North Korean Economy Watch

UPDATE 2 (2011-7-23): The Choson Sinbo, a pro-Pyongyang news service based in Tokyo, has published an article on rare-earths development in the DPRK.  You can see a PDF of the original Korean article here.

According to coverage of the article in Bernama:

According to resource development senior officials, the amount of rare earth buried in the North amounts to approximately 20 million tonnes.

Estimates on the amount could rise fo the current digging work finds new burial grounds or more elements deeper in existing sites, said the Tokyo-based paper, which serves as a channel for Pyongyang to deliver messages.

So far, no exact amount of rare earth deposits in the reclusive communist nation has been confirmed. The largest burial deposit was located in North Pyeongan Province the paper said, while the rest of the elements were distributed in the southern and northern parts of the nation.

The North is working on using the rare earth minerals in manufacturing industries and is considering joint projects with other nations, Kim Heung-joo, vice chief of the state-run resource development agency, was quoted as saying by the paper.

The government will put limits on its output aqnd exports of rare earth materials, Kim added.

According to coverage in the AFP:

China has 90 million tonnes of rare earth deposits, Russia has 21 million tonnes while the United States has 14 million tonnes, the report said.

…

The largest deposit was discovered in North Pyongan Province, the paper said, while the rest of the elements were distributed in southern and northern parts of the country.

A senior North Korean official of the state natural resource development agency told the newspaper that North Korea was encouraging joint ventures with other countries to develop rare earth metals.

“It is important that these elements be processed in the country before being exported,” the official, Kim Hung-Ju, was quoted as saying by the Chosun Shinbo.

…

Currently, China produces more than 95 percent of the world’s rare earths — 17 elements critical to manufacturing everything from iPods to low-emission cars and missiles.

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UPDATE 1 (2011-6-23): Here is the story in KCNA:

DPRK Makes Full Use of Rare-earth Minerals

Pyongyang, June 20 (KCNA) — An effective utilization of rare-earth minerals is of weighty significance in economic growth, said an official of the Ministry of State Resource Development.

Kim Hung Ju, vice department director of the ministry, told KCNA the DPRK government has paid much effort to the exploitation and utilization of rare-earth minerals.

The country has large deposits of high-grade rare-earth minerals in west and east areas.

Prospecting work and mining have been launched in the areas and detailed exploration of new deposits is going on in a far-sighted way in areas with favorable mining conditions.

Meanwhile, scientific institutes have intensified researches in various rare-earth elements.

KCNA has previously boasted about rare-earths development.  See 2002-11-18, 2004-7-29, and 2010-4-9.

ORIGINAL POST (2011-6-23): According to Yonhap:

North Korea is showing a growing interest in developing rare earth minerals, in an apparent bid to earn much-needed cash from selling the materials abroad.

Rare earth minerals are compounds of rare earth metals, including cerium and neodymium, which are used as a crucial element in semiconductors, cars, computers and other advanced technology areas. Some types of rare earth materials can be used to build missiles.

In a report carried by North Korea’s official Korean Central News Agency (KCNA) earlier this week, the communist state said it is working on developing rare earth minerals for economic growth.

“An effective utilization of rare earth minerals is of weighty significance in economic growth,” the report said, quoting Kim Hung-ju, vice department director of the North’s Ministry of State Resource Development.

“The DPRK government has paid much effort to the exploitation and utilization of rare earth minerals,” it said, referring to North Korea by the acronym of its official name, the Democratic People’s Republic of Korea.

The report added that there are large deposits of high-grade rare earth minerals in the western and eastern parts of the country, where prospecting work and mining have already begun. It also said the rare earth elements are being studied in scientific institutes, while some of the research findings have already been introduced in economic sectors.

The article follows another KCNA report in July 2009 that described North Korean leader Kim Jong-il’s inspection of a semiconductor materials plant, saying he stressed the importance of producing more rare earth metals.

Until now, North Korea’s official media have mostly reported on the use of rare earth minerals in medicine and fertilizers. But its new focus on developing and using the materials appears to stem from the country’s interest in selling the metals for a high price on the international market, according to experts.

Rare earth elements are becoming increasingly expensive, as China, the world’s largest rare earth supplier, puts limits on its output and exports.

“It appears that North Korea only recently started taking an interest in rare earth materials,” said Choi Gyeong-su, head of the North Korea Resources Institute in Seoul. “The country does not have the technology to even determine the exact amount of its reserves, so it doesn’t seem likely anytime soon that the rare earth materials will be used to produce goods for the high-tech industry.”

Read the full story here:
N. Korea seen exploiting rare earth minerals for exports
Yonhap
2011-6-23

According to the Korea Herald:

North Korea is pressing to ink a deal with China to prevent double taxation, a pro-Pyongyang newspaper said Wednesday, signaling an apparent bid to attract investment from its key ally and the world’s No. 2 economy.

The isolated country has already signed similar accords with Egypt and 11 other countries and negotiations are under way with other countries, the Chosun Sinbo reported, citing a North Korean official handling the issue of attracting foreign investment.

However, the newspaper, widely seen as the mouthpiece of the communist regime in Pyongyang, did not give any further details.

…

Earlier this month, North Korea and China broke ground on their border island and the North’s Rason special economic zone to jointly develop the two areas.

The trade volume between North Korea and China stood at $3.46 billion in 2010, up from $2.68 billion in 2009, according to South Korea’s Unification Ministry, which handles inter-Korean affairs.

The North designated Rason as a special economic zone in 1991 and has since strived to develop it into a regional transportation hub near China and Russia, but no major progress has been made.

The North hopes to transform Rason into a regional hub of transit trade like Singapore, and it should expand economic relations with outside world to improve its faltering economy, the newspaper said, citing the North Korean official.

North Korea and China are also likely to complete the repairs of a key logistics road that links the Chinese city of Hunchun to the Rajin port inside the Rason economic zone by October, two months earlier than previously planned, according to sources in Hunchun.

Beijing has secured the right to use the port, which provides China with an export route to other countries.

Read the full story here:

N. Korea pushing to sign double taxation avoidance deal with China
Korea Herald
2011-6-22

According to the Daily NK:

For the ten years from 1995 to 2004, churches in South Korea sent a total of 270 billion South Korean won in aid to North Korea’s Chosun Christians Federation to fund projects including the building of an orphanage.

This money represented fully 77% of all private donations sent to North Korea in the same period. However, the truth is that nobody knows how the money has been spent, or by whom.

Such religiously motivated support for the Chosun Christians Federation results in not only problems for other missionary work, but also prolongs the suffering of the people, according to Yoo Suk Ryul, the director of Cornerstone Church, an active missionary group working along the North Korean-Chinese border. He has just released a new book, ‘The Collapse of the Kim Jong Il Regime and North Korean Missionary Work.’

In it, Yoo writes, “The Chosun Federation first came to our attention as an association affiliated to the United Front Department of the Chosun Workers’ Party so, to that extent, funds from missionary organizations are obviously propping up the Kim Jong Il regime.”

…

“The rebuilding of the church should not be done through an organization affiliated to the Kim Jong Il regime or the Chosun Workers’ Party,” Yoo therefore asserts. Rather, he believes assistance should be rendered to underground churches, to begin the spread of the gospel from the bottom up.

In addition, “To date, Chinese-Koreans and our defector brethren have received training in China, and through this indirect method have entered North Korea to establish underground churches.” However, “North Korea’s situation both at home and abroad is change rapidly now, so missionaries need to turn to a strategy that is more direct.”

Additionally, he goes on, “The Bible, radio, TV and DVDs should continue to be sent by balloon, along with all other methods of advancing the spread of the gospel,” and explained, “This is a strategy to force Pyongyang’s fall through the gospel.”

Yoo has invested much time and effort into persuading Korean churches to end their existing missionary work in North Korea, and follow a new path. “Missionary work in North Korea is not something that can be accomplished with a strategy of passion alone,” he writes, “This missionary strategy does not grasp the essence of the North Korean system; it is a house of cards.”

Read the full story here:
New Religious Strategy Is Needed
Daily NK
Cho Jong Ik
2011-6-22

…by expanding the capacities of Hanawon.

According to Yonhap:

South Korea will build a new facility to accommodate a growing number of North Koreans fleeing poverty and political oppression from their communist homeland, an official said Wednesday.

The move is the latest reminder that the flow of North Korean defectors isn’t letting up despite Pyongyang’s harsh crackdown on escapees. Seoul is now home to more than 21,700 North Koreans.

South Korea has already been running two other resettlement centers, known as Hanawon near Seoul to help the defectors better adjust to life in the capitalist South.

Still, the government will break ground for another resettlement center in Hwacheon on July 7 as the two current facilities are running at full capacity, Unification Ministry spokeswoman Lee Jong-joo told reporters.

The area is about 118 kilometers northeast of Seoul.

She also said the government is planning to offer re-education for former North Korean teachers, doctors and other experts in the new resettlement center to be built by the end of 2012.

The announcement comes amid the latest dispute between the two Koreas over nine North Koreans who defected to the South earlier this month.

Seoul has indicated it will not return the North Korean defectors despite the North’s request for repatriation. The North usually claims South Korea kidnaps its citizens, charges that Seoul denies.

Some defectors have criticized Hanawon.

Read the full story here:
S. Korea to build new resettlement facility for N. Korean defectors
Yonhap
2011-6-22

A DPRK law enforcement manual was “released” by a South Korean missionary group named Caleb Mission.  The document seemingly offers a glimpse of the typical workload of a North Korean police officer.  The document, to the best of my knowledge has not been posted on line yet, so caveat emptor.  The Korea Herald offers some details below:

The classified guidebook for law enforcement authorities published by the North’s police agency in June 2009 lists 721 actual cases related to criminal law, civil law and the code of criminal procedure and offers advice on how to punish offenders.

One of the cases in the 791-page reference book is about a hog-raiser who sold pork injected with growth hormones and made a lot of money by selling more meat.

In this case, the North Korean law enforcement authorities cannot do anything about the hog-raiser because the man made money by selling pork at a legally permitted price in the market through his own efforts, explains the guidebook.

…

The book also explains that the act of getting paid for transporting another person’s luggage from the train station using a bicycle cannot be seen as a crime because the law does not stipulate that selling an individual’s efforts is a crime.

A food salesperson can be punished for “violating the order of product sales,” however, if he sprayed water on his seaweed to make it look fresher.

Much of the guidebook is about crimes where individuals caused damage to the state by stealing from the government or neglecting their duties, an indication of the seriousness of economic difficulties many North Koreans are going through.

Attempts to evade mandatory military service and euthanasia have become social headaches in the North as well.

A doctor who took $800 from five people in exchange for forging their medical records was charged with bribery and violating the law on military duty.

If a person avoided conscription by lying about his eyesight and later was found to have normal eyesight, he could be questioned by the authorities on charges of violating the law on military service.

The guidebook also stresses that euthanasia is illegal, mentioning a case where a son drugged his father to death to relieve him of the pain from illness under the consent of his mother.

Both the mother and the son should be seen as accomplices in a murder because “although they did not have a foul motive in killing him, the victim did not ask for it,” the book reads.

Bribery and treats in exchange for influence-peddling was also prevalent in North Korea.

People accused of trading South Korean or American films were punished for illegally bringing in and distributing “decadent culture” under North Korean criminal law.

Read the whole story here:
Official guidebook offers glimpse of N.K. society
Korea Herald
Kim So-hyun
2011-06-22

According to the Daily NK:

Recently, younger cadres have started being posted to city and county units of the National Security Agency (NSA) and People’s Safety Ministry (PSM), according to sources.

One such source from North Pyongan Province explained on Sunday, “NSA and PSM cadres are being rapidly changed for younger men, who are now playing a pivotal role. There are now two or three men in their late 20s and early 30s in the case of an NSA office, and among the ten men in a PSM office, five or six are in their 30s.”

“The change to younger agents began last year, making men in their mid-40s who should be at peak capacity start looking over their shoulder,” the source added.

A source from Yangkang Province concurred, adding, “Just now in the local NSA, prosecutors’ office and PSM, early- to mid-30s people have been stationed in almost all posts. These early- and mid-30s people are even taking places as high as vice director of the city or county NSA.”

The NSA and PSM represent the domestic force behind the Kim dictatorship, the tools of both policing and intelligence functions. As such, experts assert that if people loyal to the Kim Jong Il system are being replaced, that is another telling sign that North Korea is edging towards a system led by successor Kim Jong Eun.

Cheong Seong Chang of Sejong Research Institute explained, “This looks like generational change to facilitate the Kim Jong Eun succession system. To increase Kim Jong Eun’s ability to secure the system, they are changing existing cadres for younger men at a rapid pace.”

Even as late as the early 2000s, to become an NSA or PSM agent required an individual to have ten years of military service and two years of civilian work under his belt, and to have passed through a political college dedicated to the respective service.

Having gotten a foot in the door, an individual needed at least three to five years to gain promotion through local agent, vice section chief, section chief, vice director and then director positions, and as a result one would often be in one’s 50s before reaching the vice director’s chair. Of course, family background and political conditions also had to be met.

However, now there is an alternative course, with viable candidates being plucked from military service of only five or six years to enter an ordinary civilian college, and thereafter being stationed with the security forces.

After which, following two or three years as an entry-level agent, those who enter via this foreshortened route are sent for six months of political education, graduating whilst still in their late 20s or early 30s. It is these individuals who are now emerging early into mid-level positions in the security forces.

While it is claimed that this process is open to all soldiers with good backgrounds and represents an example of “Kim Jong Il’s consideration” of his subjects, the reality is that only a minority of young people, noticeably the children of cadres, can benefit from it, according to sources.

Regardless of which, the Pyongan Province source said that this policy change is causing problems, with the younger men speaking disrespectfully to people who are below them but who society traditionally views as their elder.

The Yangkang Province source explained, “Because they got pushed down the pecking order overnight, got hurt or feel betrayed, many are driven to drink. These older men are complaining at getting nagged by younger people.”

Alongside this, recently most new placements are far from an individual’s home.

A Shinuiju source commented, “In the past, prosecutors or People’s Safety agents were people born locally, but since August they have been coming from other provinces or counties. This seems to be a policy handed down to combat the many cases of agents turning a blind eye to the actions of family and friends.”

However, “These days, if you have money you can solve anything, so the interpersonal connections of these people make no difference,” the source concluded.

Read the full story here:
Younger Men Taking Over Security World
Daily NK
Lee Beom Ki and Lee Seok Young
2011-6-21

Here is the statement from the US Treasury Department:

​On June 20, 2011, the Office of Foreign Assets Control of the U.S. Department of the Treasury (“OFAC”) amended the North Korea Sanctions Regulations, 31 C.F.R. part 510 (the “NKSR”), to implement Executive Order 13570 of April 18, 2011.  OFAC also removed from 31 C.F.R. chapter V the Foreign Assets Control Regulations, 31 C.F.R. part 500 (the “FACR”), and the Regulations Prohibiting Transactions Involving the Shipment of Certain Merchandise between Foreign Countries (Transaction Control Regulations), 31 C.F.R. part 505 (the “TCR”).  The final rule containing the NKSR amendments was published at 76 FR 35740 (June 20, 2011); the final rule removing the FACR and TCR was published at 76 FR 35739 (June 20, 2011).

Here and here are the links to the final rules (PDF).

Here is a link to the Treasury Department’s DPRK information resource page.

Pictured above (Google Earth): Rason’s three ports: Rajin, Sonbong, Ungsang

Institute for Far Eastern Studies (IFES)
2011-6-21

North Korea and China hosted a groundbreaking ceremony on June 8 for the launch of the joint development project in Hwanggumpyong Island near the DPRK-China border. On the next day, the launching ceremony for the Rason Economic and Trade Zone took place.

The KCNA reported on April 27 that the modernization projects for the Rajin, Sonbong, and Ungsang Ports are to take place. According to the report, “These three ports in Rason City have the geographical advantage for maritime transportation. . . . Rajin Port, surrounded by Daecho and Socho Islands, is an ideal harbor that provides security and excellent marine conditions for docking ships.”

Currently at the Rajin Port, a number of equipment, fishery products, and processed foods are handled. An official from the Rason City People’s Committee stated, “There are plans of advancing Rajin, Sonbong, and Ungsang Ports even further to double the capacity and cargo.”

Recently, news on the Rason Economic and Trade Zone by the KCNA can be heard more frequently as North Korea is making an effort to advertise the development of this area. Recent reports covered news on the preferential tariff system, development program, and light industry zone.

The preferential tariff system of the Rason Economic and Trade Zone was adopted as means to lure more foreign investment into the area and improve the North Korea’s image as being more cooperative and supportive toward foreign businesses. Preferential treatment is being granted to foreign investors in order to turn the area into a major entrepot, export producer, and financial and tourist hub of Northeast Asia. One North Korean official stated, “Rason Economic and Trade Zone has favorable conditions to grow as a major trade zone. There are plans of constructing state-of-the-art equipment, facilities, and light industry factories to develop the area as a major export base.”

China and Russia are said to be paying special attention to the Rason Port development. China is already known to have invested in Pier 1 at Rajin Port and Russia in Pier 3.

North Korea has taken various legal measures to develop the area since Kim Jong Il’s field guidance visit to Rason City in December 2009. Rason City was designated as a “special city” in January 4, 2010 and the Rason Economic and Trade Zone Law was passed on January 27, 2010.

Additional Information:
1. A Swiss firm is alleged to have rented Rajin’s Pier No. 2.

2. Here and here is some background information on the new Hwanggumphyon SEZ.  Here is some more information on the Rason ground-breaking and Chinese investment tour.

From a recent Newsweek article about meth use in the DPRK:

First synthesized in 1893, meth is now one of the world’s most widely abused drugs, imbuing the user with intense feelings of euphoria, concentration, and grandiosity. Smoked, injected or snorted, the drug also suppresses the need for food and sleep for an extended period of time; coming down can bring fatigue, anxiety, and occasionally suicidal ideation.

Inside North Korea, observers say, many use meth in place of expensive and hard-to-obtain medicine. “People with chronic disease take it until they’re addicted,” says one worker for a South Korea-based NGO, who requested anonymity in order to avoid jeopardizing his work with defectors. “They take it for things like cancer. This drug is their sole form of medication,” says the NGO worker, who has interviewed hundreds of defectors in the past three years. A former bicycle smuggler who defected in 2009 told NEWSWEEK of seeing a doctor administering meth to a friend’s sick father. “He took it and could speak well and move his hand again five minutes later. Because of this kind of effect, elderly people really took to this medicine.”

Jiro Ishimaru, founder and editor of Rimjin-gang, a magazine about North Korea and reported by people inside the country but published in Japan, says he has seen several North Koreans take meth to relieve stress and fatigue, including his former North Korean business partner. “He didn’t start taking it as a drug but as a medicine,” Ishimaru says.

The drug also offers an escape that might not otherwise be possible. As Shin puts it: “There’s so little hope in North Korea—that’s why ice is becoming popular. People have given up.”

Read the full story here:
North Korea’s Meth Export
Newsweek
Isaac Stone Fish
2011-6-19

Lankov writes in the Korea Times about the DPRK’s various Special Economic Zones:

In early June, the governments of China and North Korea declared that they would work to develop two new special economic zones (SEZs). One zone is to be situated in the small port city of Raseon, on the eastern coast of South Korea, just 20 kilometers from the nearest crossing to China. Another zone will be developed on the unremarkable sandy island of Hwanggumpyong, in the vicinity of Sinuiju, the largest city on the border (some three quarters of trade between the two countries pass through this city).

One cannot be surprised by this initiative as talk of new SEZs “soon to be established” has been around for over a decade. There is little doubt that the North Korean government is very interested in the idea of SEZs. Unfortunately, this interest does not necessary mean that the North Korean authorities are willing to make the concessions that would allow the SEZs to operate efficiently.

The history of North Korean SEZs is essentially the history of frequent failures and occasional partial successes. The first attempt to create a SEZ took place in 1991, when the North Korean government established a SEZ in the remote northwestern corner of the country. The Raseon SEZ, as it has now become known, is located where the borders of China, Russia and North Korea meet.

Read the remainder of the story below:
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