North Korean Economy Watch

According ot the Daily NK:

A source from inside North Korea has offered an insight into the lives of the rich and powerful Pyongyang elite thanks to some rare pictures of the Rakwon Department Store.

Rakwon Department Store, which can be found on Changgwang Street in the capital’s central district, is operated by Daesung Corporation, part of the powerful No.39 Department of the Chosun Workers’ Party. Lying in an area near Changgwangwon, Air Koryo HQ and the Changgwangsan Hotel, with one of the city’s nicest apartment complexes directly behind it, the store boasts state-of-the-art facilities.

On the first floor, there is a supermarket selling food and other daily requirements, while electronics and clothes are to be found on the second floor.

On the third floor, there is a restaurant with a separate exit to the street which boasts an advanced microbrewery imported from Germany to produce various draft beers.

The restaurant has a main area with twelve tables and a further fifteen rooms. Each room houses a 30” wall-mounted TV and karaoke facilities used by Party officials and their families. The restaurant is known to be among the best in the city, comparable with Roksanwon, which is run by the People’s Security Ministry.

The restaurant’s draft beers are particularly popular with the rich, and other restaurants in the city are now also seeking to import similar facilities, the source told The Daily NK.

As the pictures show, all restaurant prices are denominated in Euro.

There is also a sauna in the basement, the source said. Inside the sauna, there is both a swimming pool and family bathing area. As it happens, there is another popular swimming pool, Changgwangwon, right next door, but The Daily NK’s source explained which is better, saying, “Changgwangwon is for middle-class Pyongyang residents, but they really envy those Party officials and the privileged few who can go to Rakwon Department Store.”

A $30,000 grand piano was sold by Rakwon Department Store even during the currency reform period, causing a sensation among Pyongyang insiders, he added.

Here are the pictures from the story:

The Rakwon Department store used to sell the highly-demanded, high-quality Japanese goods for yen.  It is interesting to see how their business model has changed since the 1980s.

Read the full story here:
Pyongyang’s Fine Dept. Store, Rakwon
Daily NK
Park In Ho
7/2/2010

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:  According to the Boston Herald, the diplomats were sentenced to eight months in prison.

ORIGINAL POST: It is no secret that North Korean diplomats and embassies are self-financing.  In fact, they are profit earning and they must remit funds back to Pyongyang.  While this means that DPRK diplomatic relations are not a drain on the treasury, as is typically the case with other countries, it does mean that the DPRK’s official representatives are more likely to make headlines for their business dealings rather than political statements.

And so here is the latest installment in this saga from Reuters:

Swedish police have arrested two North Korean diplomats on suspicion of smuggling 230,000 cigarettes into the Nordic country, the Swedish Customs Office said Friday.

The pair, a man and a woman who have diplomatic status in Russia, were stopped by Swedish customs officers Wednesday morning as they drove off a ferry from Helsinki, the Finnish capital.

Customs officials discovered Russian cigarettes in the car driven by the couple, Swedish Customs spokeswoman Monica Magnusson told Reuters.

The two North Koreans claimed diplomatic immunity.

“They were accredited as diplomats in Russia, but had no accreditation in Sweden,” she said. “They were arrested on suspicion of smuggling.”

Magnusson added that the pair were still being held by Swedish police and that she was not aware of them having any contact with North Korean officials since their arrest.

Sweden’s Foreign Ministry said it had been informed of the arrests but would not comment directly on the matter, saying it was a criminal case and was being handled by the police.

Foreign Ministry spokeswoman Cecilia Julin said foreign diplomats are only immune from criminal prosecution in countries where they have been accredited with the authorities.

“If you come to Sweden and commit a crime, you’re just like any other foreign national,” she said.

Sweden is one of only seven countries to have an embassy in North Korea, treated by much of the world as a rogue state due to human rights abuses and its possession of nuclear weapons despite opposition by the international community.

The Foreign Ministry said the arrests were primarily a police matter, but that the North Korean embassy in Sweden was in contact with the ministry over the matter.

An official at the North Korean embassy in Stockholm said earlier he had no knowledge of the arrests.

North Korean diplomatic staff were expelled from Sweden and two other countries in 1976 after a “massive” smuggling scheme was uncovered.  According to Time Magazine (in 1976):

Not in years have so many diplomatic persona suddenly been declared non grata. In Oslo, members of North Korea’s diplomatic mission—three bureaucrats and a chauffeur—were given six days to pack up and get out. Foreign Ministry officials frostily informed North Korea’s Ambassador to Stockholm, Kil Jae Gyong, who is also accredited to Oslo, that he was no longer welcome in Norway. Similar scenes took place in Helsinki and Copenhagen, and as of last week, twelve North Korean embassy staffers had been unceremoniously ordered home to Pyongyang.

International politics had nothing to do with the abrupt action by the Scandinavian governments. What had happened was that North Koreans in all three countries* had been caught red-handed in a massive smuggling racket involving liquor, cigarettes and dope —apparently instigated by the financially hard-pressed government of President Kim II Sung. Officials in Norway estimated that their branch of the Kim gang had smuggled into the country at least 4,000 bottles of booze (mostly Polish vodka) and 140,000 cigarettes, which were then given surreptitiously to Norwegian wholesalers for distribution on the black market. In Denmark, the illegal goodies impounded so far included 400 bottles of liquor, 4.5 million cigarettes and 147 kilos of hashish, which police confiscated two weeks ago from two Danes who had just bought the drug from North Korean embassy staffers.

Personal Use. How long the North Koreans have been into smuggling as a sideline remains unclear, but Scandinavian officials have been closely watching their business dealings for about five months. In Norway, neighbors of the neat brick North Korean embassy in Oslo’s West End had long been puzzled by the constant movement of cars in and out of the compound and by the sight of mission staffers struggling in the backyard with huge mysterious boxes. In Denmark, customs officials got suspicious last month when the North Koreans imported 2.5 million duty-free cigarettes, allegedly for the “personal use” of one staffer.

The discovery of illegal activity by the North Koreans in Scandinavia may be only the iceberg’s tip. Five months ago in Cairo, Egyptian officials caught two North Korean diplomats with 400 kilos of hashish in their luggage. A North Korean official assigned to Malaysia has also been recalled after dealing in smuggled goods.

The North Koreans have protested their innocence, and mission staffers in Finland insisted that they would not leave the country. Nonetheless, Scandinavian officials have little doubt that the smuggling was ordered by Pyongyang as a desperate measure to help resolve the government’s horrendous financial crisis. Western experts estimate that North Korea, with a G.N.P. of only $4.5 billion, has a foreign debt of more than $2 billion, at least $500 million of which is owed to the capitalist world. North Korea not only maintains some 60 expensive missions abroad but also buys millions of dollars’ worth of advertising space in newspapers round the world every year to publicize the latest speeches of Kim II Sung. Faced with a severe shortage of hard Western currency, officials speculate, North Korean diplomats turned to smuggling to support their missions and pay for the ads, sending any excess profits home to Pyongyang.

The DPRK embassy has also been accused of smuggling in Pakistan.

Sometimes the DPRK embassy staff make “good” business decisions.

Good article here with further info (h/t OneFreeKorea).

2007 CRS report: Drug Trafficking and North Korea: Issues for U.S. Policy

You could probably write a series of books on the DPRK embassies in Russia and  China.

And just for the record: Sweden–the North Koreans are not the only ones doing this–everyone is.  When I lived in Europe over 15 years ago I talked with fellow teenagers about doing this!  If you want to increase people’s incomes, increase tax receipts, and lower the incomes of mobsters and bootleggers–lower your cigarette taxes!

Read the full stories here:
Diplomats arrested for cigarette smuggling
Reuters
Jens Hansegard
11/20/2009

SCANDINAVIA: Smuggling Diplomats
Time Magazine
11/1/1976

Apparently Kim Jong il is growing intolerant of North Korean television advertising anything other than how great he and his father are.  According to Yonhap:

“Recently, Kim saw the commercials while watching TV. He was enraged, asking where the commercials came from and describing them as the prototype of China’s early reforms,” one source said.

Starting July 2, North Korea’s television played commercials that showed young women in traditional clothes serving frothy mugs of Taedonggang beer billed as “Pride of Pyongyang.”

Other products, including ginseng and quail, soon followed in television advertisements, which had rarely been seen in the country, generating outside speculation that North Korea may be starting to embrace the capitalist mode of life.

But according to Yonhap News Agency’s own analysis, the commercials disappeared as of the end of August. The sources said Cha Sung-su, the North’s top broadcaster, has also been discharged.

One source said Cha may have been unduly victimized in the case because the commercials were a product of Kim’s earlier instruction to create “more interesting and diverse” television programs.

Cha, 69, is one of Kim’s closest aides, having accompanied him on public inspections at least six times since the leader reportedly had a stroke last year and then recovered.

He is the North’s top television man, having served on the communist country’s broadcasting committee for about four decades. He is also known in North Korea for his numerous poems.

I previously blogged about the beer commercials (as did most other K-bloggers) and included a link to a longer 10-minute “infomercial”.

Here is the actual commercial courtesy of the BBC. Here is the commercial on YouTube (without commercial interruption).

Here is the ginseng commercial (Koryo Insam).

Here is the quail restaurant commercial.

According to the Choson Ilbo:

Italian customs recently confiscated 420 bottles of expensive liquor on their way to North Korea. Italian newspaper Vivere Ancona said customs in the eastern port city seized 150 bottles of brandy and 270 bottles of whisky in containers destined for North Korea at the end of last month.

The confiscation follows a UN Security Council ban on the export of arms, high technology and luxury goods to North Korea after the communist country’s nuclear test in May. The liquor is reportedly worth 12,000 euro, but the brands were not identified.

In July, Italian customs seized two luxury yachts worth W23 billion ordered by North Korea (US$1=W1,222). At the time, the order was disguised as coming from a Chinese company, but the investigation revealed it had actually been made by North Korean leader Kim Jong-il.

Here is a post about the yachts.

Here is a post about DPRK weapons seized by UAE.

Read the full story here:
Italy Seizes Luxury Liquor Bound for N.Korea
The Choson Ilbo
9/14/2009

Click on image to see advert

The BBC offers what is hailed as the first Taedonggang Beer commercial. According to the article:

In a rare nod to commercial motives in the resolutely communist nation, the TV advert features a thirsty worker holding a mug of frothy beer.

Young women in traditional Korean dress are shown serving trays of beer to men in Western suits.

Billed as the “Pride of Pyongyang”, the advert promises drinkers that the beer will help ease stress.

“It represents the new look of Pyongyang,” the two-and-a-half minute advert says. “It will be a familiar part of our lives.”

Taedonggang Beer Factory has been making the brew since buying a British brewery and shipping it lock, stock and barrel from the UK in 2002.

The beer has been occasionally available in South Korea and is said to be of high quality.

North Korean leader Kim Jong-il, said to have a fondness for fine wines and brandy, has taken a personal interest in the brewery.

“Watching good quality beer coming out in an uninterrupted flow for a long while, he noted with great pleasure that it has now become possible to supply more fresh beer to people in all seasons,” North Korea’s state news agency, KCNA, said after he visited the brewery in 2002.

The DPRK did allow a ten minute “infomercial” to be made about Taedonggang Beer (probably by the Chongryun).  You can see it here:

Click on image to see video

Here is a previous post on the beer.

Here is the location of the Taedongggang Brewery.

The full article can be found here:
North Korea launches beer advert
BBC
4/3/2009

North Korea Uncovered version 18 is available.  This Google Earth overlay maps North Korea’s agriculture, aviation, cultural locations, markets, manufacturing facilities, railroad, energy infrastructure, politics, sports venues, military establishments, religious facilities, leisure destinations, and national parks.

This project has now been downloaded over 140,000 times since launching in April 2007 and received much media attention last month following a Wall Street Journal article highlighting the work.

Note: Kimchaek City is now in high resolution for the first time.  Information on this city is pretty scarce.  Contributions welcome.

Additions to this version include: New image overlays in Nampo (infrastructure update), Haeju (infrastructure update, apricot trees), Kanggye (infrastructure update, wood processing factory), Kimchaek (infrastructure update). Also, river dredges (h/t Christopher Del Riesgo), the Handure Plain, Musudan update, Nuclear Test Site revamp (h/t Ogle Earth), The International School of Berne (Kim Jong un school), Ongjin Shallow Sea Farms, Monument to  “Horizon of the Handure Plain”, Unhung Youth Power Station, Hwangnyong Fortress Wall, Kim Ung so House, Tomb of Kim Ung so, Chungnyol Shrine, Onchon Public Library, Onchon Public bathhouse, Anbyon Youth Power Stations.

The Daily NK posted a fascinating interview with a local North Korean merchant.  He provides interesting anecdotes of everyday life:

Tongil Market (Featured in A State of Mind):

Nowadays, the way to survive is selling in the jangmadang (market). With the exception of the residents of the Joong-district and its vicinity, who are often mobilized to national events, seven out of 10 households do business in the jangmadang. In the Pyongyang Tongil (unification) Market alone, the number of people doing business is between 5,000~6,000 people. The size of a street-stand is approximately 50cm by 50cm large. There are also about 2,000 people selling outside of the market.”

“There are people also selling in the alleyways. The Tongil Market usually consists of people from the Tongil Street, so merchants from the other regions cannot do business there. In the Tongil Market alone, there are around 8,000 people [doing business]. Because the Market is so large, the cadres from the other regions frequently come to buy goods.”

Even in North Korea, capital enhances worker productivity: 

Mr. A said that in the markets, the sale of industrial goods (all kinds of products such as clothing brought from China) and cosmetics are supposed to be lucrative. The traders usually bring in about 5,000 won per day and 15,000 won per month. Such an amount of money can buy about 2kg of rice per day. The people who make a lot of money are the marine product merchants. They make around 7,000~8,000 won per day. Marine products are often purchased by officials who have money and rice.

The people in the lowest class do not have the capital to do business, so a majority of them sell noodles or food. They make about 1,500 won per day, which can purchase about a kilogram of corn. People who sell food sell rice, sidedishes, and snacks on site. To them, selling is a battle to survive.

Coping mechanisms:

Mr. A relayed that not-so-affluent households raise several domestic cattle, collect medicinal herbs or brew liquor to sell. The remnants of the liquor are used as livestock feed. Selling two bottles of liquor made of corn as raw material generates about 500 won in profit. However, the authorities have strictly been regulating brewing liquor in homes, resulting in difficult situations. If exposed for making liquor, both the person-in-charge and the People’s Party Unit chairman are banished to the countryside.

Beekeeping is seasonally supposed to be lucrative. In May when the acacia flowers start to bloom, the number of people who collect honey in the mountains increases. In the surrounding areas of Pyongyang, there are at least trees on the mountains, so beekeeping has been feasible. One person can collect about 100kg of honey per month by keeping around 15 beehives. The honey is usually consumed by people who want to use it in medicine or by officials.

Work overseas:

“The utmost goal of workers in Pyongyang is to go to another country to earn money. Recently, they have even gone to the Middle East, Southeast Asia, Africa, and the Democratic Republic of Congo. Once they leave, they do not return for three years. They can go back or stay in Pyongyang. Workers who have gone to Russia or to Congo for farming come back with 10,000~20,000 dollars in three years.”

“With that money, they can buy a house and prepare a significant amount of capital for business. Those who have gone abroad not only do the work ordered by organizations, but also engage in private farming, do business and save as much money as they can. There have been a quite a few people around me who have gone abroad recently to make money this way. Out of 100 male workers, there is at least one or two. In order to go overseas, one has to pay 300~400 dollars in bribes.”

Read the full article here:
Doing Business Is a Battle
Daily NK 
Jung Kwon Ho
6/18/2008

This site has covered the strange saga of Park il Woo (Steve Park), Korean entrepreneur and spy, who has been spearheading efforts to bring DPRK soju into the United States (History: Part 1, Part 2, Part 3).

This week, Joseph Goldstein, Staff Reporter of the New York Sun, picks up the story and fills us in on Mr. Park’s prosecution, conviction, and future plans. 

Here are the story’s bullet points:

1. Park was being paid by South Korean officials and providing them with updates about his business trips to North Korea.  He pleaded guilty to lying to lying to FBI agents about his relationship with these South Korean officials. (NKeconWatch: I am not sure if the charge was lying to the FBI or of being an unregistered foreign agent–or both).

2. William Pauley III, U.S. District Court in Manhattan, sentenced him 18 months’ probation, though the crime carries a maximum penalty of five years.  Shortly after pleading guilty, prosecutors for the Manhattan U.S. attorney’s office agreed to lift a prohibition that barred him from contacting the South Korean officials for whom he was accused of spying.

3. Jennifer Rodgers (prosecutor’s office) gave her permission to allow Park to travel to North Korea “on business” for two weeks beginning May 30, according to court papers filed by Park’s attorney.  Court documents don’t mention the nature of the business that Park intends to conduct while in North Korea. But it is likely connected to Park’s long-standing efforts to import North Korean soju, a liquor made from corn and rice, into America.

And what lies ahead for Mr. Park…

Park’s import company, Korea PyongYang Trading U.S.A., is partnering with a New Jersey company, Tang’s Liquor Wholesale, to distribute the drink across New York, New Jersey, Pennsylvania, Virginia, and Maryland, according to Korean press reports.

Bottles of Pyongyang Soju are expected to retail for just more than $10. The drink is made in a factory North Korea’s capital and uses water pumped up from more than 500 feet underground, Yonhap reported.

Park told Yonhap that it was the first product North Korea actively sought to export to America. He said he would soon try to import North Korean beer as well, according to Yonhap.

So it looks like the DPRK is admitting a known South Korean spy into the country for the purposes of boosting exports… 

The whole story is worth reading here:
Bizarre Turn Seen in Case of Korea Spy
The New York Sun
Joseph Goldstein
5/27/2008

UPDATE: According to the Choson Ilbo:

Exports to the U.S. of the North Korean liquor Pyongyang Soju have been halted due to a lack of interest from consumers, Radio Free Asia reported Tuesday. Tang Kap-jeung of importer Tang’s Liquor Wholesales in Flushing, New York, told RFA, “There was some interest at first because people were curious, but the poor taste led to dwindling orders and we stopped imports a year ago.”

Customers in the U.S. enjoy South Korean soju, which is smoother and odorless, and nine out of 10 people said the North Korean variety was not to their taste, he added.

He said the price tag of the North Korean liquor at US$3.75 a bottle due to special tariffs was another factor behind the poor sales. 

Sales of Pyongyang Soju began in 2008 primarily in New York, New Jersey, Georgia, Maryland and California, RFA said. Export versions of the soju are also sold in China and Japan. 

ORIGINAL POST: According to Yonhap, North Korean Soju has finally (again?) landed in New Jersey (h/t One Free Korea):

The first shipment of North Korean-made liquor to the United States has arrived in New York and will go on sale as soon as it clears customs, the importer said Wednesday.

Tang Gap-jeung, head of Tang’s Liquor Wholesale, which is in charge of U.S. distribution, told Yonhap that 1,660 boxes of Pyongyang Soju arrived Tuesday. Each box has 24 bottles of liquor made from corn, rice and glutinous rice flour. (Yonhap)

This is not the first time that someone has tried to import North Korean soju into the US (part 1 of the story here).  Unfortunately, that effort came to an end when the entrepreneur who launched the venture was arrested for being an unregistered South Korean spy (again, h/t One Free Korea).  The fate of the soju went unreported.

Mr. Tang is probably not importing the “adder soju” (with a dead snake in the bottle), which is absolutely vile, but worth the money just to keep in the liquor cabinet for show.  Adder soju aside, North Korea can make some tasty liquor, so if you want to try something new this weekend, here is where you can pick some up (call first and make sure the shipment has cleared customs):

Tang’s Liquor Wholesale of NJ
530 Church St
Ridgefield, NJ 07657
(201) 313-8800

The full story can be read here:
N.K. liquor import arrives in New York
Yonhap
4/23/2008