North Korean Economy Watch

Institute for Far Eastern Studies (IFES)
NK Brief No. 08-6-17-1
6/17/2008

According to an article run in the June 10 issue of the Rodong Sinmun, the newspaper of the North Korean Workers’ Party, economic independence “is not closing the doors and solving everything 100 percent on our own,” and stressed the fundamental rule of ‘selling what is present and buying what is missing’, otherwise known as comparative advantage*, as the key to advancing overseas foreign economic relations.

The newspaper article, titled, “The Main Principle for Maintaining the Basic Path Toward Construction of a Powerful Economic State,” explained, “In every country there are limited resources, and at the level of advancement of the economy as well as science and technology, and on the principle of trading based on what is available and what is necessary in each sector, it is normal to give what one has and receive what one does not in order to advance the economy.”

This fundamental rule of strategic trade can also be seen in the July 2005 agreement reached at the 10th meeting of the South-North Economic Cooperation Promotion Committee. At the time, the two Koreas agreed to mobilize natural resources, funds, technology, and more as much possible, based on what was available in each state, in order to advance joint national projects.

The newspaper stressed that “not mobilizing domestic preparations and possibilities and relying entirely on outside [powers] to advance the economy is, in the end, putting the fate of the economy in someone else’s hands…by fully mobilizing in-country forces and potential as a base, resolving necessary issues through foreign economic relations is just secondary.” The article added that the country “must stand by this principle to build a strong economy with an independent strength that would not waver even if there were global economic waves,” and that this would, “increase and guarantee the physical livelihoods of the people.”

The article closed by noting, “the important, fundamental issue as [North Korea] maintains the basic path toward the construction of a powerful economic state…is keeping the economic structure’s distinctive qualities alive while technically reviving the people’s economy,” and furthering the development of heavy industries and national defense industrial sector.

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*North Korean Economy Watch: “This is not the definition of comparative advantage.  Click here for wikipedia.”

The Daily NK reports that demand for South Korean pornography among Northerners is on the increase:

The demand for X-rated movies among North Korea’s high cadres is so great that a single VCD sells for 50 US dollars.

The latest publication of Good Friends, a North Korea-related aid organization, tells the story of Mr. Park, a resident of Hyesan, Yangkang Province. Mr. Park was arrested for making copies of South Korean adult movies–called “colored movies” in North Korea–and selling them in Pyongyang. Despite the high price per VCD, the publication notes that supplies are getting tight.

“Mr. Park bought the CDs near the North Korean- Chinese border from China. Then he would make his friend in Pyonsung, South Pyongan Province copy them and to sell them to traders in Pyongyang,” reported the publication.

The fact that there is a demand for pornography in the DPRK is not surprising (I have met several North Koreans who have seen it more than once) but the price reported in the story seems unusually high. 

Read the full story here:
Pyongyang Cadres Want South Korean Adult Movies
Daily NK
Park In Ho
4/4/2008

Institute for Far Eastern Studies (IFES)
NK Brief No. 08-3-27-1
3/27/2008

The latest issue of the North Korean publication “Economic Research” (2008, issue no. 1) highlights the need to restructure North Korea’s trade system in order to meet the demands of the capitalist market. The journal quotes Kim Jong Il as saying, “[We] need fresh improvement, in our own manner, of the basic Socialist economy’s trade system of yesterday, meeting the current demands being faced due to the capitalist market.”

Therefore, the journal stresses, “As the socialist market crumbles, and given the demands of the capitalist market as [our] focus shifts to overseas economic relations, what is currently needed for the development of overseas trade is improvement of our own style to the trade system that can ensure large profits.

The journal goes on to recommend that, in order to meet these new demands of the international capitalist market, “the most important thing is improving the import-export system based on the foundation of an self-reliant national economy.” It states that raw materials should not be sold as-is, but rather should be turned into processed goods and then sold, that goods popular on the international market should be manufactured for export, and that niches should be chosen in which North Korean goods can dominate the international market.

However, the journal also says, “If individual offices trade with capitalists outside the scope of government controls, ‘reform’ and ‘opening’ sought by the imperialists would occur, and the nation’s economy could liberalize and capitalize…International trade must take place orderly under the uniform control and guidance of the nation.”

The journal asserts that even though a variety of offices are engaged in trade, they must first receive government permission, follow government guidelines, and operate in a government-created environment. The central government must standardize prices and designs of selected export goods from each trading company.

Institute for Far Eastern Studies (IFES)
NK Bfrief No. 08-3-13-1
3/13/2008

International fuel and food prices are skyrocketing, while the cost of Chinese goods continues to rise, so that this so-called ‘triple-threat’ is sending shockwaves through the North Korean economy. In this year’s New Year’s Joint Editorial, North Korea championed the banner of a ‘strong and prosperous nation’, and declared that this year would focus on the economy, however this ‘triple-threat’ will likely make it extremely difficult for the North to meet its policy goals.

With oil prices peaking at over 110 USD per barrel, if these high oil prices continue, North Korea, which imports crude and refined oil from China, Russia and other countries, will face a growing import burden. In accordance with the February 13th agreement reached through six-party talks, South Korea, the United States and others will provide some heavy fuel oil, and the agreement stipulated the amount of oil to be delivered, rather than the value, so this will not be affected by rising prices. However, this oil does not cover all of the North’s needs, and as for the remaining portion, either the amount imported will have to be reduced, or the North will have no choice but to invest considerably more in fuel. In addition, as a large portion of North Korea’s oil is imported from China, Pyongyang’s trade deficit with its neighbor will also grow.

According to the Korea Trade Investment Promotion Agency (KOTRA), North Korea imported 523,000 tons of crude oil from China in 2005, 524,000 tons in 2006, and 523,000 tons last year, each year accounting for approximately 25 percent of total oil imports. North Korea’s trade deficit with China has shown a steadily growing trend, reaching 212,330,000 USD in 2004, 588,210,000 USD in 2005, and 764,170,000 USD in 2006. With grain prices also skyrocketing, and North Korea depending largely on China and Thailand for rice and other grain imports, the burden on the North’s economy is growing, and this is one factor in the instability of domestic prices in the DPRK.

According to the Chinese Customs Bureau, North Korea imported 81,041 tons of rice and 53,888 tons of corn last year, increases of 109.9 percent and 37.4 percent, respectively. North Korea’s corn, rice and oil imports from China are subject to market price controls, so that rising international prices directly affect the North’s cost burden. Last year, the price of Chinese goods rose 4.8 percent, recording the largest jump in ten years, and this trend extends to a wide variety of goods. 80 percent of disposable goods in North Korea are produced in China, and rising Chinese prices are directly reflected in North Korean import costs, which is passed on to DPRK citizens.

As North Korea emphasizes the building of its economy, it appears unlikely that residents will feel any direct effects of Pyongyang’s promise to prioritize the stability of its citizens’ livelihoods.

Institute for Far Eastern Studies (IFES)
NK Brief No. 08-3-3-1
3/3/2008

In the latest issue (February 3rd) of the DPRK Cabinet bulletin, “Democratic Chosun”, it was reported that the first extended cabinet meeting of the year opened in the beginning of February, with Premier Kim Young-il presiding. The bulletin stated that the issue of accomplishing this year’s economic plans was discussed.

At the meeting, Vice Premier Kwak Bum-ki stressed that accomplishing this year’s economic goals was “essential for opening the doors to a breakthrough for building an economically strong nation,” and that it was the “fundamental task laid out before the Cabinet.” He went on to reveal the tasks and directives needed to revitalize all realms of socialist construction, which he stated was necessary to create a powerful and prosperous nation by 2012, the centennial anniversary of the birth of the late Kim Il Sung.

In particular, he called for the production of the “lifeline of socialist construction”, and specifically, electricity, coal, metal, and railways, which he referred to as the “four lines for the advance of the people’s economy.”

Accordingly, the goal of carrying out overwhelming repairs to power generation facilities, and at the same time constructing new power plants in order to increase electrical production capabilities by several hundred thousand kilowatts, was proposed.

The meeting also stressed the need for concentrating efforts on geological exploration and exploitation industries in order to reasonably development and use natural resources, for a change in production of goods necessary for daily life, and for a resolution to the people’s ‘eating problem’ alluded to in the recent New Year’s Joint Editorial.

The bulletin also reported that there was discussion on creating a new five-year plan for the development of science and technology, going as far as to say, ”the role of science and technology in the building of an economically powerful nation is decidedly large, and in order to answer the very real calls for development, [the issue of] strengthening international economic projects” was brought up.

Premier Kim Young-il, Vice-Premier Kwak Bum-ki, Chairman Kim Kwang-rin, of the Committee on National Planning, Park Nam-jil, of the Power Supply Industry Bureau, and Kim Yong-sam, from the Railways Bureau, were among cabinet ministers present.

The Reporters Without Borders 2008 Annual Report has been published.  It is not an index (with rankings assigned to each country) but rather a survey that groups nations into one of five quintiles based on the publisher’s perceptions of press freedom: (1. Good situation, 2. Satisfactory situation, 3. Noticeable problems, 4. Difficult situation, 5. Very noticeable problems.

If you read the report (here), it is mostly a qualitative analysis and there does not seem to be any objective methodology for grouping countries into a particular quintile. (Disclaimer: I have note read the whole thing, but usually the methodology is spelled out in its own section for these types of publications, but I have not been able to find it). This worries me because if there is no standard methodology, with relative weights, then the results are vulnerable to questions of subjectivity.

North korea is ranked a “Very Noticeable Problem.”  To read just the North Korea section of the report click: rwb-dprk.pdf. 

When President Kim il Sung was alive, he delivered a “state of the nation” address each new year.  Since his death in 1994 audio recordings of his past speeches have been played publicly.  However, the North Korean government did develop a new tool to fill the role of informing the public about the government’s policy goals without overshadowing the unique position of the deceased leader: the “Joint Editorial” published by three of the DPRK’s leading journals, Rodong Sinmun, the People’s Army, and the Youth Vanguard. Each January it is published and North Korea watchers rush to interpret and extrapolate what each line signals. If you have a lot of spare time, you can read some extensive excerpts here.

The title: Glorify This Year of the 60th Anniversary of the Founding of the DPRK as a Year of Historical Turn Which Will Go Down in the History of the Country

Although many publications have pointed out that North Korea missed yet another deadline to declare its nuclear facilities, South Korean reviews seem to indicate that the editorial was docile compared to previous years:

(more…)

Daily NK
Lee Sung Jin, Yang Jung A
12/27/2007

In contrast to the news that Kim Kyung Hee (Kim Jong Il’s blood sister) will visit Hoiryeong in commemoration of the 90th birthday of Kim Jong Suk, it was confirmed that only upper-level Party officers participated in the celebrations.

Rumors started circulating early this year that Kim Jong Il would visit Hoiryeong, North Hamkyung, which is the birthplace of Kim Jong Il’s mother Kim Jong Suk. However, with the commemorative event approaching, Kim Kyung Hee, instead of Kim Jong Il, was supposed to visit Hoiryeong.

A source in Hoiryeong said in a phone conversation with a reporter on the 23rd, “An event commemorating the 90th birthday of Kim Jong Suk was held in Hoiryeong from the 18th to the 20th of this month and after the 20th, celebrations were held in Pyongyang. Kim Kyung Hee, who was supposed to come, did not show up.”

He added, “Provisions resumed on the 21st in time for the holiday (Kim Jong Suk’s birthday). Items that were given out were rice, corn, noodles, and oil. Holiday provisions such as liquor, gum, juice, socks, hot pepper paste, snacks, and soap were disbursed starting on the 23rd.“

The footsteps of Pyongyang’s upper-level leaders have not ceased coming into Hoiryeong. Chairwoman Park Soon Hee of Union of Democratic Women, Im Kyung Sook of the Ministry of Commerce and other representatives females in North Korea visited Hoiryeong and participated in the 90th anniversary commemorations.

The news of Kim Jong Suk’s 90th birthday anniversary commemorations has been relayed through North Korea’s media.

The Chosun Central Television, with Kim Jong Suk’s birthday coming up, reported on the 21st that oath ceremonies at the party, army, and office levels took place in Hoiryeong on the 20th.

At the ceremony site, the broadcast relayed that large-sized banners were set up praising Kim Il Sung and Kim Jong Il and the propagandistic signs stating, “Our greatest tribute to Mother Kim Jong Suk, the anti-Japanese heroine. May the revolutionary life and the results of the struggles of the great brethren Kim Jong Suk be immortal!”

The participants in the commemoration were Kim Il Cheol (Minister of the People’s Armed Forces), Kim Jung Gak (First Vice Director of KPA General Political Department), Choi Tae Bok and Kim Ki Nam (the secretaries of the Central Committee of the Party), Yang Hyung Sup (the Vice-Chairperson of the Supreme People’s Committee), Jeon Seung Hoon (the Vice-Minister of the Cabinet), and others high level officials.

In Hoiryeong, a joint performance by the People’s Army’s orchestra opened the day with a concerto “May the loyalty go on forever.” On the 19th, the “Nationwide Youth Students’ Poetry and Singing” took place among 3,000 participants, which consisted of youth and related persons of the Youth League Central Committee in each region.

Even prior to this, the nationwide landscape and crafts exhibitions commemorating Kim Jong Suk 90th birthday anniversary were held on the 12th at the Pyongyang International Cultural Exhibition Hall and on the 18th, a variety of events such as the opening of the Central Arts Show at the Korean Fine Arts Museum was held.

One researcher at a national policy research institute said regarding Kim Kyung Hee’s absence, “It is known that she has been suffering from an alcohol addiction for a long time, so does not make frequent public appearances.”

Yonhap
12/8/2007

North Korean leader Kim Jong-il has given warm encouragement to local workers developing Mount Paektu, the highest point on the peninsula that will be opened to South Korean tourists next year, the North’s broadcaster said Saturday.

South and North Korea agreed to open a direct flight route between Seoul and the North’s Mount Paektu during their second summit in October. The inter-Korean tour, set to start in May, is organized by South Korea’s Hyundai Group.

Kim “expressed his gratitude to officials and workers who have wholeheartedly supported the development of the Mount Paektu area,” the Korean Central Broadcasting Station, monitored in Seoul, said, naming technicians, researchers and factory workers involved in the project.

Hyun Jeong-eun, chairwoman of the Hyundai Group, agreed with North Korea during her visit to Pyongyang in early November to start in May sightseeing tours of the North’s 2,744-meter mountain, located on its border with China. A group of South Korean government officials and researchers have conducted an on-site inspection.

Mount Paektu will be the third inter-Korean tourism project organized by Hyundai Asan, a unit of the Hyundai Group in charge of North Korea business. North Korea opened its border city of Kaesong to South Korean tourists early this week, following the launch of a tourism program to the North’s east coast mountain of Geumgang nine years ago.

The Mount Paektu and Kaesong tour projects are part of agreements South Korean President Roh Moo-hyun and North Korean leader Kim Jong-il reached during their summit that sought to boost economic cooperation and reduce tension.

Korea Times
Jung Sung-ki
12/4/2007

Kim Chang-soon, director of the Institute for North Korea Studies in Seoul, died of a chronic illness Tuesday. He was 86.

Kim, a former North Korean journalist, has been recognized as the “pioneer” of North Korean studies in South Korea.

Born in Uiju, North Pyeongan Province, he was a journalist in the North before he fled the country about six months into the three-year Korean War in 1950.

Kim was a senior editorial writer for the communist regime’s newspaper, Minju Chosun, and had been once granted the rare opportunity of interviewing the late North Korean leader Kim Il-sung.

He said he learned first hand the “deceptive nature” of North Korea’s communism when he was imprisoned on charges of “anti-revolutionary” crimes in 1949.

In the early 1970s, Kim became the chief director of the private North Korean think tank in the South after spending several years with the now-defunct Naewoe Affairs Research Institute run by the Seoul government.

The area of North Korea studies was almost like a “barren land” in South Korea before Kim devoted himself to it as the head of the state-funded institute in 1962.

In an interview with Japan’s Kyodo News in the early 2000s, Kim said his hardships and inhumane treatment in North Korean prisons were almost “beyond description” and it made him become an incisive critic of North Korean communism and its followers.

He is survived by his wife, Jin Yong-joo, and two daughters.

A funeral service will be held at the Asan Medical Center in southern Seoul. His body will be buried at the Tongil Park in Paju near the inter-Korean border today. For more information, call 02-3010-2294.