Archive for May, 2006

Kaesong products to be marked

Wednesday, May 31st, 2006

Joong Ang Daily

By the end of the year, products made in North Korea’s Kaesong Industrial Complex, as well as visitors’ passes, will be tagged with special radio chips to speed up customs procedures, the Information Ministry said yesterday.

The Kaesong complex is one of four government projects that will use the radio frequency identification chips.

According to the Information Ministry, embedding the chips on Kaesong-made products with details about the products will shorten the time it takes to get through customs from three hours to 30 minutes.

The government also plans to tag arms and ammunition and install the chips at port facilities to improve logistics and track waste management, such as the safer disposal of medical waste.

The chips ― which contain information about the product to which they are attached as well as its location ― are picked up by radio frequency signals from a control station equipped with a transceiver.

“These projects are the first steps toward the widespread use of these chips in Korea,” an Information Ministry official said.


Living Art/Sonoko goes down in flames (literally)

Monday, May 29th, 2006

Living-art-factory-ground-2004-12-15 Living-art-GE-2006-1-22 Sonoko-fire-GE-2011-5-13

Pictured Above: (TL) A Picture of the Living Art/Sonoko Factory (source) (TR) A Google Earth Image of the Factory (B) The remains of the fire

UPDATE 4 (2012-1-16): The Living Art/Sonoko Factory has burned down. According to Yonhap:

For Kim Suck-chul, Christmas 2010 was a nightmare that nearly cost him his fledging factory in North Korea.

Kim was the first South Korean businessmen to make an inroad into the joint inter-Korean industrial complex in the North Korea’s western border city of Kaesong.

Kim set up his factory in Kaesong in late 2004 to produce kitchenware and hired some 350 North Korean workers.


Cooking pots made in the North were brought to South Korea for sale in late 2004, where they made headlines and quickly sold out in a major department store. The kitchenware was later exported to Mexico and Germany also.

A pre-dawn fire on Christmas Eve, 2010, destroyed half of Sonoko Cuisineware’s factory in the Northern economic enclave, costing Kim about 2 billion won (US$1.7 million).

The fire began in a shipping container in the factory’s compound after North Korean workers did not switch off an electric pad and electric heater the previous day, Kim said.

He said the South Korean authorities had inadequate fire fighting measures for the South Korean factories in the complex.

“Firefighters came to the scene more than 40 minutes after the fire tore through the factory,” Kim told Yonhap News Agency by phone from his office in Ilsan, west of Seoul.

He said a fire engine and water wagon came from a fire station just 300 meters away, though the water wagon held so little water it had to return to the station to refill before coming back to the scene.

The blaze completely destroyed machines and other equipment in the factory, bringing the operation to a halt for more than a year.

“All of my North Korean employees are working for other South Korean factories in the complex as I could not pay them wages,” Kim said. He added that four of his eight South Korean workers had either quit or taken leaves of absence.

Kim said he has yet to recover from the devastating damage due to financial constraints.

He sent official documents to former and then current unification ministers on four occasions between April and October of last year to try to secure financial assistance to resume operations, but was only told to “wait.”

Out of frustration, he posted his latest appeal on the Web site of the Unification Ministry, which handles inter-Korea affairs.

“I’m in deathly agony and I can not sleep,” he said. In a worst-case scenario, he said, he may file a suit against the government over the issue.

Unification Ministry spokesman Kim Hyung-suk indicated the government can not give special favors to the kitchenware manufacturer, saying it needs to exercise fairness in its handling of the more than 120 South Korean companies in the complex.

Despite lingering tensions on the Korean Peninsula, the two Koreas have kept intact the shared complex that serves as a key legitimate cash cow for North Korea.

UPDATE 3 (2006-11-28): Living Art and Sonoko managers indicted for embezzlement. According to the Korea Herald:

Prosecutors yesterday indicted the chief executives of two kitchenware manufacturers that operated a joint venture in North Korea’s Gaeseong industrial complex on charges of embezzling government funds granted to promote inter-Korean ties. One was also charged for delaying salary payments for his employees.

This is the first time any business concern in the industrial complex has faced criminal charges.

The Seoul Central Prosecutors Office charged Kim Seok-chul, the chairman of Sonoko Cuisineware Inc., and Kang Man-soo, head of Living Art Co., for colluding to embezzle 300 million won – part of the 3 billion won in government loans which they received as aid for investing in Gaeseong.

The two companies set up a joint venture in Gaeseong in 2004 under the name of Living Art. The kitchenware maker began to use the name of Sonoko in January this year after Living Art pulled out of the venture three months earlier citing financial difficulties.

“After receiving the loans on Oct. 26, 2004, Kim and Kang took the total amount of money in a month,” said a prosecutor investigating the case, declining to be identified.

The prosecutor said Kim and Kang used part of the money to pay their personal debts.

The government funds were extended as low-interest loans, sums of which Living Art redeemed before going bankrupt. Sonoko Cuisineware is reportedly covering the monthly interest payments as it has been independently operating in Gaeseong to produce pots, pans and other kitchenware. The two companies dissolved their partnership in October of last year.

Prosecutors said Kim is also charged of violating inter-Korean economic exchange laws after providing factories in Gaeseong to three different companies where had no business approval by the Unification Ministry which oversees all inter-Korean businesses.

Prosecutors suspect Kim had approached investors by promising to help them gain entry into North Korea, and allegedly led an investors visit to Gaeseong in June of this year with false identities provided by Sonoko.

Prosecutors also accused Kim of delays in payment of salaries to his employees to the tune of over 20 million won in October 2004.

Kim also sent gifts such as expensive imported liquors to North Korean officials in return for business favors. He claimed to have used his own money for the gifts.

The history of Sonoko and Living Art dates back to before Living Art was selected to enter the Gaeseong pilot project in 2004.

Kim was then in charge of exports at Living Art. He persuaded the company to set up a plant in Gaeseong.

Living Art was to invest in the manufacturing equipment, while Kim financed the plant-building.

The 3 billion won of government loans were for building the production facility, but Kim reportedly claimed Living Art failed to pay for the equipment.

Living Art was feted for manufacturing the first Gaeseong-made products that were exported overseas with tags on the pots and pans declaring “Made-in-Korea.” However, the company soon slipped into financial difficulties, leaving Sonoko to cope on its own. In October last year, Sonoko broke off all ties with Living Art and began to independently operate in Gaeseong.

Read the Full story here:
Two Kaesong potmakers indicted for embezzlement
Korea Herald

UPDATE 1 (2006-5-31): According to the Korea Herald:

In separate news, the Unification Ministry yesterday denied local reports that there was any wrongdoing behind the selection of Living Art as one of the first businesses to enter Gaeseong.

Reports said there were suspicions of backroom deals involving Living Art, which was the first business to roll out products from the inter-Korean complex with the help of millions of won in government loans. Notwithstanding, the enterprise quickly went bankrupt.

“Living Art was not initially among the first 15 companies selected to enter Gaeseong, but was among the next 10 candidates. Living Art was added to the list after two vacancies occurred,” the ministry said.

The ministry said Living Art has paid back 700 million won out of the 3 billion won in government loans it received, and that the company did not appear delinquent at the time the loans were approved in September 2004.

Read the full story here:
Korea Herald
Lee Joo-hee

ORIGINAL POST (2006-5-29): Living Art (리빙아트 공장) has become the first company to go bankrupt in the KIC. According to the Choson Ilbo:

A kitchenware manufacturer that was among the first to move to the joint Korean Kaesong Industrial Complex in the North in 2004 went bankrupt not long afterwards. The firm was picked despite being in serious trouble already, prompting suspicions of irregularities in the selection process. The prospect of recovering the hefty startup loan from the Inter-Korean Economic Cooperation Fund looks dim.

Living Art was one of only 15 companies chosen from among 136 hopefuls in June 2004. Korean Land Corporation, which was in charge of selection together with the Unification Ministry and the Export-Import Bank of Korea, at the time stressed it would choose only financially sound businesses.

But Living Art went belly-up early in 2005, stopped all activities and sold its plants. As of at the end of May, It had yet to submit its audit report for last year to the Financial Supervisory Service.

In September 2004, soon after the company was selected, its South Korea plant and facilities in Incheon were temporarily seized and put up for auction, but only a month later it was given a loan of W3 billion (US$3 million) from Exim Bank. A financial expert says it is hard to understand how that could happen. Sonoko Cuisineware, an affiliate of Living Art, still makes cookers in Kaesong but is in serious financial trouble because of the Living Art bankruptcy.

Living Art released first products from the Kaesong Industrial Complex in December 2004 and held a grand celebration attended by politicians and officials from the Unification Ministry and Korea Land Corporation. The products were sold in Korean departments stores.

Read the full story here:
Bankruptcy Casts Shadow Over Kaesong Complex
Choson Ilbo


Fruit Farms in Korea Take on Fresh Looks

Sunday, May 28th, 2006


Fruit farms across the country are taking on fresh looks through a dynamic drive to cultivate new specimen of fruit trees. Scientific research institutes in the field of agriculture and different nurseries produced 1.5 million saplings of new species of apple trees last year alone by making vigorous endeavors to acclimatize high-yielding fruit species to the climatic and soil conditions of Korea for five years.

Fruit farms in Hwangju, North Hwanghae Province, Onchon, South Phyongan Province, and other parts of the country significantly increased the area of fields under short apple trees which bear fruits faster than other species, bringing the area of fields under apple trees of new species to hundreds of hectares.

Pear trees of new species on Pyongyang, Myonggan and other fruit farms have produced sweet and delicious fruits over the last two years.

The cultivation of peach trees of new species has also proved successful in orchards in different parts of the country. For example, a peach weighed 350-400g last year.

The area of fields under grape of new species is on the yearly increase in various fruit farms including the Sariwon fruit farm in North Hwanghae Province that has turned into a farm specializing in the grape cultivation.

Meanwhile, persimmon-apricot trees are widely distributed in the areas south of Pyongyang and fruit farms in Unpha, Pongsan and other areas prove successful in cultivating jujube trees fruits of which are incomparably rich in vitamin and sugar content and more fragrant than native species of jujube.


‘Yellow Spring’ in North Korea…Similiar To The Food Shortage in 1998

Sunday, May 28th, 2006

Daily NK
Kim Young Jin

North Korea is facing the hardest “yellow spring” right now. ‘Yellow Spring’ means the hardest time of the year in North Korea. “Yellow spring” originates from how the sky looks yellow because of starvation.

Mr. Lee Hyun Soo (46) who crossed the Tumen River on 15 May said, “It is hard to endure day by day”.

Mr. Lee, head of a household of four said, “Rumors of people going to China and South Korea go around. I tried not to cross the border, but I did because of my family members who are starving”. He complained, “The government have been acting like they would give us food for a long time, but they deceived us”.

Recently, North Koreans who cannot make their ends meet like Mr. Lee started to cross the Tumen River again. The reporter met 5 North Koreans including Mr. Lee. They met with the reporter at a secret place in Yanji, and expressed strong discontents about the situation of food shortage in North Korea and the policy regarding food distribution system.

Mr. Choi Young Nam (37) said, “I have been waiting since the 1st of April. I know that there are even less rice in spring, so where would the rice come from? They cannot deceive us like this”. Mr. Choi said. “In January and February, rice for 2~3 days were given to the old and supporting families. After that, we bought the rice at Jangmadang price at the distribution center”.

The official price of rice is 45won($0.015) for rice and 25won($0.0083) for corn. After North Korea resumed its food distribution system, the government regulated the rice transaction at Jangmadang while selling rice at 950 won($0.32) and corn at 350 won($0.12), which is same as Jangmadang price. Recently, price at Jangmadang went over 1300 won($0.433) and the price at distribution center went up accordingly.
“Similar To The Situation At The End Of Food Shortage In 1998”

They say, “Family of those who work at the government, police and national security agency store up food for one year. People who work at powerful organizations such as Office #5 (foreign currency earning office under office #39 under the Party, loocated at each city and province) receive food, but other workplaces do not distribute food anymore”.

After the 7.1 Economic Management Improvement Measure in 2002, policy which orders each organization to provide for their workers has been adopted; workplaces with power can feed the workers, while poor factories cannot. People generally have an attitude that does not care if others can eat or not.

Mr. Park who was involved in ‘suitcase business’ with Chinese said, “Everyone is involved in trade, and I could not even break even because I could not sell the goods at fair price”.

Mr. Park who is employed at a steel factory in Hoeryong has three family members to support. Mr. Park crossed theTumen River to earn money by farming in China, because it seemed hopeless and difficult to live in North Korea. Following is what Mr. Park said.

“The situation is similar to the situation at the end of food shortage in 1998. The number of people who come to China will increase soon. People at the border area know that why they are so poor because they are involved in trade with Chineses. All they have in their heart is anger”.

“Living By Grassroots and Porridge, The Old and The Sick Are Dying Of Starvation”

Mr. Hyun Joo Hoon (50) who sold goods in Pyongan and Hwanghae Province says, “People in Pyongan Province are worse off than those in border area”.

People in Pyongan Province and at border area both do not receive food from distribution system, but people in provinces without the capital to start business began to eat grassroots and porridge for meals. Mr. Hyun said, “I ate corn porridge because I only received five day worth of food”. Mr. Hyun said, he had seen the sick and the old dying of starvation at Soonchun and Dukchun in South Pyongan Province.

Mr. Hyun said, “It is because the government regulated the outflow of food to other provinces as the government ordered the regional governments to distribute food on their own”. In the fall of last year, North Korean government has regulated the outflow of food by placing posts at highways connecting different cities and districts.

Mr. Lee added, “People in the inner provinces believe the propaganda of the North Korean government that the reason for the poverty is the economic sanction by imperialists, even when they are dying. Unless their thoughts change, they cannot even resist”.


Price of Rice Rises Sharply in May

Friday, May 26th, 2006

Daily NK
Kwon Jeong Hyun

In North Korea, domestic rice prices are showing a sharp rise.  In mid May, the price of rice in North Pyongan province was 1,300W ($0.43)/1kg. Compared to the price in May 2005, it rose 500W ($0.17). In Jangmadang, there is a rumor that rice will rise to 2,000 won ($0.67), so it seems that it’s just a matter of time before rice becomes more expensive.

The reason for the rising cost of rice is simple: a lack of rice. The rice stored in Autumn has begun to run out and there are not enough edible plants to go around. North Korea calls this period the Spring Austerity Season. This period is the hardest season for North Koreans.

The average wage of North Koreans is 3,000W($1). To be more exact, it means that 4 family members have to live off of 1.5kg of rice a month. Everybody struggles to survive by doing business, digging up edible plants, getting help from relatives living in China, and selling scrap iron.

The following is March prices from North Pyongan province. This shows the great difference from this year’s price. Except for food and groceries, the price does not vary much:



1kg 800won – March 7 / 1,300 won in May

1kg 700won(730won by wholesale) – May 21~31


450 ~ 500won


1kg – 4,000won


1kg – 6,500won

Duck meat

1kg – 4,500won

Goat meat

1kg – 4,500won


1kg – 4,000won


Per one – 150won

Edible oil


1kg – 2300won

Yellow(bean oil)

1kg – 2,650won


Ajinomoto made in Japan : 450g-2,400won(2,260won by wholesale)

Gaedan made in China : 450g 2,150won(2,050won by wholesale)




Minye, for woman, made in China – 17yuan

Bosuk, for woman, made in China – 21yuan

Gyeongpum, for man, made in china – 26yuan

Soanda, for man, made in China – 31yuan


Nanais, one pair – 1,050won

Bubu made in China, one pair – 1,250won


Man’s hide shoes, fair average quality, made in China – 60yuan

Man’s hide shoes, lower-grade quality, made in China – 50yuan


Goods related with a Computer

Monitor 17″

Retail price – 110~120 dollars, Wholesale price – 90 dollars


65~70 dollars


5,000won per ten






Snacks or Side dishes(March 28 ~31)

Roasted chicken

6,500won~8,000won per one


1kg – 400won

Roasted duck

9,000won~12,000won per one


1kg – 700won


1Box – 6,750won


1kg – 750won(690won by wholesale)


1 box – 4,700won

Butter powder

1kg – 5,000won

Rice cake

1box – 8,000won

Chinese noodle

1kg – 2,000won

Dry squid

1kg – 8,800won

Wild walnut powder

25g – 400won

Sweet potato

1kg – 300won

Milk powder

400g – 5,000won

Korean noodle

750g – 2,400won


Fruits (March 28 ~ 31)


1kg – 1,800won

Water melon

3kg – 9,000won


1kg – 2,000won


1 box – 9,000won


1 cluster – 5,500won


1kg – 1,200won


1kg – 1,200won


Leisure (March 28 ~ 31)




1 hour – 5,000won

Internet cafe

1 hour – 1,000won

Admission fee for Sauna



1 person – 70won


9,000won ~ 15,000won

Mangyeongdae Playground

Adult – 50won, Child – 20won

Print of a photograph

10 ~ 18cm : 800won

A comic book

1,500won (lending – 100won)


Taxes and Exchange Rate (March 7 ~ 31)

Exchange Rate


March 13


March 18


March 19


March 31



March 19


March 31


The present


Electronic fee : using for 4 light bulb, a TV, a refrigerator, a recorder(3months) – 600won

Water fee – 10won per capital(3months)


Medicines and Medical Instruments


1 pill – 75won

Sphygmomanometer, Stethoscope



12 pills – 140won

1 bottle of 5% Glucose



1 pill 300won(Made in China-30won)

A acupuncture needles case


Cold medicines

1 pill – 30~50won


School Things



Pencil case

500 ~ 700won

Ball pen

150 ~ 250won





Mechanical pencil




Entrance fee for Shinuiju Medical college including bribe costs

200 ~300 dollars

Money due of private computer shop per meonth

200 ~ 300dollars


Housing Prices

Single story house with 2rooms, 1kitchen in a city

Monthly rent 20,000won

Middle quality apartment with 2rooms, 1kitchen

3,000 ~ 3,500dollars

Rent for a 110 square meters Karaoke

40,000won per month

High quality apartment with 3rooms, 1kitchen


Single story house with 2rooms, 1kitchen


Single story house with 3rooms, 1kitchen(660㎡)



Others (March 28 ~ 31)

Sanitary napkin

500 ~ 1,000 per one

Cosmetics(Cream, Toner)

Made in S.Korea-10,000won, Made in China-35,000won

3 kinds of toner set


Small size gas range

27,000won(25,000won by wholesale)

3 kinds of Aloe set


Auto bike

150 ~ 200dollars


Sony, used, made in Japan – 680yuan

Gukhwa, used, made in China – 350yuan


In Deep South, North Koreans Find a Hot Market

Thursday, May 25th, 2006

New York Times

TAEJON, South Korea — At the Pyongyang Moran Bar on a recent Friday evening, a large video screen showed uplifting images of rocky mountains and an open blue sky. A slogan appeared at the bottom: “Kim Jong Il, a man who comes along only once in a thousand years.”

The North Korean waitresses wore traditional dresses in the bright colors that were fashionable in the South some years back. The singer’s interpretation of “Whistle,” a North Korean standard of the 1980’s, was shaky and off-key. Service was bad and included at least one mild threat. Drinks were spilled, beer bottles left unopened and unpoured.

But the South Korean customers could not get enough of the Pyongyang Moran Bar.

“Encore!” cried Bae Seong Wan, 44, at the end of “Whistle.”

The Pyongyang Moran Bar is located, not north of the demilitarized zone, but here in downtown Taejon, a city in the South Korean heartland.

The 120-seat bar opened in February, complete with inferior North Korean beverages, North Korean landscape posters, North Korean songs, a photo of Mr. Kim above the bar counter with his South Korean counterpart and, most important, North Korean waitresses — or, as a sign outside announced, “beautiful girls from North Korea!”

Until the 1990’s, South Korean schoolchildren were awarded prizes for drawing posters depicting diabolical North Koreans. Then the South’s so-called sunshine policy of engagement transformed North Koreans into real human beings in the minds of South Koreans and in popular movies like “Joint Security Area.”

Now, after more than half a decade of rapprochement, the North is all the rage, in a retro-kitschy fashion, and North Koreans are seen not as threatening aggressors but as country bumpkin cousins, needing an introduction to big-city life.

North Korean defectors and South Koreans alike are opening North Korean-themed restaurants, selling North Korean goods and auctioning off North Korean artwork on

Half a century of division has turned the South into the world’s most wired society, as its consumer products and pop culture increasingly shape the tastes of youth across Asia.

North Korea, meanwhile, has remained frozen in time, a repository — at least to someone with a sharp nose for marketing — of an unchanged Korea.

“North Korea is retro,” said Jong Su Ban, 42, a North Korean defector who plans to open a North Korean restaurant, Ok Ru Ok, in Seoul soon. “It reminds South Koreans of the 1950’s and 1960’s, before South Korea industrialized. They see handmade crafts that are not sophisticated, and they think, ‘It’s like us before we developed.’ ”

The timing was right, Mr. Jong said, pointing out that only a few years ago a restaurant in Seoul with a waiter dressed as a North Korean soldier went belly up fast. “He made people uncomfortable,” he said.

At a company called NK Food, Hong Chang Ryo, 45, a South Korean who opened two North Korean restaurants in Seoul this year and is planning to open a third here, agreed.

“Even two or three years ago,” he said, “we couldn’t have done this. We would have been fingered as commies.”

Mr. Hong’s first restaurant, Nalrae, Nalrae — or fast, fast in the North Korean dialect — “invites you to a different taste” with more than 27 dishes named after places in the North. Shelves stocked with mushrooms, alcoholic beverages, seaweed — “straight from Pyongyang” — are the main attractions in the restaurant, which is painted organic green. A menu promises “nonpolluted, well-being dishes using natural resources from North Korea.”

“It feels rural, natural, unpolluted,” said one first-time customer, Lee Sae Mie, 23, a university student.

While about 40 percent of the dishes’ ingredients come from the North, Mr. Hong said, the flavors had to be adjusted, considerably, to appeal to South Korean palates.

“We had to rack our brains,” Mr. Hong said. “We all know they just eat cornmeal over there. Well, we just don’t know what they’re eating over there. So we mixed and matched. Dishes may look North Korean but actually taste South Korean.”

Increasingly, though, people are parting with South Korean won to buy goods from, which Park Young Bok, a South Korean, set up in 2003. The site sells mostly food products, which shoppers can also buy at 70 stores nationwide.

Last September, Mr. Park added an auction for North Korean paintings, which have been selling briskly, reaching $115,000 in sales in April. With South Korean officials still banning artwork with political content, most of the imports are of landscapes — though, oddly, a tapestry of the Virgin Mary was auctioned off recently for $80.

At his warehouse just outside Seoul, Mr. Park showed off some of the 30 North Korean alcoholic beverages he sells — some of them with labels slapped crookedly on the bottles, others with the contents partly evaporated because of poor bottling.

But to hear some of the patrons at the Pyongyang Moran Bar here tell it, leaking bottles, even bad service, are part of the North Korean appeal.

“I don’t know how to open this,” said one waitress struggling with a bottle of Budweiser. The waitress — who had worked at the bar for only two days and who, like many North Koreans, had never opened a bottle before — tried to get the top off, then handed the bottle to the customer, who opened it himself.

Another customer, Kim Chung Sig, 39, said, “I don’t expect the service to be good here.”

Choi Jung Hee, 37, the manager, said she had trouble training her North Korean staff of five waitresses. “At least, they should say, ‘Hello!’ properly when customers come in, but they don’t,” she said.

“Things are very different in North Korea,” she said. “Over there, waitresses and salespeople are kings because they have access to goods. But here you have to treat customers like kings. You have to bow to them and be polite even if they are rude.”

Reaction to the bar is decidedly split, an indication, said Mr. Jong, the North Korean who is opening up Ok Ru Ok, that South Koreans see in North Korea what they want to see.

Older South Koreans, who still look upon the North as an enemy, want to see images of starving North Korean babies, Mr. Jong said. Younger people, who often want friendly relations with the North, want to see the clean streets of Pyongyang.

“Both sides want to satisfy their beliefs,” Mr. Jong said, standing inside his soon-to-open restaurant. “That’s why I’ll put up only neutral images of North Korea in my new restaurant.”

Everything has fallen into place now for Mr. Jong, who came to South Korea in 2000 and earned a living writing pornography before plunging into food. He has even secured a supply of the North’s coveted Taedong River beer.

“When I lived in North Korea,” Mr. Jong said, “I never knew that this beer even existed. I’ll have North Korean beer for the first time in South Korea. I lived in a very funny country.”


Moody’s pessimistic on DPRK reform

Wednesday, May 24th, 2006

Will this have repercussions in the south’s credit rating?

From the Daily NK:

On May 22, an official of Moody’s Investor Service, a Credit Rating Agency, announced that despite Kim Jong Il’s visit to China early this year, North Korea did not show indications for internal economic reformation.

On May 22, Vice-president Thomas Byrne of Moody’s Investor Service rated the possibility of North Korea towards economic reformation negative in the North Korean Economic Outlook Symposium held by Institute for Corean-American Studies(ICAS) in the Rusell Senate Building.

Vice-president Byrne estimated that North Korea failed to adjust its currency and exchange rate, and its trade environment was not improved, so that rather its economic situation was worse. Plus, he emphasized that North Korea did not show any signs of internal economic reformation.

He said about Gaesung Industrial Complex that, “If 5 more complexes like Gaesung Industrial Complex develop, we can see North Korea be in the economic reformation’s process, yet the Complex is no more than a symbol”. He emphasized that if North Korea has a strong resolute for economic reformation, “it should follow the economic model of South Korea because the way to Seoul is easier than the train to Shanghai for it”.

Vice-president Byrne warned that if South Korea would continue to support North Korea economically, it would face economic crisis soon.

While saying that, “The difference between the approaches of South Korea and the U.S is not great enough to make an impact on the credit rating of South Korea”, he stated, “Due to North Korea, South Korea always gets a lower credit rating than its original rating”.

Meanwhile, a special correspondent informed that North Korean-Chinese trader Lee Dae Kil(pseudonym, 49) who recently came back from North Korea showed a negative opinion about North Korean economy.

Mr. Lee said that, “There has been little profit in spite of trades with North Koreans for a few years”, and “North Koreans buy and sell only for living, not for investment for profits. He said that, “The North Korean government does not show even such efforts”,.

Mr. Lee said that, “After it was known that the U.S blocked banks banking with North Korea, dollar transactions sharply decreased”, and “There were people who even asked me about what happened outside”.


Seoul may face fiscal challenge to future DPRK aid

Tuesday, May 23rd, 2006

From Yonhap:

By Lee Dong-min
WASHINGTON, May 22 (Yonhap) — South Korea is fiscally able to handle its economic aid to North Korea, but the situation may change in the future when it will be required to spend more on its social welfare system, a senior official at Moody’s suggested Monday.

Speaking at a symposium by the Institute for Corean-American Studies (ICAS), Thomas Byrne, vice president of the international credit rating agency, said he does agree that North Korea is headed to meaningful economic reforms.

South Korea is one of three nations whose geopolitical risks are considered in judging its credit rating. Israel and Taiwan are the others.

Divided since the end of the three-year Korean War in 1953, the Korean Peninsula remains tense and volatile as Pyongyang seeks nuclear weapons it claims it needs as a deterrent against possible U.S. attack.

According to Byrne, the situation keeps South Korea one notch below the credit rating it normally deserves.

In trying to ease the tension, Seoul has been trying to engage Pyongyang by providing food and other types of economic assistance. A recent project involves an industrial complex in the North Korean border city of Kaesong where South Korea’s smaller firms have built manufacturing plants to use North Korea’s cheap labor force to make their products more price-competitive.

Byrne said Moody’s assesses the fiscal implications of South Korea helping to keep North Korea’s debilitated economy afloat.

“In fact, the North Korean economy is more unstable now,” he said, citing hyperinflation, backfired currency reform efforts and minuscule international trade hovering at US$3 billion a year.

Seoul, along with Beijing, is a major donor to Pyongyang, but it may be pressured to think otherwise, according to the Moody’s official.

With its aging society and expected large expenditures in social welfare and health care, South Korea will need a larger domestic budget, he said.

“Domestic social welfare demands would compete with sunshine/co-prosperity policy if the latter continues to increase, or increase sharply in the future,” said Byrne.

Despite North Korean leader Kim Jong-il’s visits to China that many saw as his study of Beijing’s economic reform path, the Moody’s official didn’t see any significant signs.

“I don’t see any internally generated reform process,” he said. “North Koreans aren’t anywhere near the positions of embarking on policies of China… or Vietnam.”

Kaesong is, at least for now, more important for South Korea than North Korea and not enough to show that Pyongyang is changing, he said, “If there were five other Kaesongs in North Korea, then it may mean something to North Korea… then, maybe North Korea is changing,” Byrne said.

The tension over North Korea’s nuclear problem intensified with U.S. accusations that Pyongyang was counterfeiting American currency and dealing in contraband.

In September, the U.S. Treasury designated Macau’s Banco Delta Asia (BDA) a primary money laundering entity working for North Korea, saying the bank was abetting Pyongyang’s illicit financial activities.

Daniel Glaser, deputy assistant secretary of treasury, said there is “very little question” that North Korea was involved in counterfeiting U.S. dollars, mostly $100 notes commonly called “supernotes.”

“Every seizure of these notes has been linked to each other… all of them have involved distribution by North Korean diplomats,” he told the ICAS symposium.

He again denied that the action against BDA was in any way meant to affect the nuclear negotiations with North Korea.

“This is a new approach to U.S. national security,” Glaser said, emphasizing that it was under new laws and newly created offices that steps like those against BDA were coordinated.

Wendy Cutler, assistant U.S. trade representative, focused on upcoming free trade agreement (FTA) negotiations with South Korea that she hopes will have far-reaching effects beyond the two nations.

“This agreement will help underscore U.S. commitment to engage the Asian region … the U.S. is committed to developing robust trade relationships in Asia,” she told the symposium.

Seoul and Washington will hold their first formal FTA talks next month in Washington and hope to come up with a final draft by end of this year.

Cutler, who heads the U.S. side in the negotiations, noted that FTAs require political decisions that defy strong domestic opposition.

FTA opponents in South Korea plan to come to Washington to protest the launch of the negotiations, alarming law enforcement officials of both countries.

Cutler said despite press reports of such opposition, polls indicate general support.

“It’s important to know that the Roh (Moo-hyun) administration and the majority of the Korean population and business community support the FTA,” she said.

A U.S. trade official, reacting to reports of protesters coming to Washington, cited the same polls.

“You need to keep in mind that based on polls in Korea, overall sentiment in Korea is strong support for the FTA,” the official said.


DPRK and Brazil Sign Trade Agreement

Tuesday, May 23rd, 2006


An agreement on trade between the governments of the DPRK and Brazil was signed here on Tuesday. The agreement was inked by DPRK Minister of Foreign Trade Rim Kyong Man and Brazilian Ambassador to the DPRK Luiz Augusto de Castro Neves.


Japanese claim they have proved DPRK counterfitting smokes…

Tuesday, May 23rd, 2006

From the Daily NK:

On the 15th, Tokyo Shinbun reported that “At the inspection on board by Japanses Maritime Safety Department, it has been confirmed that fake Japanese cigarettes produced in North Korea have been delivered to South Korea and Taiwan”.

Although the US has recently announced that the most profit-making illegal activity that North Korea is involved in is production of fake cigarettes, it is the first time that physical evidence is obtained.

Japanese Maritime Safety Department analyzed the testimony of the crew and information obtained by reconnaissance satellite, and concluded that ships dock at Wonsan, Chongjin and Najin to leave with fake cigarettes. It is suspected that the goods are transferred to ships that belong to Taiwanses or South Korean mafia on the sea of Taiwan or Busan.

There are tens of different kinds of fake cigarettes, including Japanese such as Mild Seven, Seven Star and American, such as Marlboro.

Production of Fake Cigarettes started with Growing Opium

When and how did production of fake cigarettes start?

It is almost the time of order to “grow poppy” by Kim Jong Il in November 1992 that production of fake cigarettes started.

At the time, much effort was put into creating a cigarette-production base in North Hamkyung Province. Grain Factory at Hoeryong changed its name to ‘Hoeryong Food United Company’ and the cigarette factory under it was expanded. After 1994, soldiers discharged from their duty were put into ‘4.25 farm’ where they produced the raw material for cagarettes. 4.25 farm was built where #22 political prison camp used to be, in Changpyong, Hoiryeong City.

The area centered around 4.25 farm is known for the good quality of cigarettes in North Hamkyung Province. Especially, “Poisonous” cigarette (contains high nicottine) in Ryonggye, Saebyul, near 4.25 farm is known to be the best of the best.

The average cigarette in South Korea “THIS” has 0.65mg of Nicottine, while the ‘poisonous cigarette’ has about 1.5mg. Even a habitual smoker needs to mix in tobacco. Well-known tobacco is produced in Yunsa, North Hamkyung Province.

The poisonous cigarette from 4.25 farm and tobacco from Yunsa have potential to be the raw material for high quality cigarette such as Mild Seven and Seven Star. However, it seems that it has been hard to produce high quality fake. It has been heard that raw material is imported from foreign countries.

“North Korea Is Fit For Production of Fake Cigarettes”

North Korea is fit for production of fake cigarettes in terms of domestic and international environment. In other countries including China, production of fake goods is strictly controlled and is illegal. However, it is not so in North Korea. A brandname for North Korean cigarette ‘Sweetbrier’ produced in Pyongyang factory is also made in Soonchun cigarette factory in South Pyongan Province and other thousands of domestic factories.

Domestic factory means a co-op where goods are produced using the leftovers from factories. Kim Jong Il started the movement on 3 August 1984, which is why the movement is called ‘August the 3rd Movement for Production of Goods By The People”.

In North Korea, the order from Kim Jong Il turned itself into a commercial activity where fake goods are produced and sold to the people. Accordingly, production and transaction of fake goods are not illegal in North Korea.

Main customer for the fake cigarettes is foreign small and middle scale businesses. Especially in China, as the regulation has gotten stricter, the fake cigarette producing factories turned to North Korea. North Korea smuggled machines and raw materials from China to cigarette factoriesin places such as Pyongyang and Hoeryong to produce fake cigarettes.

Production of Fake Cigarettes Was Run By the Government From The Beginning

North Korea supplies labor and factory, while Chinese companies took charge of supply of raw material and circulation. It is hard for fake cigarettes to be circulated through legal procedure. Therefore, the deal needs to be made with international mafia.

The analysis coincides with the testimony of a North Korean defector (51) who has delivered raw material for cigarette from foreign countries to Pyongyang cigarette factory. He did not want to reveal his identity, but he said he clearly saw a cigarette paper and packs with foreign language on them in 1996.

Japanese Maritime Safety Department said North Korea started producing fake cigarette when it became difficult for them to produce and smuggle stimulants such as opium, which is not a correct analysis.

Production of cigarette in North Korea started when Kim Jong Il order to grow poppy in November 1992. Production of cigarette was not started in order to replace the production of opium, but was managed by the government from the beginning.