North Korean Economy Watch

According to the Daily NK:

Today, the North Korean markets seem to have returned to the days before the currency redenomination. The price of rice appears to be rather stable, especially when compared with that of February or March. Especially, following Kim Jong Il’s trip to China, rumors indicating that food would be imported began to circulate, and this has made declining prices even more marked.

According to inside sources, the price of rice in Hoiryeong, North Hamkyung Province is now 480 won per kilo (June 4th), 420 won in Sinuiju (June 7th), 360 won in Sunam-district of Pyongyang (June 2nd), and 380 won in Sariwon (June 7th). The price of corn is approximately 50% that of rice, although recently in Hwanghae Province, households using corn as feed for pigs drove an unusual situation where the corn price reached almost 70% that of rice.

The exact nature of Chinese support for North Korea cannot be confirmed officially, however, the North Korean regime’s encouraging foreign currency earning enterprises to import food from China since March seems to have contributed to rice price stabilization.

One inside source added that the “reactivation of food smuggling on the border between North Korea and China” has also helped.

However, the main overall reason for the failure of the initial prediction, “When the farm hardship period comes in May and June, food prices will skyrocket” appears to have been the normalization of the market.

The source commented, “Compared with the situation prior to the currency redenomination, trading in industrial goods has decreased slightly, however, it is close to its previous condition. Since buyers and sellers can access that market any time, price volatility is not that great anymore.”

That being said, the opening hours of the market have been reduced since the authorities handed down a “rice planting battle order” in early May which stated, “Everyone must participate in the rice planting battle. The market should only be used for the purchase of food, side dishes and those necessities required for the day.”

The source explained, “Markets everywhere now open between 2 and 4 P.M. and close at sunset,” adding that there are small differences depending on the particular market. In North Hamkyung Province, the market normally closes at sunset; however, markets in Hwanghae Province and Pyongan Province, which are under heavier pressure due to the rice planting, close earlier, at around 6 P.M.

But concerns about food will not be solved even if the price of rice remains stable. Merchants are still watching prices with a concerned look since rumors constantly assert that food prices will increase again in July. The North Hamkyung Provincial Party Committee held a cadres meeting last May in which it released news that food distribution for the months from July to October must be prepared by each unit individually, meaning that the central authorities have no plans to assist.

The agricultural situation is one concern. North Korea has been suffering from a severe fertilizer crisis since the beginning of spring farm preparations. After Kim Jong Il’s visit to China, Chinese fertilizer was imported which temporarily alleviated the situation, but the rumor is that fertilizer for the summer has yet to arrive.

Recently, Kim Jong Il visited a domestic fertilizer production facility, Namheung Youth Chemical Works in Anju City, South Pyongan Province. There, he complimented factory management, saying, “It is a relief to know that fertilizer is being produced in Namheung.” The incident displays North Korea’s concerns about fertilizer.

Other factors which destabilize food prices are the icy inter-Korean relationship and international community sanctions.

Recently, around the North Korean market, the number of street vendors, so-called ‘grasshoppers’ has greatly increased. One source explained, “This situation has been caused by the middle class being demoted to the lower classes due to the big damage they incurred during the currency redenomination.”

Sharply decreasing trade in higher priced goods like home appliances and furniture is derived from the same source.

The tumbling credibility of the North Korean currency is another ongoing worry, as is a lack of small denomination bills. One source explained, “If you purchase a 30,000 won jumper from Sungyo Market in Pyongyang, the cost is $30 (market exchange rate, the equivalent of 27,000 won on the day), but it is 30,000 won if you pay in North Korean currency.” That’s a ten percent mark-up for people using local currency, the material representation of a lack of trust in the won.

In areas of Pyongyang, Wonsan, Sariwon, and Haeju, dollars and then Euros are preferred over won, but in Jagang Province, Yangkang Province, and North Hamkyung Province, Yuan are preferable to dollars. Places where all four; U.S. dollars, Yuan, Euros and won are being used are Sinujiu and the port city of Nampo on the west coast. One source explained that due to this situation, high-priced products like televisions, DVD players and refrigerators are being sold only for U.S. dollars or Yuan.

Also, he added, “There is a shortage of small bills which is causing some inconveniences in market trading.”

At the time of the currency redenomination, North Korea displayed 7 kinds of small bills and coins; 1 chon, 5 chon, 10 chon, 50 chon, 1 won, 5 won, and 10 won. The source explained that demand for the ‘chon’ unit coins is practically non-existent; the problem is that 1 won, 5 won, and 10 won are frequently used in market trading but a shortage of bills is causing inconvenience. Merchants are setting the price of goods mostly in increments of 10 won and 50 won as a result.

Read the full story here:
Everything Is Stable, But for How Long?
Daily NK
Park In-ho
6-9-2010

According to AFP:

The unification ministry, which must authorise all cross-border exchanges, said the shipments from private groups of milk and other items totalling 320,000 dollars would be sent late this month.

The South cut off most trade with the North after accusing its neighbour of firing a torpedo to sink the ship in March with the loss of 46 lives. It exempted humanitarian aid.

The impoverished North suffers severe food shortages. The UN Children’s Fund says one in three of its children is stunted by malnutrition.

And according to KBS:

The Unification Ministry is prohibiting South Koreans from going to North Korea to celebrate the tenth anniversary of the signing of the June 15th Joint Declaration.

The ministry recently rejected a South Korean group’s request to travel to the North to attend the ceremony marking the signing in Pyongyang.

The ministry said it could now allow the trip due to heightened inter-Korean tensions over the sinking of the Cheonan.

Representatives from South and North Korea and overseas Korean communities had planned to hold a joint ceremony in Pyongyang after holding working-level contacts in the North Korean border city of Gaeseong in May. 

Read the full stories here:
S.Korea to ship aid to North despite tensions
AFP
6/9/2010

S.Koreans Banned From Attending 6.15 Event in NK
KBS
6/9/2010

Draft paper by Robert Schmucker and Markus Schiller
May 5, 2010

Download the PDF here. 

Summary
Today, there are at least seven different missile types of longer range available in North Korea – Scud B, Scud C, Scud D, Nodong, R-27/BM-25, Taepodong 1 and Taepodong 2/Unha-2. All were developed during the last three decades, each of them within a few years, and six are subject to the INF treaty. Some of the missiles have common roots, but their diameters vary significantly, ranging from 0.88 m over roughly 1.3 m and 1.5 m to about 2.5 m. This means that North Korea managed to develop at least four completely different lines of missiles to perfection and serial production, all of them with a negligible number of test launches. A total of roughly a dozen missile tests was actually observed before 2009, a number that is even today insufficient for only one military missile development in the USA, Russia, China or France. The repeating reports of North Korean “short range missile tests” are irrelevant – at those tests, the DPRK launches small anti ship missiles that were purchased in China or Russia. This has nothing to do with ballistic missiles.

It is often argued that the North Korean missiles are tested in other countries, namely Syria, Pakistan and Iran. This argument is insufficient. Combining all Scud B, C, D and Nodong launches in these countries, they are still not enough for a respective indigenous development, and the other missile types were never launched outside the DPRK. The choice of launch sites in the respective countries also is a clear indication: Pakistan tests its missiles close to Cashmere at the border to India, and as previously mentioned, Syria launched Scud D at the Israeli border. If the missiles head in the wrong direction – what is not uncommon at development tests –, this would have catastrophic consequences. Therefore, it must be assumed that these missiles had already had finished their development programs.

Aside of their small number, the sequence of North Korean tests is also noteworthy. There were only sporadic launches from 1984 to 2006, with a total of roughly ten. This was followed in 2006 and 2009 with an event of about a half dozen missile launches within a few hours, respectively, both including a large satellite launch vehicle. There might be a link to Iran’s and Pakistan’s orientation towards modern solid rocket technology. Russia can offer nothing on this market because of the imposed restrictions of the INF treaty – there are no old Soviet solid fueled missiles of this performance class, and new developments in this class are not allowed by INF – the required tests might be observed by the USA. Iran also increases its indigenous activities, resulting in a foreseeable loss of this source of funding. No wonder that the DPRK now has to demonstrate larger systems to stay in the proliferation game.

Conclusion
This is the visible North Korean situation: A country that has absolutely no other technical and economic merits offers a variety of quickly reverse engineered and indigenously developed high tech weapons, all of them with typical Soviet characteristics.

Every other country in the World had to rely on outside help of experienced institutions for their missile programs: China on Russia, India on the US and France, Pakistan on China and France, and so on. Even the US and the Soviets acquired German expertise after World War 2. Every country had foreign support for their missiles – except the DPRK.

It should be noted here that the common view of North Korea’s reverse engineering capabilities seems to come from one single source in the late 1980s, without any further proof. Today, this source is reported to see these claims with different eyes.

To get back to the analysis method that was introduced at the beginning: The three aspects country, program and missile are not compatible. The DPRK has no capabilities on any other area than rocketry, the programs are invisible or nonexistent, but a selection of operational missiles is offered that should even have countries like France, for example, go green with envy.

It is also strange that Russia silently watches the DPRK cloning and selling Soviet products, thus earning hundreds of millions of dollars, and doing this without any financial compensation for the Russians.

These antagonisms can be explained on several ways. Some claim that in the age of computer simulations, a single test is enough to proof functionality of highly complex machines such as missiles. After that, the missile goes straight into serial production. But this obviously only works in the DPRK: The new Russian submarine missile Bulava, for example, seems to have failed in 7 of its 12 flight tests so far – operational deployment is far from any discussion.

There is a different explanation that is much simpler – a connection to Russian institutions. All of the North Korean missiles were procured from Russia or at least realized with foreign support. Some, as Scud B, might come from old stocks, single remainders of old Soviet prototypes certainly were among them, and others might still be in production. A guided North Korean licensed production of simpler components can also not be excluded. In any case, the indigenous contributions of the DPRK are small at best. It is not said, though, that the Russian government or the leadership of the institutions in question know of this: Much happens in dark alleys, as was illustrated by the example of the Gharbiya gyros for Iraq.

The DPRK will of course try to reverse engineer parts and components, and it will try to acquire the capabilities for indigenous development and production. Due to this, single engine tests should be observable, not only to demonstrate indigenous activities, but also to learn and to slowly increase the DPRK’s competence on the missile sector.

But in the public opinion, this explanation is wrong, because – well, because it cannot be right. Because there is a well established view of North Korea that is also confirmed by defectors: The rockets are secretly designed, tested and produced in huge underground facilities, and these efforts are directed by an evil and megalomaniac villain who threatens the free world with his missiles.

How to best counter this type of threat should be known from the movies – just call James Bond.

More from CxI and NPR.

Apparenlty the DPRK tried to pass a striker off as a goalkeeper.  According to the Los Angeles Times:

For reasons that are not entirely clear, North Korea seems to have to learn everything the hard way.

Take the World Cup, for example. The rules clearly state that a team must be made up of 23 players, three of whom must be goalkeepers.

But North Korea decided to select only two real goalkeepers and named a striker as its third goalkeeper. The idea was to carry 21 field players compared to 20 for all other 31 competing teams.

Cheating, is what it amounted to, really.

But FIFA, decided that this was not at all sporting and has told North Korea that by designating forward Kim Myong-won as a goalkeeper means that he can only play as a goalkeeper during the tournament.

In other words, the North Korean ploy backfired in two ways: The team has only two goalkeepers at its disposal — so an injury and a red card would leave it with none — and it can’t use Kim at all, unless it wants to put a forward in the net.

Not that it matters in the long run. Coach Kim Jong-hun’s team plays Brazil, the Ivory Coast and Portugal in the first round, after which it will be on a plane headed home. All it has achieved by the bizarre move is to ruin what little chance it had, which was none.

But perhaps that was the real ploy all along. Now North Korea can claim a conspiracy to deprive it of the right to field its best team. Not that North Korean fans will know anything about the tournament. The country’s oddball leader, Kim Jong Il, said last year that only North Korean victories could be shown on television.

Since there are likely to be none of those, the fans are out of luck.

Their fans in South Africa have been shut out, too, since North Korea arrived. The team has held four training sessions and has barred foreign reporters from all of them.

Embarrassment, no doubt.

But there are some North Korea fans who will be traveling to South Africa: The Chongryun.  According to the Wall Street Journal:

An excited bunch of about 50 soccer fans are set to fly out from Tokyo June 14 for a historic game at the World Cup in South Africa. Not to watch Japan, though –- to follow their preferred team, North Korea.

A majority of Japan’s 600,000 ethnic Korean population prefers to cheer for North Korea, rather than its southern neighbor. And as part of its World Cup promotional campaign, the North Korean Football Association of Japan (in Japanese), a Tokyo-based soccer organization that runs leagues for the North Korean-affiliated community in Japan, has organized tours to watch the games in South Africa, as well as selling team merchandise online.

According to Lee Kang Hong, who works at the NKFA, there will be approximately 50 people from all over Japan traveling to South Africa to cheer on the “Chollima”, meaning winged horses, when they take on heavyweight Brazil in its first game on June 15.  Mr. Lee, who will also be making the journey to Johannesburg, says the five-night trip to the host nation costs 630,000 yen ($6,900) per person. While there are two tours in the works, no one has signed up for the second trip to watch North Korea’s second game against Portugal, according to Mr. Lee.

But the Portugal game looms large in NFKA’s Japan plans. A bright red t-shirt emblazoned with the slogan “1966 Again” might have proved popular with fans of England, still longing for a repeat of its only victory in the tournament. But the shirt actually recalls the near miraculous upset North Korea pulled off against Italy in the 1966 World Cup in England before succumbing in the quarter-finals to Portugal.

The t-shirt is on sale for 2,500 yen ($27), while a scarf costs 1,500 yen ($16). Those with a bit more to spend can snag a replica of the team uniform for 12,000 yen ($130). But demand hasn’t been brisk so far: less than 100 items have been sold thus far, according to Mr. Lee.

Still, the apparel will also be sold at the various organized festivities to be held in school gymnasiums and restaurants around Tokyo when North Korea takes the field in its World Cup rematch against Portugal June 21. Similar events were held in late May to send off the three players born in Japan who will be playing for North Korea and hail from the tight-knit community of Japanese-born ethnic Koreans who affiliate themselves with Pyongyang.

As for the team’s prospects in South Africa, a repeat performance of the 1966 run would stun the entire world of soccer. But then again, the team wasn’t exactly a hot favorite 44 years ago either.

Daily NK
Min Cho Hee
6/7/2010

On June 6, 1946, the Chosun Children’s Union was founded. The Children’s Union, an organization for all children between seven and fourteen, is guided politically by the Science Education Department of the Central Committee of the Party.

Its hierarchical structure consists of a number of levels populated by students, including section committees of class and school, provincial and local school committees, and the national coalition of the Children’s Union. Within the structure, there is one head and two vice-heads of the Union in each school, one school committee member from each classroom, one head and two vice-heads of a section committee which exists within each class, and three to five committee members of each section committee.

The teacher who takes responsibility for the Children’s Union in a school is known as the Children’s Union Instructor, while the homeroom teacher of each class is generally also the section committee instructor. Based on the notion that a student’s political and organization life should be divided from his or her general school life, the teacher undertakes homeroom tasks and Children’s Union tasks under two different official positions.

Members of the Children’s Union must act according to the “regulations and obligations of the Chosun Children’s Union.” In order to “do good works,” part of the social activities of the Union, Union members make a “Kid’s Plan,” which specifies the kind and scale of the activities the member intends to carry out, be it collecting scrap iron, copper or paper, raising rabbits, participating in propaganda choirs or being a children’s watch guard (someone who monitors the activities of other students).

The symbols of the Children’s Union are the red scarf, like that of Young Pioneer organizations in other communist states, a badge showing a torch, and the greeting and slogan of the Union, “Let’s always be ready to become workers in the construction of socialism!” in long form, or, more pithily, “Always ready!”

Every student has to take part in one of three Union entrance ceremonies during their second year of elementary school.

The first entrance ceremony is held on Kim Jong Il’s birthday, February 16, the second on Kim Il Sung’s birthday on April 15, and the last one on June 6, the date of the organization’s founding. Model students who have a good family background can join the Union on Kim Jong Il’s birthday with his or her homeroom teacher’s recommendation, the next political class of students enter it on April 15 and the rest of students joint en masse on June 6th.

Entrance ceremonies are held regionally. First on the agenda at the ceremony is to recite the entrance oath; next, Union officials give badges and ties to new members; then the children shout the Union slogan with right arm aloft in salute.

The main concern of parents is the day of their child’s entrance ceremony. Students who are permitted to join on Kim Jong Il’s birthday have the best prospects, with a high possibility of becoming Union leaders of one kind or another. Activities within the Union are, of course, noted, so it is important to be successful from the beginning.

Therefore, the position of homeroom teacher of a second-year elementary class is desirable, since it allows the teacher access to bribes of money, clothes, rice and more from parents keen to see their child enter the Union on February 16.

Until the early 1990s, when the authorities stopped provided students with school uniforms, the red scarf was also provided by the state, but now, as with so much, it is the duty of parents.

Therefore, from February to June demand for the ubiquitous red scarf of the Children’s Union increases in North Korean markets. In the Sunam market in Chonjin, the red scarf of the Union sells for between 500 and 1200 won.

Yet even in the simple red scarf there is a symbol of inequality. Children from the upper classes have silk scarves manufactured in China, while the other students use cheap nylon versions or receive them from siblings.

Daily NK
Hwang Ju Hee
6/7/2010

Showing Pyongyang’s desire to reach new markets, Uriminzokkiri (Being amongst Our Nation), a website managed by the North Korean Committee for the Peaceful Reunification of the Fatherland, recently covered “Rakbaek Makkoli,” taking its lead from an article published in the latest issue of monthly domestic publication “Deungdae” (Lighthouse).

Makkoli is a traditional Korean drink made from fermented rice which has its roots in agricultural areas. Recently it has experienced a resurgence of popularity in South Korea.

The Uriminzokkiri report explained of the North Korean makkoli, “The makkoli produced by Rakwon Department Store in Pyongyang is a healthy beverage and good to drink. It is consumed internationally as well as domestically.”

Given that Uriminzokkiri is targeted at South Koreans, the appearance of “Rakbaek Makkoli” looks like an attempt to profit from the thriving South Korean makkoli business.

Although North Korea has exported “Pyongyang Soju” to the U.S., Japan and China in the past, consumers didn’t take to it due to its expensive price and strong taste. Therefore, North Korea may be looking to makkoli.

One defector, who used to be involved in trade in North Korea, explained in an interview with The Daily NK, “Bottled makkoli is thought of as a luxury beverage, but the general populace can drink it only on holidays when the state distributes it.”

He added, “But the common people, especially those who live in agricultural areas, brew their own with spoiled rice or bread and yeast. Cadres don’t usually drink this.”

The South Korean makkoli industry is thriving under the influence of a South Korean cultural wave which is in evidence in Japan, China, Taiwan and even as far away as the U.S. The most famous traditional makkoli, which is made in the southwest provinces of South Korea, has recently begun to be produced for export, while marketing men in Seoul recently hit upon calling makkoli “Drunken Rice” in an attempt to forge an international makkoli brand image.

To that end, makkoli has been promoted several times at summits and other international events by South Korean President Lee Myung Bak.

UPDATE 2: According to the Daily NK:

The recent shooting of four Chinese smugglers on the border between North Korea and China by a North Korean border guard was due to a quarrel between the Chinese smugglers and North Korean border guards about an antiques smuggling ring, according to a local trader.

The North Korean border guard shot the four smugglers on June 4th; three were killed and one was wounded. Afterwards, the North Korean authorities apparently issued an apology for the accident to the Dandong municipal government and paid compensation to the victims’ families.

The trader, Kim, who lives in Dandong, reported the details of the shooting accident to The Daily NK earlier this week. The spot where the accident happened was on a boat around Hwanggeumpyeong on Shin Island at the mouth of the Yalu River, he explained, where the facilities of the Shinuiju Shoe Factory are located.

According to Kim, although it was reported in some quarters that the North Korean border guard did not know who was on the boat and fired at it in the dark, in fact, both sides already had close relations.

They were well acquainted with each other thanks to smuggling, Kim said; the North Korean guard had apparently passed several antiques which he had obtained in the North to the Chinese smugglers. However, the Chinese smugglers did not pay for them and severed contacts with him.

The antiques the North Korean guard had procured included rare pieces of white Chosun dynasty china, he said.

After the Chinese smugglers disappeared, the guard tried to find them for a while, but then encountered them by chance while on his patrols.

The guard chased and eventually caught them, then they argued, but the smugglers refused to pay money for the antiques, claiming they were all imitations.

After a while, the smugglers said they would give other goods of equivalent value instead of money and then tried to leave, at which point the guard apparently shot them.

Kim also reported the details of the North’s official response. After the Chinese Ministry of Foreign Affairs released a statement heavily critical of the shooting, the North sent a delegate to Dandong on the 15th to apologize, he explained.

In a meeting with Dandong governmental officials, the North’s delegate reportedly said it happened accidentally, and expressed the North’s sincere apologies for the accident.

The delegate apparently added that the North would restrict shooting towards the Chinese side and suggested that both sides should strengthen their mutual regulations on smuggling. He also paid $3,000 for each death as per the stipulations of a treaty between the two countries.

Kim said, “I thought the compensation was too low, so I asked once again, but their answer was that it is stipulated by the treaty.”

He added, “They promised the Chinese side that the border guard who shot the Chinese would be severely punished on suspicion of smuggling antiques and killing citizens of an allied country.”

UPDATE 1:  According to Reuters:

The isolated North made the effort to soothe China, its sole major economic and political supporter, after North Korean border guards last week shot at the Chinese nationals crossing the river border near the northeast Chinese city of Dandong.

Three were killed and a fourth was wounded.

Chinese Foreign Ministry spokesman Qin Gang said both countries were now “further investigating and handling the case”. He provided no other details.

On Tuesday, the Foreign Ministry made a rare public complaint about its neighbor and now North Korea appears to be seeking to placate Beijing.

North Korean border authorities said an initial investigation showed the incident was an “accident”, China’s official Xinhua news agency reported.

“The North Korean side expressed its grief over the Chinese deaths, and offered condolences to the families of the dead and to the injured, and will severely punish the perpetrators,” said the report.

“The North Korean border security authorities will further investigate this incident and prevent such incidents from recurring.”

ORIGINAL POST: According to the Associated Press:

A North Korean border guard shot and killed three Chinese citizens and wounded a fourth on the countries’ border last week, China said Tuesday after lodging a formal diplomatic protest.

The guard shot the four residents of the northeastern border town of Dandong last Friday, apparently on suspicion they were crossing the border for illegal trade, Foreign Ministry spokesman Qin Gang said.

“On the morning of June 4, some residents of Dandong, in Liaoning province, were shot by a DPRK border guard on suspicion of crossing the border for trade activities, leaving three dead and one injured,” he said at a regularly scheduled news conference. He used the acronym for North Korea’s formal name, the Democratic People’s Republic of Korea.

“China attaches great importance to that and has immediately raised a solemn representation with the DPRK. Now the case is under investigation,” he said.

Dandong is a major shipping point and rail link for goods going into and out of North Korea from China.

Qin did not give any further information. There have been some reports in South Korean media on the incident, though North Korea has not acknowledged the shootings.

And how did the South Koreans react?  According to the Los Angeles Times:

The irony of China’s protest over last week’s shooting was not lost on South Korea.

“This time it is their citizens who are killed, and they show they are not so naive after all about North Korea,” said Kim Tae Jin, a North Korean defector and human rights activist in Seoul. However, he applauded China’s protest of the shooting. China needs to show North Korean leader Kim Jong Il “that he can’t get away with whatever he wants,” Kim said.

China’s public protest is unusual in that relations between China and North Korea are normally shrouded in secrecy, to be discussed only in the politburos of the longtime communist allies.

“It is rare for China to publicly complain. Usually there is a private apology or money paid,” said Kim Heung Gwang, a former North Korean college professor and head of Seoul-based North Korea Intellectuals Solidarity.

The stretch of the Yalu just south of Dandong is frequently trafficked by smugglers, some of them bringing North Korean-made drugs into China or banned Chinese products, such as DVDs or cellphones, into North Korea.

The North Korean government is especially strict about the export of copper, which has been looted from factories, electrical and telecommunications facilities by Northerners desperate for money. But the North’s border guards do not normally shoot to kill — at least not when the smugglers are Chinese.

“Only their own people,” said Kim.

Read the full stories here:
China says NKorean border guard killed 3 Chinese
Associated Press
Tini Tran
6/8/2010

China makes rare public protest against North Korea over killing of 3
Los Angeles Times
Barbara Demick
6/9/2010

North Korea seeks to soothe China over border shootings
Reuters
6/10/2010

The interview (in German) can be found here. A reader, however, sent in an English version:

Klaus-Martin Meyer: Mr. Kelber, you were recently in North Korea for the first time. Was this trip in what is certainly a totally different world consistent with your expectations?

Ulrich Kelber: Though I prepared myself with both oral and written accounts, there were things, both positive and negative, that surprised me. Among the negative things were the uniformity and control; among the positive were how well educated the people are, and their effort to bring the country forward.

Klaus-Martin Meyer: The political climate of the Korean peninsula is currently more tense than ever. The North Koreans described their version of the fall of Cheonan. How realistic is it?

Ulrich Kelber: I’m not an expert on these sorts of questions, which prevents a very detailed assessment. North Korea’s November threats of retribution alone aroused suspicions. But, in fact, South Korea has to allow questions. Why can’t an independent commission examine the evidence? Why aren’t the survivors permitted to testify publicly?

Klaus-Martin Meyer: In Pyongyang you also visited a German joint venture with the company Nosotek. As a member of the Bundestag, what are your impressions of the working conditions and day-to-day work of software developers in this sector of the North Korean economy? Are you convinced that Nosotek is actually developing for the international market?

Ulrich Kelber: Yes, we saw typical products for the international market, which, as a computer scientist, greatly interested me. The programmers and graphic designers are obviously very highly trained, with technical equipment up to Western standards. One significant exception to this is the lack of internet access in the company itself. Of course, this makes business and customer support more difficult, but isn’t an obstacle for actual software development.

The working conditions were the same as I have seen at German start-ups or in developing countries. No one could comment on the wages, which is also the customary rule in Germany. However, I had the feeling that the employees were part of the middle class, to whatever extent it exists in North Korea.

Klaus-Martin Meyer: How do you rate the opportunities and risks for foreign entrepreneurs in North Korea?

Ulrich Kelber: That’s hard to say after a single visit, but at Nosotek there seems to be little standing in the way of economic success. Possible risks would be the regime further shutting the country off, or wider-reaching sanctions. The well-trained employees, which I also can affirm in other areas such as the trades and agriculture, represent a great opportunity for all businesses.

Klaus-Martin Meyer: As usual in closing, our standard question (not just in interviews about communist countries.) Where do you see North Korea being in five years?

Ulrich Kelber: If the regime doesn’t open up economically, the country will barely progress, in spite of any efforts, for example, to maintain their infrastructure. Even with a little more openness, North Korea could make enormous economic gains, since both infrastructure and well-trained workers are available. The possibility of a political thaw depends both on the ability of the North Korean regime to resolve the succession issue, as well as whether or not South Korea’s hardliners keep calling the shots.

According to the Choson Ilbo:

South Korean activist Do Hee-yoon quoting a source in China on Monday said that a 33-year-old official surnamed Rim from the Sinuiju city government’s trade bureau was arrested by Chinese police on charges of drug trafficking in Dandong on the evening of March 2.

“North Korean agents targeting South Korea have been arrested before for their involvement in drug trafficking, but it’s unprecedented for a senior government trade official to be arrested for direct involvement,” Do said. “The Dandong Customs Office has mobilized customs officials from Dalian to probe all aspects of North Korea-China trade.”

The drug enforcement bureau of Anshan in Liaoning arrested four drug dealers based on a tip that Dandong drug dealers gained control of the trafficking network in Anshan, he added.

Under questioning, they revealed that a key figure in the drug ring in the Dandong area was a North Korean and that he was soon to arrive. Officers arrested Rim in Dandong on the evening of March 2 about after a month-long stakeout and took him to Anshan.

The bureau confiscated 2 kg of top-quality methamphetamine Rim had hidden in a kimchi container when he traveled from Sinuiju to Dandong, Do said. Rim was reportedly a very influential man in the North Korea-China trade. Despite the danger, he had traveled to China to buy goods necessary for his younger sister’s wedding scheduled for March 6 and take bribes.

“It seems Rim took a lot of bribes. There are rumors that he was going to take three large truckloads of goods back to the North,” Do said. “Rim’s arrest confirms that the North engages in international drug trafficking at the state level,” he added.

A South Korean official said the government has similar information but China has not officially confirmed it.

Read the full story here:
N.Korean Official Held in China for Drug Trafficking
Choson Ilbo
6/8/2010

Institute for Far Eastern Studies (IFES)
NK Brief No. 10-06-07-1
6/7/2010

In 2009, North Korea’s foreign trade (not including inter-Korean trade) amounted to 3.41 billion dollars, 10.5 percent less than 2008, which saw the largest amount of DPRK overseas commerce since 1991. Exports were down 5.97 percent (1.06 billion USD), while imports were down 12.45 percent (2.35 billion USD), recording a 1.29 billion USD trade deficit.

These figures come from a KOTRA analysis of the Korea Business Center (KBC)’s statistics of trade with North Korea by foreign countries. Because North Korea does not reveal trade statistics, this ‘mirror analysis’ method of analyzing the statistics of its trading partners is the only method available.

Looking at each country’s trade figures individually reveals that China is the North’s largest trade partner. DPRK-PRC trade amounted to 2.68 billion USD last year, 78.5 percent of all the North’s foreign trade. The North exported 790 million USD worth of goods to China, while its imports from China amounted to 1.89 billion USD. As North Korea’s trade with China continues to grow relative to that with other countries, so too, does its economic dependence on Beijing. In 2003, DPRK-PRC trade amounted to 42.8 percent of its overall foreign trade. This grew to 48.5 percent in 2004, accounted for more than half (52.6 percent) in2005, hit 56.7 percent in 2006, 67.1 percent in 2007, and 73 percent in 2008.

North Korea’s main imports from China were crude oil and petroleum (330 million USD, down 44.2 percent from 2008), boiler and machinery parts (160 million USD, up 10 percent), and electrical components (130 million USD, up 31 percent). Top exports to China included coal (260 million USD, up 26 percent), minerals (140 million USD, down 34.1 percent), and textiles (90 million USD, up 20.7 percent).

Germany, Russia, India, and Singapore were the North’s 2nd thru 5th largest trade partners. Trade with Germany was up 33.7 percent, amounting to 70 million USD, while trade with Russia, India, and Singapore dropped off. After these countries, Hong Kong, Brazil, Thailand, Bangladesh, and the Netherlands made up the rest of the top 10 trade partners, which account for 92 percent of all the North’s overseas trade.

In addition, with continuing sanctions against the North by the United States and Japan, there were no exports to these countries, and imports from these countries amounted to a mere 2.7 million USD and 900,000 USD, respectively.

Inter-Korean trade for 2009 amounted to 1.68 billion USD. This was down 7.8 percent from the previous year. North Korean imports from the South were down 16.1 percent, recording 740 million USD. This was largely impacted by the closing of the Keumgang Mountain tourism project.

Combined, North Korea’s total foreign trade was down 9.7 percent, to 5.09 billion USD. 53 percent of this was with China, while 33 percent was with South Korea.

Continued international sanctions against the North and the possibility of additional unilateral sanctions from several countries means DPRK foreign trade will likely shrink more in 2010. It is also expected that the North’s economic dependency on China will continue to grow.