North Korean Economy Watch

According to the Choson Ilbo:

North Korea asked China to provide it with the latest J-10 fighter jets and other hardware but was rejected, it emerged Wednesday.

According to a high-ranking source in the North, North Korean leader Kim Jong-il made the request to Chinese President Hu Jintao when he visited China in early May. But Hu apparently told Kim that China will protect and support him if attacked.

Observers guess this is the reason why Kim left a day earlier than scheduled.

One North Korean defector who used to be a high-ranking official said, “Kim is increasingly afraid of an attack by South Korean and U.S. forces” following the North’s sinking of the South Korean Navy corvette in March. The North Korean leader therefore wanted to get his hands on the latest Chinese fighter jets to counter South Korea’s F-15 and F-16 fighter planes.

“Kim wouldn’t have visited China with such a large entourage if he merely wanted economic assistance,” the defector said. Another North Korean defector and former soldier said Pyongyang may have bolstered its so-called asymmetric warfare capabilities by strengthening special forces “but still lags behind South Korea in terms of naval and air force capabilities and feels threatened.”

There is speculation that North Korea is forced to lean on China because it does not have the money to buy expensive Sukhoi fighters from Russia.

Read the full article here:
Kim Jong-il Demands Fighter Jets from China
Choson Ilbo
6/17/2010

Institute for Far Eastern Studies (IFES)
NK Brief No. 10-06-14-2
6/14/2010

During the third session of the 12th Supreme People’s Assembly, convened on June 7, Kim Jong Il promoted his brother-in-law Jang Sung Thaek to vice-chairman of the National Defense Commission (NDC), named a new premier, and replaced several department heads and ministers. This appears to be an attempt to shore up the regime as it seeks to “open the door to a strong and prosperous nation” by 2012, the 100th anniversary of the birth of Kim Il Sung. Kim Jong Il made a personal appearance at this latest assembly meeting, unlike the SPA meeting held in April. The leader’s presence hints at the importance of the latest gathering.

This promotion of Jang Sung Thaek and shake up of Cabinet positions appears to be part of efforts to realize the quickly approaching goal of establishing a ‘strong and prosperous nation’ by 2012, assigning those most able to positions of responsibility, regardless of age or experience. Most notably, Jang, widely thought to be second-in-command in North Korea, was promoted to vice-chairman of the NDC. He was first appointed to the NDC at the first meeting of the 12th SPA in April 2009, making his climb to vice-chairman in a mere 14 months.

Before the latest promotion, Jang held the position of vice-director of the Workers’ Party of Korea, a newly created position that he was the first to hold. In this position, Jang oversaw national security offices, police, and the courts, putting him in a position of power difficult for anyone else to achieve. Having traveled to both South Korea and China, Jang Sung Thaek was likely promoted to present the image of a strong military and, at the same time, establish stable relations with the international community in order to ensure a smooth transition of power as well as to resurrect the economy by 2012. When Kim Jong Il led a delegation to China last May, the Chinese government treated Jang very well, ignoring standard protocol for someone in his position.

In addition, Choe Yong Rim was named the North’s new premier, and eight new vice-ministers were appointed. Regional Party secretaries were allowed to participate directly, allowing those who are most knowledgeable of local conditions to impact the decisions of the administration. Most of the new appointments were very experienced elites, including Choe Yong Rim (80) as premier, and Kang Neung Su (80), Kim Rak Hui (77), Ri Thae Nam (70), and Jun Ha Chul (82). The regime is promoting a number of veterans who are making their “last stand for the motherland” as part of the effort to ensure stable transformation of power after Kim Jong Il.

With Kim Rak Hui’s appointment as vice-premier and new appointments to the Ministry of Foodstuff and Daily Necessities Industry as well as the head of the Light Industry Ministry, North Korea seems to be pursuing the improvement of standards of living promised in the 2010 New Year’s joint editorial. Pyongyang Party officials appear to be attempting to reassert a centrally planned economy in the aftermath of botched currency reform efforts; however those witnessing regional economic conditions appear much more able to come up with appropriate economic policies. North Korea has been unable to make any significant progress in resolving its food shortages or its inability to provide daily necessities to the public, leading the regime to scapegoat some high-ranking officials. Now, many in and outside of North Korea are watching closely to see if the regime can launch economic efforts capable of successfully ‘opening the door to a Strong and Prosperous Nation’ in the next two years.

Writing in the Asia Times…

A few days ago, a new session of the Supreme People’s Assembly – North Korea’s rubber-stamp parliament – was convened in Pyongyang. In most cases, such sessions do not attract much attention outside a tiny circle of the full-time Pyongyang watchers: few people would be excited by the sight of monotonously and tastelessly dressed men and women sitting in rows and raising their hands to signal their unanimous approval of the laws and resolutions that – as everybody understands – seldom bear any relation to reality.

However, this time observers suspected that something unusual was going to happen. The assembly’s last session took place in April, and was not supposed to meet again so soon. As we learned on June 7, parliament was convened to authorize (with the expected 100% approval rate) a major reshuffle of the North Korean leadership – and, judging by the urgency of gathering, this reshuffle was seen as a pressing matter.

A few days earlier, on June 3, the official North Korean wire agency reported that one day before, Yi Che-kang, the first deputy chairman of the ruling Korean Workers’ Party, had been killed in a traffic accident. The victim of a car crash was, formally speaking, second only to Dear Leader Kim Jong-il in the party hierarchy.

This news had to be suspicious: North Korea’s traffic is arguably the thinnest in Asia, but the country has a long tradition of traffic incidents taking the lives of high officials. The first such incidents occurred in the early 1970s, during the transition of power from the country’s founding father Kim Il-sung to his son.

Nowadays, the new dynastic transition is unrolling. In early 2009, after long delays and much hesitation, Kim Jong-il decided that his youngest son, Kim Jong-un, would become the next great leader of the country. So far, no reference to the “Young General” has appeared in the open media, but one can come across accolades to his greatness and superhuman wisdom in classified materials that are published for the benefit of officials (and distributed widely).

The events of the past week allow us to surmise how the power structure of North Korea will look like in the first years after Kim Jong-il’s death. It seems that North Korean political heavyweights have finally begun to prepare for the unthinkable – the demise of the Dear Leader.

The choice of Kim Jong-un as a heir designate serves, above all, the interests of the North Korean elite, so one can even suspect that the choice was somehow pushed on Kim Jong-il by his entourage. The “Young General” really is young, being merely 27 or 28 years old. Even North Korean propaganda mongers find this embarrassing, so they insist General Kim is in his early 30s.

The choice of such an exceptionally young candidate serves, above all, the interests of the old guard, Kim Jong-il’s own entourage. A young crown prince has no power base and no allies. Thus, even if he technically becomes the supreme leader, he will have no choice but to follow the advice of his father’s entourage, that is, people who are running the country now. He is doomed to become a puppet – at least for some while.

However, a weak crown prince will require an able prince regent. For the past few years, most Pyongyang watchers agreed that the most likely candidate to take such a position is Jang Song-taek, a brother-in-law of Kim Jong-il.

Born in 1946, he is 64 and hence young by the standards of North Korea, where a majority of the top leaders are in their 70s and 80s. The recent Supreme People’s Assembly session confirmed these speculations. At the session, Jang was appointed vice chairman of the National Defense Commission. The North Korean constitution stipulates that the chairman of this body is head of the state, and Kim Jong-il runs the country exactly in this capacity. Therefore, Jang officially became the second-placed person in the country.

The car incident that killed Yi Che-kang was also timely for Jang Song-taek. Yi was widely believed to be a rival of Jang. Now, with Yi dead, Jang seems to have no serious rivals left. The recent assembly session also appointed a new head of the North Korean cabinet. In North Korea, the prime minister is essentially a top technocrat, but it is still significant that this position went to Choe Yong-rim, who is rumored to be close to Jang.

Jang’s position remains precarious: Kim Jong-il is still the supreme leader, and in North Korea even blood connections with the highest family do not always secure a person from august wrath. In the past, family members have been exiled a number of times, and in one case a young relative of the Dear Leader was assassinated in Seoul, where he had defected. A few years ago, Jang Song-taek disappeared from public sight for a year, and he is widely believed to have spent this time in exile.

At any rate, the North Korean elite – with at least tacit approval of Kim Jong-il – began to work on the architecture of a post-Kim Jong-il regime. It seems that the future power structure will consist of Kim Jong-un, a much extolled Star of Revolution and Shining Comrade (or whichever flowery titles they will invent) who will essentially be a powerless puppet while real authority will dwell with a council of technocrats and generals presided over by Jang Song-taek. In all probability, it means that the death of Kim Jong-il will not bring about much change: for a while the country will be steered by the same people who have been running it for the past two or three decades.

However, power transitions do not always go as intended. To start with, Kim Jong-un’s personality cult is still in its infancy, and it will take few years to develop it to the usual North Korean levels. We are yet to see pages of all newspapers filled with countless stories of the “Young General’s benevolence”. However, before the personality cult is developed enough, not only Kim Jong-un’s position but the entire system will remain insecure. We do not know whether Kim Jong-il and his old guard have enough time at their disposal: at the latest Supreme People’s Assembly session the Dear Leader did not look particularly well.

It is also possible that after Kim Jong-il’s death some cracks in the top leadership, now invisible, will lead to intense infighting and thus undermine the cohesion that is essential for the stability of the system.

And even if the transition goes smoothly enough, the resulting system will remain inherently unstable. Kim Jong-un might be young, inexperienced and compliant now, but he will get stronger and wiser, and in all probability will not be too happy about the control of the old dignitaries. Many young kings ended up challenging and removing their regents.

On the other hand, the likely members of the future regent council are quite old, with an average age of 75 or so, hence in a decade many of the present-day top dignitaries will be dead from natural causes (and, perhaps a car crash or two).

Finally, Jang Song-taek might be tempted into assuming all power for himself. Nasty things are known to have happened to young crown princes in the past – from food poisoning to riding incidents and, perhaps, even good old car crashes.

But, whatever happens, the first days of June saw the contours of post-Kim Jong-il North Korea emerge.

Read the full story below:
Son rising for a post Dear Leader era
Asia Times
Andrei Lankov
6/16/2010

According to National Public Radio:

Conventional wisdom holds that the people of North Korea are trapped in a world of rigid conformity, totalitarian discipline and complete isolation from the rest of the world.

But increasingly another picture is emerging: North Koreans are far more aware of the outside world, according to evidence provided by North Korean refugees, South Korean humanitarian aid workers, Chinese traders and others.

It is rare for an American to travel to North Korea, and even rarer for an American to spend much time there. Steven Linton has done both.

“In general I think North Koreans are clearly growing in their awareness of the rest of the world. I think there’s no question about that,” Linton says.

Linton has been going to North Korea for many years. He is engaged in a campaign to combat tuberculosis there, and he says North Koreans are soaking up information about the rest of the world.

“One of the most underrated realities about North Korea is its very dynamic relationship with China, and the amount of information that flows across that border. Students; business people; it’s a continuous stream of traffic,” he says.

With that traffic come thousands of DVDs, CDs, cellular telephones, used computers and videotapes — many of them from China and South Korea.

Traders Fill Information Gap

Kim Heung Kwang came to South Korea from the North six years ago and created a group called North Korea Intellectuals Solidarity. He has his own network of people in both Koreas. Kim says market-oriented traders and smugglers in the provinces of China bordering on North Korea are filling the information gap.

He says that many Koreans in China make a living by setting up satellite TVs at their homes to receive South Korean media. Then, they burn CDs and DVDs of the programs and sell them to North Koreans — for a profit, not propaganda.

These media are so prevalent inside North Korea now that knowledge about South Korea has become commonplace, says Yoo Ho-yeol, a professor at Korea University in Seoul. Yoo regularly talks to students and refugees from North Korea.

“They are telling us that those people living along the border area, all of them know well about South Korean society or daily life,” he says.

Groups such as North Korea Intellectuals Solidarity also have managed to send cell phones across the Chinese border, and now thousands of people can call to South Korea, via cell phone systems in China, to provide news of developments inside North Korea. And they can receive text messages, photos and music via cell phones.

It was through channels such as these that news leaked out of North Korea late last year of the disastrous currency reform the government had imposed and widespread resistance to it.

Impossible To Stop Flow Of News

It is still not risk-free to possess these materials. But, says Kim of North Korea Intellectuals Solidarity, while possessing a videotape from South Korea in years past might bring a three-year prison or labor camp sentence, now the materials are so common that local authorities appear to understand they’ve already lost this battle.

“The efforts are ongoing to inspect and collect everything that they can find. But because the demand is so big and the activities are [going on in the] black market, the government is feeling that it is fundamentally impossible to eliminate all sources. So I feel that they are just going through the motion now,” he says.

And there is word of mouth. Humanitarian workers from South Korea who have brought medicine or food to North Korea say simple conversation can be transformative.

Hwang Jae-sung has done agricultural work in North Korea for an aid group from the South called Korean Sharing Movement.

“They saw what we were, and what we do and what we brought. And they go back to [their houses] and they just tell their wives and children and so on. The word spreads, a thousand miles,” Hwang says.

Sanctions Undermine Efforts

Ironically, the policies of the United States can get in the way of the freer flow of information. Some economic sanctions imposed by the U.S. have created problems for the North Korea Intellectuals Solidarity group. It has been sending USB drives that carry books, news articles, music, teaching materials and computer games to North Korea.

But North Koreans need more computers to use them, says Kim, the group’s director.

“The prerequisite for this program is enough computers in North Korea. But there are several regulations in place blocking our efforts. So I think that the United States needs to change its regulations on these matters,” he says.

The number of used computers from South Korea and Japan is enormous. But sanctions make it more difficult to get even these computers and more information into North Korea.

Read the full story and hear audio below:
Awareness Of Outside World Growing In North Korea
National Public Radio
Mike Schuster
6/15/2010

According to Yonhap:

South Korea has approved four shipments of humanitarian assistance to North Korea, a government official said Tuesday, upholding its policy of supporting those in need of such aid despite the sinking of a warship blamed on Pyongyang.

The aid, worth slightly over 300 million won (US$245,000), comes after South Korea approved two shipments of infant food to North Korea on June 8. North Korea is one of the poorest countries in the world, and its children suffer from chronic malnutrition.

“The latest shipments will be delivered to a nursery, a tuberculosis clinic, a maternity hospital and a kindergarten” in four different North Korean areas, Unification Ministry spokesman Chun Hae-sung told reporters.

Wouldn’t it have been nice if he told us the names of the facilities and cities where the aid was going? Or if someone from the press asked him?

Read the full story here:
S. Korea approves additional shipments of humanitarian aid to N. Korea
Yonhap
Sam Kim
6/15/2010

According to Yonhap:

North Korea and China will jointly produce a film marking the 60th anniversary of the Korean War, according to the Chinese embassy in Pyongyang on Tuesday.

The announcement was posted on the official Web site of the Chinese embassy amid heightened tensions after North Korea’s sinking of the warship Cheonan in the Yellow Sea in March this year, which killed 46 South Korean sailors.

Read the full story here:
N. Korea, China to produce film on Korean War
Yonhap
Kim Young-gyo
6/15/2010

Evan Ramstad writes in the Wall Street Journal about some interesting developments in the North Korean media:

North Korea’s state media over the last two weeks stepped up an anti-South Korea campaign after being accused of sinking a South Korean warship, with reports repeatedly portraying angry citizens vowing to work harder to “get back” at the South.

The reports have dominated TV newscasts monitored in Seoul and appeared in newspapers that arrive in South Korea more than a week after publication.

The volume ramped up when Seoul on May 24 announced penalties, including a trade ban, against the North, which it blames for sinking a warship in March and killing 46 South Korean sailors.

Amid the heightened tension between the two Koreas, the North’s reports are not focused on the prospect of conflict but instead seek to connect its government’s anger at Seoul with the need to improve the North’s impoverished economy.

That shows the North Korean regime has latched onto the sinking incident not just to preach about perceived external threats but as a new way to shift responsibility for the country’s troubled economy away from itself, said Brian Myers, an American professor in South Korea who has studied the North’s propaganda operations since the early 1990s.

“They’re using hatred of the outside world to inspire people to work harder,” he said. “The extent of it is quite striking.”

In a typical example of the reporting, Kim Myung Ho, manager of a collective farm, said on a state TV newscast last Friday that workers now “dash to work in the mindset of destroying the enemy’s schemes by doing the work of two or three men. As a result, the speed of rice planting is getting better everyday.”

…”They’ve been vilifying Lee Myung-bak for two years, but this is the first time I’ve seen it connected to growth in production,” said Mr. Myers, who teaches at Dongseo University in Busan and recently published a book on the history of the North’s propaganda. The reporting underlines the view in the North Korean regime that economic growth is not an end in itself but a means to strengthen the country, he said.

Many of the workers portrayed in North Korean media over the past two weeks directed their criticism at Mr. Lee, often in the same words used by government statements, and said their anger at him inspired them to work harder.

“We will churn out as much steel as possible in the spirit of tossing the Lee Myung-bak group of traitors in a warmongering frenzy into the burning furnace,” Ri Myung Nam, a worker at a steel factory said on a TV newscast on June 3.

This Monday, another TV report showed soldiers at a construction project who, an anchorwoman said, were “flaming with hatred” against “Lee’s group of traitors.”

“Enraged by traitor Lee Myung-bak, we sped up our work,” soldier Kim Nam Il said in the report, adding his group last month achieved 150% of its goal, which was unspecified. “We will keep speeding up and mercilessly knock out their plot.”

Read the full story here:
Pyongyang Shifts Rhetoric at Home
Wall Street Journal

Some non-Korean fans at the Brazil v. DPRK World Cup match brought some humor to the game:

That is funny.

Final Score: Brazil 2, DPRK 1.

UPDATE: According to KCNA: 

Match between DPRK and Brazil 
 
Pyongyang, June 16 (KCNA) — The league match of the 2010 World Cup between the DPRK and Brazil took place at dawn (Pyongyang time) on Wednesday.

From the outset of the match the two teams fought a seesaw battle. The DPRK footballers created good shooting chances, not losing their confidence even after losing two goals.

At about the 88th minute of the match Jong Tae Se headed the ball before passing it to Ji Yun Nam who powerfully kicked it into the rival’s goalmouth, scoring a goal.

The DPRK team will meet its Portuguese rival on June 21.

According to the Los Angeles Times:

The North Koreans are back in the World Cup after a 44-year absence. But some may wonder why they bothered to come.

The Brazilians, who play in the tournament every four years, have more than 500 journalists following them here. The North Koreans, in only their second World Cup, brought two photographers, two TV reporters and one writer.

In the U.S., where soccer is still considered a minor sport, more than 136,000 World Cup tickets were sold. In North Korea, where the team is making history, the national soccer federation distributed 1,400 tickets.

In South Africa, a soccer game is a thinly disguised reason to sing, dance, scream and blow on a vuvuzela for hours. The North Korean fans handpicked to attend their country’s World Cup opener Tuesday displayed all the joy and spontaneity of accountants attending a seminar.

That the game — played in a wind chill of 24 degrees — ended in a 2-1 victory for Brazil was predictable. That several hundred North Korean fans were on hand to watch it was not.

China’s state-run news agency has reported that North Korea had offered tickets to sporting officials and tour agencies in China, which does not have a team here. Chinese journalists in South Africa had adopted the North Koreans as their own and, the news agency reported, about 1,000 Chinese dancers and musicians were recruited to cheer for the North Koreans.

But shortly before Tuesday’s game started, a five-row block of seats on the second level at Ellis Park Stadium filled up with more than 40 men and a woman, all dressed in identical red shirts, jackets and scarves, wearing identical red caps and waving small North Korean flags. Across the way there was another similarly sized red dot of fans in grandstands that were otherwise filled with the green and yellow of Brazil.

Kim Yong Chon, 43, one of the North Korean fans, said the group, which numbered 300, was not Chinese, but he admitted they had been carefully recruited by the North Korean government to make the trip. Speaking through an interpreter, he said the group had left Pyongyang, North Korea’s capital, and traveled through Beijing the same day and they would stay in South Africa as long as their team does.

They sang the North Korean national anthem loudly but sat passively, almost expressionless, through most of the game, with one man sucking on a beer. They spoke only infrequently to one another — Chon said they didn’t know one another before coming to South Africa — and mainly reacted to the action on the field only when directed to do so by a man who stood before them like an orchestra conductor.

Few of the men bothered to acknowledge the non-Korean fans, following the lead of their team, which was hidden on a private floor of a luxury hotel, failed to show at news conferences and banned outside journalists from its training sessions.

FIFA has chosen not to challenge the team over media availability, so after Tuesday’s game, while members of the Brazilian team spoke at length with reporters, most of the North Korean players brushed by. Only a handful bothered to stop at all, most notably star striker Jong Tae Se, who cried during the playing of his country’s national anthem. And he was quickly shooed along by members of the North Korean delegation.

Perhaps all this would have gone unnoticed had North Korea opened against another team that plays a staid, defensive game. But against the passionate Brazilians and their samba-dancing fans, the contrast was stark.

But Chon at least tried to acknowledge the tenets of international friendship and cultural exchange events such as the World Cup are supposed to engender.

“We will also be supporting South Korea,” he said, mentioning the country that North Korean Coach Kim Jong Hun had refused to acknowledge a day earlier. “Our hearts are with them too.

“But we have no tickets for any of their games.”

And according ot the Daily NK:

The Daily NK can reveal that the roughly one hundred North Korea supporters at the North Korea v Brazil football match on Tuesday night were North Koreans already in Africa earning foreign currency for the state.

A Daily NK source in China explained more, “The people who were mobilized for cheering were workers from ‘Overseas Construction Company’ and the Mansudae Art Institute. They are all in Africa generating foreign currency.”

“Overseas Construction Company” is a government department managing personnel and their lives on construction projects abroad. North Korea has several hundred such people in African countries.

The Mansudae Art Institute earns foreign currency producing statues and other public works of art in countries such as Namibia, Angola, Ethiopia and Zimbabwe, and most recently the 164-foot high, $27 million “Monument to the African Renaissance” in Dakar, the capital of Senegal, which was unveiled in April this year.

A second source explained the background to their presence. “North Korea planned to send a large cheering group from Pyongyang,” he said, “but it was cancelled due to problems of cost and difficulties regulating them on site.”

After the authorities cancelled the original plan, they attempted to sell the 65 free tickets they received from FIFA for each of North Korea’s games through overseas offices. However, that also failed.

The source explained, “The authorities attempted to sell them through Chongryon (General Association of North Korean Residents in Japan) and other foreign agents, but no one wanted to buy. Who wants to go South Africa only to see the North Korea games?”

The authorities were reportedly asking $169 per ticket.

Contradicting The Daily NK’s sources, Yonhap released an interview with one of the group, Sunwoo Ryong, today. In it, he claimed, “About 100 of us arrived here two days ago. We’re all from Pyongyang and are regular workers that volunteered.”

According to Yonhap, the group refused to reveal any further information about how they came to be in Johannesburg, but did say they intend to be at every one of the North’s matches.

Joseph Bermudez, military analyst for Jane’s Intelligence Review and author of The Armed Forces of North Korea has published two articles on the DPRK’s intelligence and security services.

The first article is called “A New Emphasis on Operations Against South Korea” and it is available from 38 North (U.S.-Korea Institute at SAIS, Johns Hopkins University, June 11, 2010). Download it here (PDF).

The second article is in KPA Journal Vol. 1, No. 5: “DPRK Intelligence Services 1967-1971, Part 2.” Download it here (PDF).

A few days ago a reader of this site identified the location of what is likely the 2nd Bureau of the reorganized Reconnaissance General Bureau. See it here.

According to Barbara Demick at the Los Angeles Times:

The numbers change daily, but as of early this month, 818 South Koreans were still working alongside roughly 43,000 North Koreans. Despite the supposed ban on North Korean products, South Korea recently accepted delivery of 20 tons of peeled garlic as well as $17,000 worth of clothing and $250,000 of electrical sockets.

Lim, who is in touch with many workers and managers, says that on a human level, relations between the Koreans at Kaesong are not as hostile as one might imagine. He paraphrased North Korean bureaucrats whispering to South Koreans, “We hate Lee Myung-bak’s government but not you as people.”

The South Koreans at Kaesong either commute — downtown Seoul is only 30 miles away — or live for up to two weeks at a time in dormitories attached to the factories. There they can watch South Korean television and make telephone calls home, although they have no access to the Internet.

Since the recent crisis erupted, the South Korean government has ordered Kaesong’s factory owners to reduce their staffing, fearful of what might happen if the war of words were to erupt into an actual war.

South Korean Defense Minister Kim Tae-young said during parliamentary committee meetings last month that there was a “a great possibility” that South Korean workers could be taken hostage by the North Koreans.

To South Korean factory owners, the idea is preposterous.

“People who have never been to Kaesong and who are only watching the television news keep asking our employees, ‘Are you guys all right?’ ” said Park Yoon-gyu, president of South Korean menswear manufacturer Fine Renown, which has operated out of Kaesong since 2008.

“We South Koreans and North Koreans have become very close to each other,” he said. “Yesterday’s enemies are today’s friends.”

But a South Korean worker who spoke anonymously to the conservative Chosun Ilbo newspaper gave a less sanguine account of the atmosphere at Kaesong. He said that armed North Korean soldiers had been seen inside the compound, despite rules forbidding their presence.

The man also said that North Korean employees were stealing food, office supplies and toilet paper, and even grass seeds from a newly planted lawn, apparently following official orders to take whatever they could from South Korean companies.

Both North and South Korea have substantial amounts of money at stake in Kaesong, which lies just south of the 38th parallel — where the peninsula was divided at the end of World War II — but changed hands during the Korean War.

Kaesong is home to 120 South Korean factories, each of which required an investment of as much as $8 million, according to scholar Lim. For cash-starved North Korea, Kaesong is one of the dwindling sources of hard currency. The North Korean workers receive monthly salaries of $70 to $80, of which all but about $20 goes to the government.

Even in the crisis, the industrial park could help defuse tensions. South Korea hasn’t followed through on its threat to resume propaganda broadcasts at the DMZ, in part out of concern about what might happen to workers at Kaesong. Loudspeakers have been installed at 11 locations but remain quiet — for now, at least.

As an aside, Paul Romer is trying to push the founding of charter cities as a new strategy of reducing poverty in the developing world.  A brief summary of his work has been published in The Atlantic and is worth a read.

You can read the full Los Angeles Times story here:
For Koreas, business park remains a neutral zone
Los Angeles Times
Barbara Demick and Ju-min Park
6/13/2010