In this report we support such bold assertions by analysing Kim Jung Un‟s statements over the past few years, but most specially, from the recent joint meeting between the Workers‟ Party of Korea (WPK) and KPA. Additionally, the report provides a snapshot of the economic developments that have already occurred over the past five years, including “shadow markets” and the introduction of a property market, which the government are actively facilitating.

1. ISS Risk Special Report:
DPRK: Analysis of its 2016
Nuclear Test and Satellite Launch
– Why Now?
Intelligent Security Solutions Limited
www.issrisk.com
8 February 2016

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Executive Summary
As well documented by the media, last month, the DPRK conducted a fourth nuclear test
followed by a satellite launch. This test came despite international condemnation and
heightened sanctions. If considered in isolation, the behaviour seen coming out of the North
over the past few months might easily be compartmentalised with the same old rhetoric and
posturing that we have all begun to expect from the regime. This report provides a different
analysis of the recent nuclear tests by viewing them in a broader context. We, at ISS Risk,
believe that, rather than just bellicose behaviour, these tests are a clear indication that
changes are taking place within the DPRK. These changes are based on the transition away
from the Songun („Military First‟) policy toward a „Country First‟ policy, indicating a reduction
in Korean People‟s Army (KPA) power and a movement toward economic development.
In this report we support such bold assertions by analysing Kim Jung Un‟s statements over
the past few years, but most specially, from the recent joint meeting between the Workers‟
Party of Korea (WPK) and KPA. Additionally, the report provides a snapshot of the economic
developments that have already occurred over the past five years, including “shadow
markets” and the introduction of a property market, which the government are actively
facilitating.
We so easily question the North‟s behaviour when we view it from our international
perspective. After investigating beyond initial expectations, we conclusively assert that the
latest nuclear tests have more to do with internal matters than international ones. With these
tests, Kim is illustrating to his people that the transition away from the traditional Songun
policy is possible. He is giving them confidence that the country is secure and they can,
therefore, begin focusing on progressing the country economically. As ground-breaking as
we would like this report to be, all it took was the simple application of rational thinking.
When the DPRK does something of such magnitude, we must look inward in order to truly
understand what is triggering such behaviour. When viewed without preconceptions, the
current situation with the DPRK is more comprehensible than it is put out to be.

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Introduction
The DPRK has inside literally one month and in the face of growing international
condemnation, conducted a fourth nuclear test with the launch of a satellite following swiftly.
The nuclear test it was claimed was an H-bomb test. International observers and nuclear
specialists strongly dispute and deny this was in fact so. So why claim something of this
magnitude with the prospects for such a draconian international response if indeed true?
Moreover, why risk a fourth nuclear test when after the third test the world was by and large
left guessing as to the real capabilities? Such ambiguity has served the DPRK well over the
years, which begs the question why change the status quo with the risks associated with
another test? Many people are asking a diverse range of questions about these two events,
the question that should be paramount is – “Why now?”
These most recent events are certainly linked, not just to each other, but also linked to a
series of events since 2011 to now that are indicative of the significant structural changes
happening in the country, change pertaining to the economy, political structures, power
balances and the creation of the dynamics and momentum to allow these changes to
progress unimpeded internally.
Should the significant events since January of this year be viewed in isolation they could
easily be construed as the same stale rhetorical posturing of old. However, when viewed in a
combined perspective and put into a broader context then the same events are no longer
just mere posturing and bellicose rhetoric. They are the clear indicators that changes are
taking place and also of more significant changes that are about to potentially happen within
the DPRK.
Overview
We believe that the deliberate timing of these two events is everything. The two events are
key points in a continued strategy being played out by Kim Jong Un, to affect change within
the DPRK since his ascension to the Supreme Leader1
position in December 2011. Just last
week one of the contributors to this report was in Pyongyang when Wu Dawei made a state
level visit to the country - no coincidence a mere few days before a significantly important
satellite launch. However, during the same period an enlarged „Joint Meeting‟ was taking
1
Titles: First Secretary of the Workers' Party of Korea, Chairman of the Central Military Commission,
Chairman of the National Defence Commission, Supreme Commander of the Korean People's Army
and presidium member of the Politburo of the Workers' Party of Korea [Wikipedia]

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place which included participation from both the Central Committee of the Worker‟s Party of
Korea (WPK) and the Korean People‟s Army (KPA) Committee. This Joint Meeting was
about the upcoming Seventh WPC (Workers Party Congress), scheduled to start in May later
this year, and was entirely domestically focused.
This meeting in itself is not necessarily a critical or telling event other than the importance
accorded to it by its Seventh WPC association, yet it was some of the comments that Kim
Jong Un made at the meeting and to whom they were directed that are significant. His key
comments and points are highlighted below.
We will analyse and evaluate these recent comments within the broader contextualization of
where we place the significance of what the nuclear test and satellite launch and other
previous events and what these events are leading to. Furthermore when referencing Kim
Jong Un‟s statements over the past few years as part of this contextualisation, his use on
select occasions of the policy term „Country First‟ is particularly interesting.
Key Points from KJU’s address to the Enlarged Joint meeting:
1. The Korea People‟s Army (KPA) „must head only in the direction that the Supreme
Leader points‟
2. Changes – the possible need for changes in government and military structure were
hinted at during the enlarged Joint-Meeting (including Central Committee of the WPK + KPA
Committee) by KJU himself during his speech
3. The enlarged Joint-Meeting would provide “important momentum” for DPRK as it
prepares for the May Congress
4. At the 7th Congress changes will be discussed and ratified
5. Anti-corruption / abuse of position: “whole of the party and our military must put up a
struggle to exterminate the practices of seeking privileges, misuse of authority, abuse of
power and bureaucratism” … strengthen Party ideology
These statements and to whom they were directed, coupled to the nuclear test three weeks
before hand and the launch of the country‟s second satellite only a few days after the
enlarged meeting are patently designed to set the stage for upcoming challenges,
endorsement of change and ratification of Kim Jong Un‟s aspirations to economically
transform and develop the country. The challenges are perhaps the most contentious to
discuss and explain, as these challenges we believe will be towards the military‟s position of

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supremacy and the predominant role they have in controlling many of the country‟s natural
resources and assets, the „release‟ of which would ultimately bring a surge of economic
developments.
The 800 pound gorilla in the DPRK‟s kitchen, holding the cookie jar, has always been the
military. Accorded to their positioning as the defender of the state and sovereign security, the
military has essentially been an obstacle to true structural changes and real economic
reforms. As such, the military was and has always been a delicate and thorny subject for the
leadership given the primacy acceded to it by the previous leaderships. Hence, the
leadership‟s play on nuclear and missile technological developments, in short, if the
leadership can demonstrate to the people that they have the capabilities to assure and
defend their sovereign security through its technological military capabilities, then the opaque
requirement for such a monolithic omnipotent military machine is no longer justified and
required. Those resources, herewith, that were dedicated to sustaining the military and the
security of the country can now be redirected to economic development and growth. This
critical move requires the leadership to successfully redirect the emphasis of the country‟s
domestic policy away from the Songun („Military First‟) policy to a „Country First‟ policy. This
must also be achieved without upsetting the military, therein potentially creating an
intractable situation. The transition needs to be accommodated and actually supported by
the military if it is to be successful.
Analysis
So what changes are occurring in the DPRK to support the bold assertion of transformations,
economic developments or modernisation and the potential for significant structural political
and power realignments? Moreover what is the connectivity between these changes, recent
events and potential future structural governmental reforms after the 7th
WPC?
1. A snapshot of developments over the last 5 years indicates that a domestic
transformation is underway – what are those?
Shadow markets are an integral and somewhat hidden aspect of the North Korean economy.
They range from shadow trading, shadow employment, shadow financing (not banking) and
shadow housing and property markets. The growth of these shadow trading market
structures has continued since the mid 1990‟s (which essentially began to flourish as barter
and trade farmer markets, evolving over time into fully fledged markets) to present, with the
accelerated growth witnessed since 2011 particularly. The shadow employment market,
tentatively and quietly approved by the leadership and government since 2013, was

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technically in existence prior to this in a much more subdued way. This shadow employment
market has grown exponentially since then and has become an integral income generator for
many citizens and is encouraging broader economic growth. Examples are of privately
funded and owned enterprises employing and paying workers a monthly salary, offering
overtime rates, generating profit and enriching owners, essentially helping to stimulate the
growth of a middle class whilst providing a livelihood and disposable income to ordinary
working class citizens. Yes, people in the DPRK actually have paying jobs!
The property market is open for „domestic businesses‟. The growth in this market is fairly
clear to be seen around the city in the different districts with the number of high rise blocks
and even commercial buildings springing up and construction cranes dotting the city. But
who are buying these apartments??? Who moreover is paying for the construction of
them??? This is where that growing and economically empowered middle class are tapping
into the „shadow finance market‟. The government are in on the act as well through the
construction of additional public housing projects, one witnessed alone in the suburbs of
Pyongyang is expected to house an 60,000 such units once completed.
These markets are feeding off one another and although „supply & demand‟ is self-
explanatory, one must realise that much of the „disposable income‟ that funds these markets
comes from the shadow employment market. The DPRK government has not acknowledged
its existence publically but structurally and operationally it has facilitated them actively, but in
a controlled fashion. (Shadow) Economic activity within the DPRK is by and large not
acknowledged, recognized or understood by the West. Why is this? If such blatant economic
activities in a country where most outside observers rely on 3rd
, 4th
or 5th
hand observations
are simply not known about beyond anecdotal passing references from a handful of brave
foreign souls who witness it first-hand, why has the international world by and large not
acknowledged the latent changes? Could it be that people really do not know about the
reality on the ground or simply choose to ignore it?
2. Looking at the progression made over the last five years why conduct Nuclear &
Satellite Missile Launch now? Consequently, the question still stands as to why now?
What is the underlying rationale domestically to the risky fourth Nuclear Test and the Satellite
Test? One must ponder exactly what could the DPRK government potentially achieve from
these actions domestically and internationally? This is where the emphasis on domestic
considerations is paramount to international considerations and western speculation on the
reasons. So in terms of understanding the rationale the answer comes from examining the
domestic motivations to these two material events in 2016. The progress of the people and

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the Party is seen through and in these two events is an unambiguous and clear message to
them, we are self-reliant (in the absolute definition of the Juche philosophy) in respect of our
sovereign security and the safety of the people, we unquestionably have nuclear capabilities
and the means to launch such capabilities. However, these displays of military and security
capacities are not to intimidate the people or to stymie the progress of the people and the
country, nor are they a gauntlet to the West and Western-allied neighbours. No, they are the
means to an end, that end is a significant political and structural realignment of power
balances in the country and the acceleration of these economic developments.
Under the status quo, and the natural limitations of the domestic political status quo as it is,
the leadership has in turn reached the natural limitations of controlled and measured
progress. The only alternative to continuation of the program, least it stumbles, is to force
further domestic structural changes. In short, without reform the rate of change and actual
achievement of change as per the agenda of KJU for the DPRK will not be realised. These
necessary structural changes are alluded to by the KJU in his speech in the recent February
Joint-Meeting article [JH Ahn article quoted here]. Main points from the speech are as:
1. Possibility of change – Although it is a statement „hinting at the possibility for change‟ it
is actually quite direct, this patently alludes to the need for change and it was KJU setting
the stage for defining what that change would or may entail.
2. Government structure – changes. By this, one can merely deduce that the government
structures are in line for a shake-up, the reasons vary, to enable greater efficiency, a
reduction of bureaucracy, streamlining decision making, addressing the influence of the
military within government through established relationships.
3. The Korea People‟s Army (KPA) „must head only in the direction that the Supreme Leader
points‟. This statement is perhaps the most significant indication of what is to come this year
and in the coming years in respect of the position of power occupied by the military and that
it is about to change significantly. But it is also unequivocally a reaffirmation of KJU‟s
absolute leadership and who calls the shots.
4. Anti-abuse of power / anti-corruption. This statement indicates a closing out of alternate
power structures other than KJU‟s and the distinct potential for cleaning house, the term
„purges‟ likely springs to mind for many in this respect, oddly a term no longer applied to
describe China‟s house cleaning under the guise of an anti-corruption campaign, a matter of
definition one supposes.
5. Strengthen Party & ideology. This comment is seemingly about ensuring that the stalwarts

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remain steadfast to the ideology and reinforce their commitment to that said ideology be it
„Military First‟ or „Country First‟.
Ultimately for Kim Jong Un to attain his desired reforms and developments under the
auspices of the existing status quo pertaining to power and influence, he has no alternative
other than to force change and be seen as the architect of that change. Therein, do the
nuclear tests, the satellite launches and house cleaning over the past few years have, as
many observers ask or state, to do with the consolidation of his grip over power? Yes, off
course they are. They are the means to both consolidate and demonstrate his power. But it
is to what end or outcome is he pursuing these actions that seems to be consistently misread
or misunderstood. In an article at the Guardian Newspaper immediately after the satellite
launch, the writer suggests tentatively that KJU could be using the nuclear tests and satellite
launches and the bellicose rhetoric to actually open up. The writer further added that the
Koreans had likely learned from the experiences of Libya. On both accounts ISS Risk would
largely agree, yes, he is using the tests and launches for a definitive purpose, but that is not
„opening up‟. It is for economic development and power and political realignment. And yes,
ISS Risk are confident that the Koreans watched Libya with raised eyebrows thinking to
themselves that it was not going terribly well for the Libyans.
3. What are the potential outcomes of the Seventh Congress Meeting? What could be
the motivation for recent events?
Firstly, what is the relevance of the Satellite Launch and Nuclear Tests to the 7th
WPC? Also,
what is the importance of these pre-7th
Congress statements / implicit points from Kim Jong
Un? However, the ultimate question is why now? Why the announcements and the tests
being held ahead of the 7th
Congress Meeting, the first in over 36 years?
The relevance of the satellite launch and the nuclear test has been sufficiently explained
above, however, the implicit message that will likely be put forward at the 7th
WPC is that
these achievements were the combined efforts of the military and the civilian scientists of the
country; one does therefore not trump the other, maintaining equilibrium as such. The Party,
the military and the civilian government under the guidance and stewardship of the leader
will redirect their efforts in a collective way to the betterment of the country and people,
ensuring further equilibrium within the power structures.
The importance of the pre 7th
WPC statements by Kim Jong Un are really directed at the
military and the military‟s power and control over the country‟s natural resources. This is
essentially about rebalancing the domestic power structure and taking significant power

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away from the military. It is about opening up access to the natural resource assets of the
country – its sole viable economic exportable commodity. Kim Jong Un and the Party must
reassuringly yet decisively demonstrate to its people that Military First is no longer the
doctrine that will bind the country together and be its guiding light. Because now they are
protected with nuclear capabilities, so the country and the people take priority. This is the
ultimate objective, the realignment of power bases, control, and access to the country‟s
natural resources that can further push economic developments to the people.
Conclusion
Everyone is normally looking for the sense in the midst of the surreal when it comes to the
actions of the DPRK. It is no easy task to separate the reality from the perception. It is our
stated position that the thinking and the timing behind the latest nuclear test and satellite
launch is more to do with internal matters, stability, control and consolidation. But it is also
our assessment that the tests were done for several reasons that observers are either
missing or have not considered. One needs to step aside and look past the panic and
commotion and apply rational thinking for the simple reason that when the DPRK do
something of this magnitude, one should look inwards to see what is happening and what is
triggering such events.
In summary, therefore, the following points should be drawn. Firstly, these events tell the
general populace they are secure (in a national security sense), that is essential in order to
have to have their support. Secondly and more importantly, on a political and strategic level,
it technically strengthens the Party‟s hand strategically over the military. Yes, a nuclear test
of dimensions real yet unknown were conducted and executed by the military, but at the
behest of the Party and the leadership. One can hear the pondering of the rationale as to
how that weakens the Military? What it means is that internally the consolidation of the
leadership‟s power over the country and the people has been achieved not so much through
the perceived Iron Fist approach, but through the economic reforms and the benefits they are
bringing. However, there are limitations to the scope and speed and depth of those reforms
under the current status quo and our own observations of these reforms are that they are
irreversible without significant strife or as a consequence of such an action. On top of this is
the crucial fact that the incumbent leadership has shown zero desire to reverse them. On the
contrary, they wish to accelerate them.
By demonstrating to their own people this 'achievement', it now presents tangible
opportunities to address the 800 pound gorilla in the kitchen holding the cookie jar, and it is a
very large cookie jar containing the keys to unlocking significant access to the country's

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resources. This has more to do with preparing the ground for direct challenges to military‟s
dominance, particularly military‟s dominance in key and critical areas and sectors that need
to be freed up for greater economic restructuring to be effective. It is highly probable in the
next few years that a paring back of the 'physical size' of the military is now an objective of
the leadership. However, it is not purely only to weaken the military grip on critical resources,
it will also free up man power and lead to a reduction in numbers, budget, control etc. It will
also help to wrest control from more powerful elements using the 'perceived need for such a
large and strong army', thereby weakening the factions and strengthening other factions less
'Military First orientated'. Until this realignment is attained, the leadership‟s economic reform
and growth strategy will always be hamstrung.