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Insight: Kim Jong Un, North Korea's master builder

North Korean leader Kim Jong Un applauds during the second meeting of security personnel of the Korean People's Army (KPA) at April 25 House
North Korean leader Kim Jong Un applauds during the second meeting of security personnel of the Korean People's Army (KPA) at April 25 House

By Jack Kim and James Pearson

SEOUL (Reuters) - North Korea's Kim Jong Un has rattled the United States with his nuclear threats and bemused the world with his penchant for funfairs, Disney and Dennis Rodman.

Partly out of the public eye, however, the young leader has presided over a construction boom since he took office two years ago with the aid of funds from China, the North's major backer, and Russia, a former Cold War ally.

Based on satellite imagery, first-hand accounts and photographs obtained from people who travel regularly to North Korea, the building activity goes far beyond the ski resort, pleasure parks and apartment blocks reported by state media.

A stronger focus on the economy is a major change in policy for the third Kim to rule North Korea, although tensions remain high on the Korean peninsula and Pyongyang has been subject to withering criticism this year as part of a U.N. inquiry into human rights abuses.

The "military first" policy of Kim Jong Il, the young leader's father, plunged North Korea into famine in the 1990s. Kim Jong Il's drive for nuclear weapons also saw one of the world's poorest countries repeatedly hit with U.N. sanctions.

"He (Kim Jong Un) understands there is urgency on the economic front more so than with nuclear weapons," said Park Sang-kwon, the chief executive of Pyeonghwa Motors, an inter-Korean automobile joint venture that makes cars in North Korea and who spoke with Kim in July.

North Korea not only has a highly opaque budget process pushed through a rubberstamp assembly, some projects appear to have no links to formal government expenditure, making it impossible to determine how Kim can pay for his building blueprint in an economy one fortieth the size of South Korea's.

But thanks to years of 'military first' policy, which prioritized investment in the armed forces, the young Kim can draw on a 1.2 million strong army to realise his goals.

These "soldier-builders" are often seen constructing apartment blocks and laying roads.

Although private property is sometimes tolerated by the government, much of the land belongs to the state, removing another major cost from projects.

BRIDGES, ROADS AND RAILWAYS

Chinese money paid for a $300 million suspension bridge across a one kilometre-wide stretch of the Yalu River, according to Chinese media reports, linking China's port city of Dandong and its North Korean equivalent, Sinuiju.

"A lot of projects in North Korea are Chinese funded, that's certain," said Wang Yizhou, from the School of International Studies at Peking University.

Russia in September reopened a 54-km (34-mile) railway track from its eastern border town of Khasan to the North's port of Rajin.

And satellite imagery shows work is under way on a 100-km (60-mile) highway along North Korea's east coast linking Hamhung to a tourist zone planned for the port city of Wonsan.

"The DPRK (Democratic People's Republic of Korea) appears to be increasing the quantity and quality of paved roads," said Curtis Melvin, a researcher at the U.S.-Korea Institute at the John Hopkins School of Advanced International Studies.

"It appears one goal is to link all the provincial capitals to Pyongyang by paved highway (and) increase road transport integration with the Chinese economy," said Melvin, who spotted foundations for the Wonsan-Hamhung road using satellite imagery.

Improving roads will also underpin plans to turn North Korea into a tourist attraction - a move with potential economic gains in the short term that avoids restructuring ailing industrial plants that are starved of cash and electricity.

One widely publicised public project is the Masik Ski Resort in the mountains to the west of Wonsan.

North Korea aims to make $43.75 million in annual profit from the resort, documents prepared for potential foreign investors and obtained by Reuters show. It expects up to 5,000 skiers to visit a day when it opens next year.

Kim Jong Un also made multiple trips to a new water park that opened on October 15, which covers 110,000 square metres (27 acres) on the bank of the Taedong River that runs through the capital Pyongyang.

His frequent appearances at fun parks and equestrian centres have been mocked in foreign media, but they tie into the other development projects by targeting Chinese tourists, for whom the North is a cheap destination.

While many Chinese flock to Paris, London or New York, some visit North Korea for a slice of nostalgia from the days before their own country opened up to the outside world in the 1980s, according to regular western visitors to Pyongyang.

"Sports and leisure are being promoted as the next major revolutionary industry," said Kim Kyu-chol, who heads an alliance of businesses mostly in the tourism industry in the South that has sought opportunities in the North.

MA THE MONEY MAN

While it is impossible to determine how the North is paying for many of its infrastructure developments, beyond Chinese money and a recent debt restructuring with Russia, it is clear there has been a major shift in its propaganda.

While state news agency KCNA still runs pictures of Kim Jong Un at military exercises, a new figure has appeared alongside the "Dear Marshal" at opening ceremonies for construction projects.

Ma Won Chun, vice director of the secretive Finance and Accounting Department in the ruling Workers' Party, has long managed the country's cash, according to experts in South Korea.

In North Korean news reports and photos, Ma is featured prominently next to Kim as he tours the work sites of apartment buildings, new hospitals and stadiums.

"It's likely Ma is the main money man, and he can give Kim Jong Un an estimate of how much money something will cost off the top of his head," said Cho Min of the Korea Institute for National Unification, a state-run think tank in Seoul.

Ma's regular appearances started after a party meeting in March when Kim Jong Un set forth his "joint economic development and nuclear power state" policy directive.

That followed an announcement by Kim in April 2012 that the time had come to "enable our people... to live without tightening their belts any longer".

Another speech this year stressing the importance of economic development was followed by the appointment of former premier Pak Pong Ju, a career technocrat, to a top cabinet post.

Still, the North faces a huge task to convince investors to come. Previous attempts to set up special enterprise zones to woo Chinese and other foreign investors have largely failed.

Spats with Seoul and the shooting of a South Korean tourist prompted South Korea in 2008 to pull out of the Mount Kumgang tourist park. Earlier this year, the North shuttered a business park on the border with South Korea as tensions between the two countries rose. It later reopened in September.

Major Chinese investor Xiyang Group staged a rare public attack on a country it described as a "nightmare" to do business in after its assets were confiscated in 2012.

Despite all the negatives, Kim, the South Korean businessman, said his group would invest if there were opportunities.

He cited plans to lay a new highway and a modern rail link between Kaesong, the North-South industrial park and the North Korean city of Sinuiju on the Chinese border, funded by China in return for mining rights in the North.

Such plans could not be independently confirmed.

"There are fairly clear indications that the focus has shifted from the military to the party. And the new policy inevitably means more openness, which has to be an expression of confidence by Kim Jong Un," said Kim.

CRANES DOT THE SKYLINE

Meanwhile construction proceeds apace. Recent visitors to the North have seen cranes and steel girders jutting out from freshly poured concrete on the site of a new terminal building at the main airstrip that serves Pyongyang.

For decades, ageing airport infrastructure had trouble keeping the luggage pickups moving, the visitors said.

Beyond the capital, small villages and towns are also getting a facelift, much of it outside state media coverage.

"In addition to the ongoing construction work in Pyongyang, new buildings are also appearing here and there in the countryside, though on a less monumental scale than the capital," a diplomat who recently visited North Korea told Reuters.

Kim himself has sharply increased public activities related to economics and sport in the first nine months of the year, relative to visits to military units, according to data compiled by the South's Unification Ministry, which is in charge of inter-Korean relations.

Some things, however, don't change. North Korea's KCNA news agency still hurls abuse at South Korean President Park Geun-hye on a daily basis.

Satellite imagery also appears to show the North is pushing ahead with preparations for a fourth nuclear test and a new missile launch, indicating Kim may still need to bolster his legitimacy as a military leader.

(Editing by David Chance and Dean Yates)

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