducts and. soybean cake replaced chemical products as the main export items. The
commodities exported in 1948 were classified. in seven ceterories; those in 1949
in fifteen categories. This was the result of the efforts made to increase 'h.e
export so as to obtain forein currency.
The commodities exported to florr :on:. and China as compared by volumes for 1948
and 1949:
'Am,.erium sulphate
.soyean cake
Calcium super-
phosphate
Craphite
hed.
Iried pollack -
Cotton cloth
1943
75,196,000 aon
10,001,000 won
2,312,000 won
8,9490000
ton
63,3449000 :fon
14,3920000 won
41:1063,000 on
01T T
12)J9
6,000 won
308,788,000 won 303.7
29,?04?000 won
49,207,000 won
.42068,000 won
150873,000 won
327,.6
77.7
?29,:5;
367,,h
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China ?
CENTRAL INTELLIGENCE AGENCY
? 1948 1949
25X1A
Percent
Ammonium sulphate 22,356,000 won 950632,000 won 42.1
Soybean cake 19,8404000 won 39,000 won
Dynamite 2,0604000 won
Salt mackerel 2,7294000 won 100370,000 won 14112.5
Import
dovernment planned import )514829?000 won
Goods imported by company or under urgent 3970083.C20 !ion
instructions 1,3484912000 won
Total 143/4809124000 won
Since the import plan for 19149 underwent three revisions durinc-7 the course
of the year, it is impossible to compare the actual imporq, with the plan, but
as compared v,ith the import of 19484 1949 showed an increase of 140,6 percent,
The following is a breakdown of actual imports by branches:
Sinulju
7.h percent
Hamhung
21.4 percenc,
Chinnampo
53,7.
Chongjin
74
1onsan
86
Namyang
1.9
The breakdown of imports by district is as followsf
1943 1949
fert-,entag.e al
comsared with 1.:1?.,?.
..............?...............____ .... -
1iom-7, Kong
55.3
76.2
193.6
China ?
21.9
18.6
1:19.4
Southrea
2101
4.9
31,0
Japan
1.7
00
22?14.
The breakdown of imports by commodity is as follows:.
7:)43 1949
Construction material 39.6 54.3
Cultural materials
Daily necessities 49:7 31.0
For re?export
Ahers 5>0
ow did the defects contained in the policy of foreirn capital utillzation
and the barter s7stem of 1948 meet the -needs of the nation in the Harr -Kerr
which is the greatest in volume arlon the Corporations trp..de enterprises? Ln
1934)8 the construction materials which are of prinary importsnce in the (onnlation
of our peoPles economic plan occupied. 39.6 percent of the imports, l'owever in
19494 throtrh straighteninx: out t'ne defects and proriptin trade on n autonomoup
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ovNTRAL INTELLIGENCE AGENCT
basis, the increase in import of construction materials to 54.3 percent and de-
crease in import of daily necessities to 33 percent were realized. lurther
55 Percent of the daily necessities imported wero cotton fabrics that were
urgently needed by the state. This is the result of the establishment in 'long
Xong of a bridrehead adequate for the conduct of trade on. an independent baeie.
In 1948, the import list was topped by rubber products with 14.8 percent, followed
by automobile and automobile spare parts with 13.8 percent, and textile goods
with 10.3 percent, _However, in 1949, textile goods jumped to first place w:Lth
19.6 percent, followed by machinery and machine tools with 14 percent, and rub-
ber products with 12.5 percent. If the comthodities imported in 194.9 can be
elassified into 26 cateFpries, those in 1949 can be classified into 35 caterori
The difficult problem of this trade wns soquisition of export commodities. First,
the government-allotted commodities can be classified into the for!owins three
categories: planned periodic allotment, allotment by instruction, and transfer.
The regular periodic allotment consisted of 47 allotments and amunted to
841,917000 won; the allotment by instruction consisted of 61 allotments and
smounted to 2449130?000 won; and the transfers amounted to 185922,000 won, raking
a total Fovernment allotment of 1,271,969,000 won. The actual erne-ants recerved
were 87.6 percent in the instance of regular periodic allotments, 83.7 percent in
the instance of Lhe allotments by instruction, and 77.5 percent in the instenoe
of the transferred goods, making an average of 85.,4 percent received in the totrl
government allotments* Next, the goods purchased by the C;orporation for ex, )rt
amounted to 427,7489000 Won, which was 110.6 percent of the amount envieaged
in the plan. A comparison between this cost price of imported goods and the
actual sale proceeds gives 149.6 persent, which mens that the actual selling
price was 19.6 percent higher than estimated in the sales olan. (In the saThs
plan, the selling price was estimated At 130 percent of the cost price.)
In railway transportation, Lhe record attained in tha planned allotment of
was 75.1 percent, while that attained in the temporary allotment of cars Wari 51.6
percent. In ehipping, 33 vessels were operated by the company and thsse ships
carried a total cargo of 103332 tons. A breakdown of this shows that the S:ortrans
tips made 21 trips with 59637 tons of cargo, the EASTERN Wi;NTURE made 9 tripe
with 299280 tons of cargo, and the SS IISIN LI FENG i ) made 3 trips
with 14.415 tons of cargo*
The rate of rotation of the total assets was 3.2 times durine the years that
of the capital was 4.9 times; that of export soods was 6.2 times; and that ef
import eoods was 13 times. The rate of rotation of the imeort commodities in-
dicated the rapidity with which the goods imported reached their destinations,
In the expenses accompanying expert, a lowerine of 14.3 percent of tho criginol
estimate was realized, while the expenses of import wore lowered 1,0 percent.
This was attributed to the respense to appeals made to the company,s employees
at the end of the first half of the fiscal yesr to make an effort to lover a.xpeed,,
itures by at least 10 percent in export and 1 percent in import. Ss a. resell- sAl
state profited to the amount of 154,094,000 von.
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flENTRAL INTELLIGENCE AGENCX
:f the basic aims in 1949 were to snlidify capitals abolish the barter sys-
tem, establish and develop trade brideheads in on; Kong, '.',erth China, Dairen
-Ukden arri Japan; and establish a skeleton network for economic investigatica
liork in overseas earkets, then the enterprise succeeded in attaining its basic
aims. 73it during the process of attaining the above aims, numerous objective
difficelties and subjective defects resulted in our committing nunerous error
For instances not enough attention has been given to planning. It was not until
July 1949 that a planning meMber was first placed in the Supervision Departerient,
and not until Dctpber of the same year that a..i=lanning Supervision Department
was crented 4ith two persons entrusted otth the task of planning, ..!'m Februry
1949, the A_anning Department was?organized with five members, but in April the
'number decreased to fours and, it was not until :Jctober that the organization. was
finally agreed. upon. This organizational deficiency prevented the Corporation
from compiling statistics of ths 194ri enterprise, conductine a thorough invest-
igation. of overseas markets, and straightening out the investigation files.
In addition to the flaws in organization, the rapid growth bf national needs neces-
sitated emergency imports which deprived the plan of continuity and created con-
fusion. Planning delays made it impossible to establish a clear-cat basis for
deciding import costs !s a results in August 1949, in order to avoid an urfave
arable trede balance arising from import of goods in the first half of the year
at costs that were not tied in any way to foreign exchange., the rates for dcm-
estic sales of imported goods had to be raised by 19.6 percent (as compared
with the original sales plan). This in turn caused considerable harm to the
eovernmentos low price policy. Jf course, another reason for raising the vete
was to increase capital.
The confusion in 19)i9 planning partly resulted from the absence of any previous
plans for 1948. 'hen planning was initiated, there were further delays. For in-
stance, instructions for trade plans for 1949 reached the Corporation on 9 !a.rce
but it was not until 14 when the second quarter was almost half over, thnt
action waa taken on the plans, Lnstead of just waiting for instructions frem
above, the Corporation should have drafted a positive trade plan based on the
statistics of the previous years the reports of domestic and foreign economic
investigations, and the domestic and international situations. The findines
thereof should have been submitted for the mobilization of doMestic resources fer
the acquisition of foreign currencyn
Text. the statistical functions became merely a matter of computing figure n
a machine.. In the compilation of statistics, all efforts were directed toirarde
meeting the deadline for reporting these statistice to the buperior organs. (,;()Y,
sequently, these statistics were never analysed nor the plans inspected, and
timely warnings were never given. The lack of effort to organize statistics on
a fnreign currency basis necessitated. the revising of the plan three times (Inri
the year, It was therefore impossible for the Corporation to suggest anything
regarding the directive for emernency import of goods, even when this directive
did not tie in. witb -.Ohe country"s trede balance.
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CONFIDENTIAL
CENTRAL INTELLIGENCE AGENCr
The 10030 loose state of organization of the Economic investiration Section has
been responsible for many defects. Actually, economic investigation is the
most backward of all the Corporation's functions, First, we have failed to
organize a suitable body to handle the all-important economic investinations-
'In independent department to handle investigation work appeared in April with
one member, and in October the Economic Section was set up with two members.
Thore is oven less to say regarding investination work in 1943. Systematic
investination of markets regardino a certain comnodity, competitors, methods
of trading, packing, transportatton, custom duties, etc., was lacking, Furtner?,
market quotations from foreign newspapers have not been studied adequately nnd
little was done to spread the findings among the personnel of the Corporatioa.
The overseas agents tended to submit arbitrary and scattered reports on thein
eoonomic investigation work. The environmental difficulties and lack of adequatc
personnel made their work extremely difficult, but it was considered that th-y
oould devote more energy to their work and the time factor in their investination..
The investigators were accusediof haying failed to grasp the exact aims of tneir
work. For instance, comrade V131 Hy6ng-ki, former head of the Tradinn 3epartotent
who went to North China to investigate trode prospects there, submitted reponts
on the North China plains, the mountain areas of Shantung, Jehol and Liaotung,
natural conditions for agriculture, statistics on periods of severe frost, run,-
falls animal husbandry in various parts of North China, etc. All this inforn,-
ation wns too general to be of much use in the drafting of a trade policy regardnng
7dorth China. Later it was learned that these data were copied from books bigh
from the book stores, and that the comrades who acoompanied ;:M1 to T.::orth China
had to wastea nreat deal of time copying these books. As contrasted with the
above, the investiganion reports from Hong Kong on red ginseng, graphite, etn?
were of very high quality.
Intimate contact with the production organs bnsed on economic investjnnation 7ta.s
lackin7. me example is the distribution and packinn of red ginseng, and
another is cod-liver oil, which, by -raising of the Vitamin A content to 7,560
USP Units, would have become an important commodity to gain foreign exdhange,
ilnd yet no efforts were made on either side (company and producer) to realie
tAs. In short, efforts were lackinn to improve the products or to di3cover new
commodities for export. The main office should provide all overseas branches
with detailed information regardinn all new export items, and the 1Dtter. in
turn, should provide the main office aith information on prospects reardinn cer-
tain commodities, the quality or specifizationz doeirei ono the amount, Eartholn
the information is heeded in adv cc Yet, efforts . in this direotion wore
lackinn among company employees and overseas agents.
The total export volume, as stated, was 1_3620171000 won. Of the total volime,
37.5 percent was directly exported by the company, while the remainrno 12.5 Per-
cent consisted of transactions nith private. individulaS, pfnrment for nurchaz-7es
made by the Corporation, and cash sales. i breakdown of thr 12.5 oorcent naves
69.4 percent for private troirsactions? 21.2 percent for purchase payments and
9.4 percent for cash sales. A considerable quantity of goods destined for exporc
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was thus re1ense0 to he domestic markets throuh private truosetions, pays
month for purchases and cash sales, and this not only broueht (.onsiderable
harm to the domes Lie commercial policy, but also gave rise te clotradictione
in the trade statistics because goods disposed of domestically _soeared as ix...
port
Although privste transactions occupied a mere 8?6 percent of the to'al extort.
there were in all 176 transactions, which provided a heavy. adninistt!tj_on burden.
on the Corporation staff and took up a great deal of valuable time. :;emerous
defects were also evident in the conducting of private transactions, instaT
the Corporation failed to study the question of custom duties on go: i importec3.
by private merchants, failed to check whether the ros(timported ler Lr: merchants
were as specified in the import permit, allowdd the merchants to setSk.:1 the.
price of their goods directly with the consumer failed to keep an ac .rate file
on the merchants with whom the Corporation dealt, failed to examine throughlv t"te
import and export permits that were issued in the Corporation ls name, These .
defects, instead of profiting the state, profited the private individus
cerned.
In studyinr export enterprises the question is raised whether there h. been in-
timate contact between the main office and its oversean agents. riasict].ys
tact was well maintained, as evidenced by the accomplishments of 1949, wever,
in part, inadequacy of contact brought no small harm to the activities cS over-
seas agents, entailing loss of foreign exchange. Following is. one concres)
example: In June .1949, the Fong Kong agent notified the home office to ss
shipment of calcium cyanamide because of the difficulty of its disposel;
on 10 June, 1,333 tOTO of calcium cyanamide were shipped on 35 ALFAN. They are
still unsold, and their reported value is hardly eneugh to pay their wareho-?sing,
Even if their value is considered at HK 1.20 per ton, the Corporation has aSresdy
suffered a loss of HK 41150,000 istakes like the above are causins state es.s.
pertiee to rot away or periods in 'Serie Horr; warehouses.
Regarding new commodities destined for export, a sufficient aunt of sameles
should be sent overseas agents with information in detail on the pacid.r.vescoTspe;-.
ition, quantity,, domestic cost, etc. In fact, the above rulin should aPply
every shipment. Past negligence in this respect resulted in disparity between
our sample and. goods delivered, cousin"; needless loss or embarrassment. As to
the methods and practices of packing, there are innumerable instances -of defect.le
work that are costing the Corporation heavily in foreign exchange. There are ne
accurate statistics on these losses, but in the futrre, the everseas af!ent
SUbmit detailed reports on losses suffered because of defective packin. The
losses from defective packing are not limited to shipments to foreign. countries,
Considerable losses have also been suffered from defective packins durine domestic;
trensit of goods, Another cause for losses was in precipitous sipment of soods
without adequate forethought. In the case of AISDAUs fifth and eighth trips, the
value of the total cargo shipped was approximately equal to the eharterage.
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Another important peoblem to consider in the export enterprise is mbeeher tle
goods have brought just prices in the overseas narkets. Take as an example
the sale of soybean cake on the Hong Kong market, During the five months ieom
elay to September, the price of soybean cake averaged HK$ 407.6e per ton. D, rine
the same period, North Korean soybean cake was sold at the average ',rice of
HK $357.17 per tea. At first it may seem that the North Korean goods were ,old
very cheat, but the price received was justified, since the North Korean sh:e-
ment included soybean cake from the Northeast (Uancheria) and Chinnameo Oil
Plant. Also, the price listed in the economic Liewspaper: was the current reeail
price. Similar examples can be listed in the ease of dried pollack and shelt
cloth.
Greater efforts should be made to meet the local demands in once comeetieien
and study the nature of the price so as not to miss any opportunities in the
effort to gain Xpreiga currencies. If a special trade policy for the Hong Long
area had not been adopted, and if the barter system had not been abolished, the
market for the soybean cake could hardly have been raintained, Even less ccn
be said for the dried pollack and sheet cloth, yhere competition vith the
parlor products from Japan and South Korea is intense.
The total volume of import in 1e149 was stated at 1,348012,000 on ,1 ereee
obstacle to the inport enterprise was the several revisions jr import nlannene,
as can be seen from the following:
Plan in first half of the year
1,0561311,000 von
Plan in second half of the year
08,917,000 von
Plan after November
64519911,000 von
If the mercency imports amounting to 1,171,583,003 won are added, the con-
fusion in import enterprise is obvious. The oultiple private trareac,ions et
home and abroad did not improve the situation.
The imeort of the previous year, conducted under the difficult situation de-
scribed above, was 89.6 percent in Corporation's hands, while erivete treeing
had 10.4 percent. An analysis of the private trade gives the following figures:
15 transactions conducted in accordance mith instructions from superior oreens,,
accounting for 11.1 percent of total erivate trade; 48 transactions concluded
by various organs with the Korean Tradine Corporation to barter for 1..7 pe-2-
cent of the private trade; and 113 private transactions conducted by the Oor-
poration itself, accounting for 70.2 percent of the private trade. The comeode
ities imported through private channels under instructions from superior preens
consisted of electric wires, gold net, tannin, diamonds for industrial. use,
glass, sulphur, phosphorus, paraffin, manila ropel.potassium dichlorate, reek
drills, rotary printing presses, lead wire, etc. The commodities bartered 17
various organs through the Korean Tradinc: Corporation consisted of filre salt-
eeter, electric wires, motor sailine veevels, steel bars, transformers,
building materials, etc., and commodities imported in private transaceione
handled directly by the corporation consisted of ma rubber, tannin, neils,
glass, potaseiun dichlorato? potassium celorate? etc. Although erivaee trans-
actions accounted for no more than 10.L eercent ef the total insort volume,
their number vns a big factor in comeliceting import enterprire and innosed a
heavy administrative burden on the Corporation. As a result, it vs emeoeseble
to conduct a thorough study of the 340 odd varieties of ideort itnm osteo-
lish intimate contact with the organs desiring these domodities so as to &e(*'
their exact uses, specifications, ti.ne of usage, etc. In short, coo:eel:sat/len
between the consumer, the company and the overseas agents was lacking,
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The pr(r)ortions of the number and amount of transactions conducted by
various organs through the Corporation:
Orza.n
Number of Pronortion Amount (in Proaation
--riJe---ETreen
Transactions 1000 mon) "TpereciET
ninistry of
National Defense 10.4 5,256 20.0
Ministry of
internal Affairs 3 6.3 3,480 13.3
Uin. of Productive
Enterprises 13 27.0 503 20.9
Min. of AlwIculturc
t
,- -
and Forests LI. 3.3 1,451 :) .7
!Ain. of Commerce 2 4.2 921 3 ! ,
.
Min. of Culture
and Propaganda 11 22.9 )11333 16.7
Yin, of Health 2 4.2 678 26
Min. of City Management 2 4.2 3,513 13.h
Special Production
Guidance Bureau 3 6.3 703 1 "i
_.t
Forestry Bureau 2 4.2 95 D?I;
Enterprising .Company 1 2.0 47 1.0
Total 48 26.170
The abeve table shows that the Corporation failed to make sufficient effor:.s
to import on time the materials needed by the various ninistries. It clso
tolls that it has failed in safeguarding the independence of trade enterprise
by failing to propose to its superior organ the formulation of a concrete
policy against the possession of export commodities by non?commercial end non,
productive orgynizations.
A glance at goods inported throuit private channels shame that none of them
could not have been imported dirActly by the Corporation. Yhe prLvate trans-
actions could, therefore, be justified 0n17 by the time factor. As fox ev:ample,
despite a cable from Hong Kong to the effect that 100 tons of tenein hed Ilready
been shipped, the organization that needed the product had to procur it at e
high price from a private source because it could not afford to welt f(r ship-
ment by the Corporation.
In the past, the overseas agents experienced considerable diXfieultiee beenuse
specifications in ordering goods from foreign countries urre rot thormeh. The
cause seems to be in the lack of besiness knowledge among the workere and in
their superficial may of doing their ?fork. For exaaple, when ordering lams
and sensitized paper, failure to indicate tho sensitavity desired and thether
the films are for daylight or night use needlessly eomflicated the 71,-)rk of the
overseas agent. Similarly, failure to indicate the year and rodel of car when
ordering spare parts created needless difficulties.
It is considered that the pricee at wtich imported 7oods were sought were just.
For example, cotton cloth imported from Hong Koag vas quoted jn
the Hong Kong Economicjklepp2p.yer durirg the months Iron April to Nover at the
average of HK M7a-per roll. -burin,:, the same period, the North Korean pur-
chasing price averaged Hit 449.77 per roll, which wee lower thei the market price
by HE :;12.29 per roll. Raw rubber, during the six months from Anvil %n qovenher
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reragoiHK $1,8h3, per ton. During the same period the average purchasing
price of the Corporation was HK $1,905.48 per ton, which was higher that. the
market price bya $61.54 per ton. Thus cotton cloth was purchased cheaper,
but raT rubber was dearer than the market price.
During the settlement of old accounts of 1948 in tiong Kong, the Corporation
suffered losses from the barter system. Some of the reasons are:
As barter condition, we had to guarantee profits to the merchants.
In estimating the value of exchange goods, the merchants are willing to
give only a very low price because they take into consideration postible
market fluctuations.
c. The merchants are prone to add illegitimate profits to their oen :foods
and deceive the party they are dealing with,
Because of the quantity and variety of goods on hand, the state often had
to barter with speculative merchants. This resulted in the deilatioa of
prices or refusal gy prospective buyers because the sales publicii-,y of the
qerchants made the amount of goods for sale appear more than t2e actual
mount.
As a conseauence of the above, goods stopped circulating and their erices
could not be maintained at a fixed level, and this, in tur:e? wiped out
future opportunities.
In order to correct these defects, the Corporation struggled to abolish the
barter system in its Hong Kong trade and succeeded in doing so. 710 are
theory can be applied in domestic transactions with private merchants
studying the problem and effecting a revolutionary improvement,
The regular export allotment from the ravernment amounted to 841,917,000 won.
Compared with this, the totel of contracts with other parties mowted to
305,684,000 won, wh:Lch comes to 95,7 percent of the ailahment. Of tee r:ainder,
231767,000 wen or 3.4 percent were not contracted, and 7,466,000 wen or 3.9 per-
cent were over-contracted. In the amount not contracted. 17,7140,000 ;on, or
61.7 percent, was 'ejected by the other party because of inadequate p 'oductior,
while 11,027,000 wen, or 38.3 percent, was rejected by the Corporation because
of export difficulties,
Av, for the actual amount of goods received from the government compared with
the amount allotted:
In regular allotment
In allotment by instructions
In transfers
87.6 percent
83.7
r
following is an analysis of reasons for non-delivery of goods after eontrale.,
-had been signed:
Cancellation of allotment
Leek of production
Inferior quality of goods
Difference in specifications
CONFTDENTT4 r
9.7 percent
11.5 fi
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1.0 percEnt
Transportation
2 0"
Refusal
7.9
Other reasons
2,0
11
The amount of goods not delivered for the above reasons in tar= of Yong Kong
dollars is UK :15187,854.
From the fact that the nercentage of goods celivered rose from 70 percent in the
third quarter to 113 percent in the fourth quartar when intimate contact was
established with the producers by resident agents to 41he various ?re-
duction centers, it can be seen that the basic cause for non-delivery wao in the
lask of adequate cooperation with the production factories.
The actual amount for the purchase of goods by the Corporation for export was
427,748,000 won, which is 110.6 percent of the goal in the 1949 plan. However,
a careful study of this figure brings to light the following: The actual
amount purchased in the country was 358,180,000 won, which is 92.5 percent of
the goal and 83." percent of the total amount purchased. The remainder, namela.
691568,000 won or 16.3 percent of the total amount, was re-export itis and
(through a contradiction in financial organization) were merey paper work on
the account books of the Porchasing Department.
As for the purchasing channels, 56 percent was purchased from government organo
(including consumers cooperatives) and 441 percent from private individuals. In
the disposal of goods imported for purchasing purposes, 41.6 naercent vent to the
oroduction organs, 21.6 percent to the business organs and 36.8 percent to priYate
individuals. Moreover, 33.2 percent was given out under contract and 6L3 per cord
as arbitrary disposal. The above figures would indicate that the purohnsing
enterprise in 1949 developed with little or no planning. Among the main cause;;
the following are given
a. Failure to set up a clear-cut ourchasinn plan. Absolutelg no investigation
was conducted on the goods that should be purchased, the state of oreduction
and consumption of these goods at homes the goods marketable abroad, etc. As
a result, the purchasing plan was unstale and unpractical.
b. Lack of capital funds for the purchase and lack of smooth stpply of goods that
the Corporation wished to purchase. The purchasing fond, a:a the plan delanded,
was too geat a burden on the Corporation. On the other hands the supply of
roods that the company wished to buy was often unsteady.
Cinder such difficulties, the Corporation had no choice but to use guerrilla tactic
in purchasing. Furthers ir strivang towards its major goal of gaining foreign cr
rencios? it could not afford to discriminate between dealing with the government
organs, consumers, cooperatives or private concerns; neither could it afford to
make any distinction among the oroduction? commercial or privae organs when ef-
iectinn barter purchases with imported noods.
In natters of transportation there appeared still other deficioncios. Th' :Torben
of freight cars requested in the plan was 1,701 and this rcombea was later revised
to 1,668. However, the actual number of freight cars operated. was 1,2544 or 75
percent of the revised number. The Cornorationvmagu:ilty of breech of contract
on 204 cars, which necessitated payment of c:amagos 198,750 won. nen:ions
for breach of contract were: no goods to transport, 31 cars; ahanno in plan, 173
cars.
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Tile number of etre requested for special occasions totaltd '
number operated totaled 2,299, or 59 percent of the equo Thr
1,620 cars was caused by no goods to transport, 1,43C ieesg, re
187 ears; and other reasons, 3 cars.
Next is the problem of shipping, which is of paramour, %.49tortance
tion. Considerable efforts have been made towards jr evement in
the state of shipping in 1949 was as follows:
Mortrans
SASTERN VailTURS
MIN LI Z..-eIG
Total Cargo
Tonnage
59,637.4
290280.4
14,415.5
but the actual
difference of
oars availaele,
to the Cornora-
this lield? and
Averaona Tonnage
per Vessel__
21839.9
3,253.0
4,805.0
The total arrearage paid to ,Yortrens anounted to US '0.0,539.76 and 2,551,202 non,
This was necessary because we failed to study closely whether or not the deilLr
average loading tonnage of 720 tons as contracted between flortrans and the Corpora-
tion was a practical figure. Following is the average daily loading fi;,Ire from
lotual record:
Chongjin Branch
Vionsan Branch
453,? tons
2373 "
Hamhung Branch
2415.9
Chinnampo Branch
457.3
Hong Kong
366,o
'
It
Dairen
225.6
Tientsin
313.6
Average
366
The original contract with Zortrane covered the period up to the third quarter
of 049. During that time, the charterage was HK $46.46 and 10137.33 wen per
ton However, in the fourth quarter, the charter contract was revised to one
based on weight in an effort to eliminate the defects of the previous contract.
As a result, charteraoe during the fourth quarter decreased to NK $40.07 and
1,071,71 von per ton, a decrease of HK 46.39 and 66.17 won per ton. The new
contract, moreover, increased the responsibility of both parties, and the
nesultinf,: increase of cargo tonnage per vessel and shortening of sailing day's
brought large profits to North Korea. Up to the third quarter, the cargo
loaded was 85.6 Iercent of the capacity, but in the fourth parte, LUe eor-
oentage went up to 93.4 percent. The dsfects in transportation are many. In
railway traneeortation, the unstable character of the export Lann and the oter-
:eella tactics enn?oyed in the purchasing enterprise were the basic facto's be-
hind the breach of contract. The same defects affected, in part, the Teippin;.7
enterprise.
The oerformance of rortrans was referrel to as splendid. Its ships pleyed a
prominent part io North Korean development of the Hong Kong and Tientsin routes
and made expansion possible. However, the following points of possible imerove-
mnnt were referred to: The Mortrans ships burned coal. They are old and their
tonna Fe is small, The transportation fee on the average is high. Following is
a comparison of the average cost per ton between the EASInT,1 VEITU1-0 and the
:lortrans ships:
Mottrans ships UK $0.07 plus 1,071.71 on
LIteTRN IFCTURE HK 840.98
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The following following are some of the defects entailed in the contract based on w
ei
CA. 12,
:henUhero i3 not -sufficient
order to increase the safety
and North China to load more
whole shipping plan. -
cargo to ship back from overseas,. the ships, in
margin in sailing, call at harbors in Contral
cargoes from nerchants there, thus delaying the
Because of the system of payment of arrearage, the ships are often requested
to depart empty even when there are definite indications that there will be a
shipment within a few days4
c. since foreign vessels are contracted under a charter system, thers is a pnso-
doxical tendency to load less on the Mortrans ships and more on foreign siins..
The problem to consider is the lowering of shipping and incidental exnpnnes. As
a result, of the appeal made to the company staff at the end of the first half of
1949 to work for a 10 percent decreas, in export expenses and a 1 percent di ease
in import expenses, the following results were obtained*
Fonort Exnenses
ort tax
Chartorage
Container cost
General expenses
Total
Plan
11.3
648
5.2
34.4
Record
Percent)
3.0
4.:3
?S.8
2).2
Increase or Decrease
Percent)
5.3-
2,5-
8?1-
1
14.3-
_ITP.ses
Plan Record Increase or Decrease
(Ft-?ment
Import tax 3
General expenses 3
Total 31
That such results were possible was due to the keen competition among the brannhos,
end the efforts of the branch staffs. On the other hand, there are a great many
other problems which await solution. For example, because of lack of a detiolite
policy regarding canvas covers. the Hamhung and the Chinnampo Branches had to :-ay
out large sums for them. The daily aserage work tonnage of 720 tons itsPif awaits
further study, ard nothing has :vet been done about conputinn DB work hours the
Joss of time due to causes beyond human control such as rain, rounh seas, sdnch
trouble or air mid drill,
The rotation of the Corporation's total assets in 1949 was 3,2 times. The averaoe
working capital per month was 330,83000 won, and the average sales volume of
imported goods was 135,432,000 won peo month. This means that the capita], rota-
tion in 1949 was 4.9 times or once every 73.4 days, As for the export oommodiliet
the average quantity in warehouses pen nonth was 219,630,000 won, and that shinpod
out per month was 113,304,000 won, zivirg rotation of six tines during the -year,
or once every 53 days, In import, the cuantity of imported goods in warclouses
oer month was 117,257,000 won, and the sales volume, of imnoeed pod was126,621(na
won, which gives a rotation of 13 tines or once evero- 27,5 days.
'(:)r greater speed in the rotation of exrort comsoditins, the Corsorstion had tried
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everthing it could. ;Mile studying rotation rates, it found that anon:; goods
es:ported were those that had been designated as unsuitable for export, ard t3-11t
leony of these in fact were needed for home consumption. The notable once were
alcohol, toilet soap, candles, grape sugar, red alum, ethyl and barium el-lorate.
There were also goods that did not accumulate at home, but accumulated in foreign
lands. AccemulaLed in Hong Kong were 1432.3 tons of calcium cyanamide, 294..3
-Lens of calcium superphosphate, and around II 294,209.00 worth of brist3es, Ein?
eeng and lamps. Ath the exception of calcium cyanamide and bristles, tleee
goods were exported in 1943 when the Hong Kong market was first being exploited.
Likewise., 20.7 tens of alcohol were shipped to Tientsin to the open market, and
these have net yet been sold. Thefolloving conclusions were drawn: (1) Goods
unsuatahle for enport should either be consumed at home or no longer proeaced,
In order to Avoid accumulation of goods, oversees economic investigation work
should be conducted on a wide front. The information collected should be put to
use, and dependable radio communications should be utilized. Among the imeorted
goods that have been in accumulation for over a year were movie cameras, rock
drill si.are earte? spinning drums, radios, and unrefined salt: while gooes thee
have been in accumulation for over three months consist of seven itemc valued
at 5,357,323 won. Reasons for their accumulation are imperfect products, dif?
ferent specificaUons, or limited usage,
Another important factor obstructing the rotation of capital is the sevena: day 'e
delay between the entry of a shi2 into the harbor and the arrival e: inserectione
regarding disposal of cargo. The time from the arrival of the ship to the sub?
mission of applioation for disposal of cargo was from three to 25 dayel necessi?
tating an average delay of 11 days. Aether? it tock an average of 13 deys from
the submission of application to the Trade Lureau to the arrival of instnuotions.
Consequently, the average period of waiting was 29 ebtfs. Since each rotation of
imported goods took 27.6 days, the above delay was equivalent to the 'eas of cue
rotasion.
In financial admenistration, inoufficLent thought was gown to the stosi2u`sltion
of foreign currencies. The overseas ofAcee failed to effect a financia7; balance
in foreign currency and gave little thought to how the profits; and losses of the
trading enterprise appeared in terms of foreign currency. As a resn2t, Ihile the
balance sheet of 1943 shoved a profit of 44,131,691 won, the inspecAcn enter?
prise organized at the end of 1949 aceually showed s deficit of 123,293,720 wen.
'2!Ms mistake must not be repeated in the future.
Accidents may be classified into accidents during transit and accident eccurring
in warehouses, 2here were in all 62 aceidents during transit, involving 1,2a1633
won. An analysis into the nature of nhese accidents shows that 33 cases or 53.2
eercent involved damages, 17 cases or 27.4 percent involved insufZicient quantity
dispatched, three cases or 4.3 percent invoiveL decrease in volume e'rom natural
=uses, two cases or 3.3 percent involl,ed robbery, ene case or 1.6 percent involved
deterioration of goeds? and the remaining six cases or 9.7 pencent consieted of
miscellaneous caeses. A total of 22 accidents occurred in warehouses. ievolviug
:.,61.61793 won, an analysis of the causes shows that eight cases or 36 percent
snvolved inadequate insoection, five oases or 22.7 percent involved decrease in
volume from natural causes, three eases or 13.6 percent involved damages, one case
or 4?5 percent involved deterioration of goods, one case or 4.5 percent involved
robbery, and the remaining four cases or 13,3 oercert consisted of miecelLanocur
oauses. The above figures should serve as a basis in studying means to IT:avert,
accidents in the future. An important erotective measure against necidente iE
marine insurance,, and while the shippann during the past two years involoed severe'.
Lens of thousands of tons, the Corporation failed to make adeouate are aneeeeets
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S:on marine insurance. Twice during 1949, the Corporation was close to eeperien 1ofig
a major sea disaster?storms that overtook the SS A1VAZOVSKY in the vicinity of
Taiwan and the Fi:.STERN VIMTURE in the vicinity of Japan.
The :Inspection Committee was first introduced on 17 NavsNiber 1949 in order to
correct the 1948 balance, which was not linked to foreign currency. It eompieted
the work on 7 February 1950. For this job, which took 7,001 work hours, 913 per-
sons were mobilized. By straightening the 1948 balance, which originally showed
e profit of 440131,000 won, instead a deficit of 123,293,000 von appeared. The
results were then linked to the balanee sheets of 1949. By thus coneolUating
the financial assects of the Corporateon? it was possible to sum up. the bUSile3S
of 1949. The committee was headed by comrade KIM Chong-yun (APn41.), who
surmounted great odds to complete the inspections.
The president's report for 1949 concludes with a statement of the raid nrowth of
of the Corporation. Despite the successes, there have been numerous defects in
the enterprise. To eliminate these defects, the president proposes the .:ollnwine:
Strengthen the planning phase. The confusion in planning in :949 wae an
imnense obstacle to the import, export, purchasing and transportatioe enter-
prises, both at home and abroad. Therefore, economic investigation work
should be organized by the Planning Department to set up annual and euarterly
plans. The chiefs of all departments and the overseas agents should partici-
pate in collecting accurate data. In the compilation of statistics, close
contact should be maintained at all times with eertinent deeartments or
sections. In particular, constant attention should be paid to the linking of
statistics to foreign currency. dhile thus far the Corporation has deneeded
on instructions from above, it should now begin its own ecomonic iavestiea-
tion and planning.
b. The Corporation must develop new methods for the acquisition of fore-en
currency. Tc accomplish this, it must conduct investigations on expert con-
modities, display initiative in its fight for foreign currencies, and eceno-
mize in all expenditures involving foreign currency.
c. The Corporation must abolish the barter system. There has been ample preci
of the losses inflicted on the state by that system. It must not on],y anolish
the system in connection with Hong. Kong, which covers 77 percenl, of Eorth
Korean trades but also Tientsin and Dairen. In domestic transactions, too,
the company should in principle abolish the barter system.
d. The Corporation must organize a department to hendle foreign curreacs cal-
culations, so that it can realize accurate trade balance In such currency.
The overseas agents must see to it that requested reeorts on the subject are
submitted within prescribed time.
et In shipping, the Corporation mast positively and yet rationally utijdze
Mortrans ships, aim at lowering the daily 'nark average of 720 tons ti: a
practical level, and in the payment of eharteraee, strive to decrease nay-
itent in foreign currency and increase payment in domestic currency..
I. The Corporation must establish intimate contact with the nreducers.. In ;0-
cdtion to dispatching resident agents to production plants, it must !nsve a
dependable system for field resorts on quality, packing, etc,, so thet the
erestige of the Corporation may be maintained. Imeoter? in view ni the
lact that 61.5 percent of non delivered goods was due to inadequate eroduc-
tion, constant attention should be devoted to this matter.
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i:. The Corperation must establish intimate contact with the consumer of ir7e-
Ported goods. It must find out exactly the required seecifications of the
products, their useel and their period of need. It MUSD organize its trade
so that there is a live seirit of teamwork among the field offices, the hoe
office and the consumers.
In order to lower import or export expenditures, the Corporation mast draw
up and enforce an accurate plan regarding packing and containers and devise
means against the reeetition of mistakes which necessitated extra expendi-
tures in the past.
1. The Corporation must be more alert to prevent acc,idents. Insurance on import
and export commodities must be taken out in foreign countries (especially
Hong Kong), and concentrated efforts must be made to prevent damages during
transit and accidents in warehouses.
The Corporation must intensify inspection work internally and seek guidance
from superior organs. Overseas agents must submit certificates and accurate
reports on imported goods at all times, and pertinent departments of the
Corporation must constantly study and analyse these reports.
k. In view df the special nature of the enterprise, the Corporation must take
special precautions in the dispatching and sateriarding of documents and
maintain absolqte secrecy on personnel, shieping and trading matters, not
only to outsiders but also to family members.
I. The persons in charge of various departments and oflices mast not on7y de-
pend on the staff Personnel Department for the training of reserve presonnell
but must also train personnel within their own departments. The rote tion of
personnel must be decreased, so that employees can become eroficie It at their
jobs. In. particular, in order to elevate the political theoretical Caaedard
of the overseas agents and send them warn greetings from hone, the Cce7)ora-
tion must not neglect to send them newspapers, magazines, and beoli nenever
possible.
Jo
In conclusion, agents overseas should
deeding the goal for 1950 by
Leninism to the practical enterprise
25X1A
devote their utmost effort towards ex-
the revolutionary theories of Moalciem and
of the Korean 'L'rading Corporation.
1111,11111
Comment The Chosen Trading Corporatior, es officially oonsideeed
ta , ummundergon;i Korea as a semi-private corporation, but it archiree ehow
no share-holding or other type of financing usual in privae or semi-private
corporations It was financed initially by the Communist Party (NKLP) aria
remains the property of the Party even though some governmental units may he
represented on the board of direetors; the company ie saidi, for example ee te
inordinate to the Department of Commerce,
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