North Korean Economy Watch

Choson Ilbo
4/9/2007

“Why are so many crosses out there?” “Why do most children wear glasses?” “Can I see your mobile phone?” These were just a few of the many questions North Korea’s youth football squad had over the weekend. On the pitch, they are not different from young South Korean players. But moving around by bus or train, they were full of curiosity about the things they saw. Twenty-three members of the under-17 football team have been staying in South Korea for 20 days.

Many questions
The lobby of the Suncheon Royal Tourist Hotel at 9 a.m. on Saturday. The North Korean soccer squad look trim in their black uniform, shoes in hand. They had countless questions for the South Korean officials of the Sports Exchange Association accompanying them. “What is the cross for?”, one asks, and when told asks again, “What is a church?” The answer seemed to baffle them. When an official explained that many young South Koreans wear glasses because they use computers a lot, one team member said, “In North Korea, only few children and scholars who read lots of books wear glasses.”

The players were particularly taken by mobile phones. They wondered how people could make calls without lines and play games or take pictures with their phones. Whenever officials from the association used their mobile phones, the North Korean youngsters gathered to see their phones.

When shown magazine photos and asked to pick the most beautiful among actresses, Jeon Ji-hyun, Song Hye-gyo and Beyonce Knowles, they chose Beyonce Knowles, still insisted they didn’t care.

◆ They enjoyed playing chess and cards when taking a rest.

The squad had three meals in their hotel restaurant and only left the hotel for training for three hours in the morning and afternoon. In the hotel, they spent most of the rest of their time playing Chinese card games and chess. They did not watch TV except football games. When the team was moving to Suncheon by bus, one player started reading a memoir by former North Korean leader Kim Il-sung, and others asked to borrow it.

Ri Chan-myong, the head of the North Korean youth squad, and the other eight North Korean officials accompanying them drank together with South Korean officials of the sports exchange association. The North Korean officials drank a lot, finishing off 200 bottles of soju or Korean distilled liquor during their 11 days in Jeju.

◆ “I miss my parents”

Five members got wounds in the middle of training. Those players sometimes said, “I miss my parents.” North Korean soccer players, who did not talk much when they first arrived in Jeju, began talking on the third days. At first, North Korean soccer squad ate only Kimbab(rice rolled in dried laver) and Kimchi, now they eat sushi, sliced raw fish, cake and fruits such as banana, apple and pineapple. North Korean soccer squad will move to Seoul on April twelfth and depart for North Korea on twentieth after having a friendly match on fourteenth. Kim Kyung-sung, chief executive member of the South and North Korean Sports Exchange Association, said, “North Korean soccer team is considering going out before they leave but nothing is confirmed.”

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Daily NK
Han Young Jin
3/29/2007

North Korean inside source informed that authorities had been asserting control over illegal selling and use of mobile phones at the markets near the border regions. National Security Agents have also been conducting in-depth investigations on illegal acts such as drug smuggling and slave trade.

In a telephone conversation with a reporter on the 28th, Park Jong Run (pseudonym) of Musan, North Hamkyung said, “Authorities came to the People’s Units and said furtively, ‘Rations will be distributed in April. In future, you will live a good life. So, stop engaging in illegal trade.’ Why would we listen to them when they tell us to stop selling especially since they aren’t going to give us distributions anyway?”

Park relayed, “They said, don’t sell our confidential information about our country through the mobile phone. People already in possession of mobile phones will be forgiven if they self-confess at the National Security Agency.” Since last year, North Korean authorities have been keeping a close watch on mobile phone use particularly in the border regions.

He said, “They threaten us with a declaration, so that we will report cases of illegality or corruption such as slave trade and drug trade.” For example, large amounts of drugs were found in the home of a Chairwoman for the Women’s Union of Hoiryeong City, late February.

According to Park, authorities will directly carry out the procedures at Jangmadang (markets) themselves, with assistance from Hoiryeong Security Agency and various police departments. Some goods found to be linked to illegal trade are in part taken away by the sudden wave of control. In particular, these authorities have a keen eye for goods made overseas such as Chinese items.

National Security Agents and the police confiscate the items arguing that, “now we have a gap between the rich and poor, as well as the richer getting richer and vice versa, because you, tradesmen have tasted some money. Now, socialism has been infected by capitalism.” However, even the security agents are acting tactful by removing only some of the goods as a mere example of punishment.

Goods confiscated are locked up at the security agency and kept in provision. The endless lines in the waiting rooms of the security agency make up the people ready to pay a fine and recollect their items, says Park. Nonetheless, security agents are reluctant to return the goods back to the traders and so bribes must be ready at hand also.

“I barely got my goods back after bribing them with 10 packets of cigarettes, but there was only half the goods left remaining in the bundle” Park criticized and said that the security agents sarcastically remarked, ‘Hey, let us eat and live a little.”

Following the nuclear experiment, authorities have been trying to gather regime support and elevate the nation’s pride arguing the nation had become a strong militaristic country. They proclaim, “The world is cooperating with us and is throwing their goods at us. In future, you will live well.” It will be difficult for North Korean authorities to prohibit trade, especially with the people’s strong will power to make money.

Yonhap
3/29/2007

A group of 143 South Koreans made a four-day visit to North Korea starting from March 22 to celebrate the opening of a North Korean digital library built with South Korean technology, a local foundation that has a leading role in the project said.

During their stay in Pyongyang, Rep. Im Jong-seok of the ruling Uri Party and other delegates attended the opening ceremony of the digital library at the North’s top school, Kimilsung University, on March 23 and toured the city’s landmarks.

The library’s computer network was built with aid from South Korea’s Hanyang University, the Kim Dae-jung Presidential Library and the Korean Foundation for South-North Economic and Cultural Cooperation, a private foundation for the promotion of such inter-Korean cooperation.

Kimilsung University is the first North Korean school to introduce the South’s advanced digital library system.

Jo Chol, vice president of the North’s university, said he hopes to see an exchange of teaching staff between the universities of the two Koreas, saying the exchange in academic fields will promote the improvement of inter-Korean relations.

Daily NK
Kim Min Se
3/14/2007

It is a well known fact that goods made in China are sweeping across North Korea with Chinese merchants taking the role of distributor.

However, Chinese merchants are not only exporting goods into North Korea but are also importing goods made in North Korea such as seafood, medicinal herbs, coal and minerals back to China.

Particularly, dried shellfish sells very well in China. As more and more Chinese merchants buy dried shellfish from North Korean markets, they play a critical role in the lives of North Korean citizens as sellers who are then able to raise the price due to demand. Every year, from April~Sept, people from the North-South Pyongan, Haean collect shellfish along the shore. 10kg of rice can be bought with 1kg of shellfish meat. Consequently, citizens of other regions also come to the beaches to collect shellfish.

If Chinese merchants did not import any goods and North Korea’s finest goods were not exported to China, the cost of goods at Jangmadang would increase exponentially. This is how close the relationship between the lives of North Korean citizens and Chinese merchants have become interconnected.

Significance of information runners

Though Chinese merchants are currently contributing to market stability, it does not necessarily mean that their existence will continue to be positive to North Korean authorities.

The people first to inform news of the Yongchun explosion in April 2004 to the outside world were Chinese merchants.

At the time, after confirming the lives their family members in North Korea, Chinese merchants who heard the explosion in Dandong gathered information about the explosion details from relatives in Shinuiju and Yongchun over mobile phones. Undoubtedly, news spread instinctively. The economic development zone, Dandong, which is at the mouth of the Yalu River is merely 10km from Yongchun.

Due to this incident, Kim Jong Il banned the use of mobile phones in North Korea. Chinese merchants have played a great role in the outflow of inside North Korean issues, a problem feared by North Korean authorities that contributes to the inflow of foreign information.

Recently, Chinese merchants have been charging a 20% fee involved in remitting dollars to defectors wanting to send money to family in North Korea. For example, if a defector wishes to send $1,000 to family in North Korea, a merchant will extract $200 and transfer the remaining $800 to the family.

As long as Chinese merchants have a specific identification card, they are free to travel between the North Korean-Chinese border and hence many defectors prefer to use Chinese merchants as the intermediary. Thanks to these merchants, many people can convey money and letters to family within North Korea.

In these respects, Chinese merchants are not only selling goods but are acting as information runners transporting news of the outside world into North Korean society.

As more and more North Koreans rely on markets as a means of living and trade between China and North Korea, the North Korean market will only continue to expand. We will have to wait and see whether or not Chinese merchants will have a healing or poisonous affect on the Kim Jong Il regime from here on in.

Daily NK
Kim Min Se
3/7/2007

90% daily goods made in China, 50% circulated by Chinese merchants

While some prospect that North Korea may be an affiliated market of China’s 4 provinces in the Northeast, the real focus is on the merchants who actually control North Korea’s markets. Recently, North Korean citizens have been asserting that markets would immobilize if Chinese merchants were to disappear.

Lately, Chinese merchants are nestling themselves with their newly found fortune in North Korea, undeniably to the envy of North Korean citizens.

In a recent telephone conversation with the DailyNK, Kim Chang Yeol (pseudonym) a resident of Shinuiju said “Most of the tiled houses in Shinuiju are owned by Chinese merchants in Shinuiju are upper class and the rich.” Unlike Pyongyang, tiled houses in Shinuiju are greater in value than apartments. In particular, the homes owned by Chinese merchants are luxurious and impressing.

Kim said “At the moment, 90% of daily goods that are traded at Shinuiju markets are made in China.” What Kim means by 90% of goods is basically everything excluding agricultural produce and medicinal herbs. Apparently, about half of the (90% of) supplies are circulated by Chinese merchants.

Kim affirmed that the market system could be shaken if supplies were not provided by the Chinese merchants. Hence, Chinese merchants have elevated themselves in North Korea’s integrated market system, to the extent that the market could break down without their existence.

In addition to this, Chinese merchants are playing a vital role in conveying information about the external world into North Korea. Even in 2004, it was Chinese merchants to first telephone China through mobile phones relaying the news about the Yongcheon explosion. As a result, rumors say that the movement of Chinese merchants can either be a “cure” to the economic crisis in which the North Korean government seems unable to fix, or “poison,” as more and more foreign information flows into the country.

How many Chinese merchants are there in North Korea?

A report by China’s Liaoning-Chosun Newspaper in 2001 sourcing data from North Korea, states that immediately after WWII, approximately 80,000 overseas Chinese were residing in the Korean Peninsula. Then following the Korean War and the formation of a Chinese government, the majority of people, approximately 60,000 Chinese, returned home. In 1958, statistics show that 3,778 families of overseas Chinese were living in North Korea, totalling 14,351 people.

These Chinese engaged in business related to farming, home made handicrafts and restaurant business, and in the late 50’s, lost all this due to the implementation of economic planning and dictatorial regime. Since then, the majority of merchants continued to return to China until the early 80’s.

In 2001, Liaoning-Chosun Newspaper confirmed that approximately 6,000 Chinese were living in North Korea. Of this figure, more than half were residing in Pyongyang, approx. 300 families living in North Pyongan and approx. 300 families residing throughout Jagang and northern districts of South Hamkyung.

At present, there are 4 middle and high schools for children (11~17 years) of Chinese merchants, located in Pyongyang, Chongjin, Shinuiju and Kanggae. In addition to these schools, there are a number of elementary schools (for children aged 7~11 years) located sporadically throughout each province.

Wang Ok Kyung (pseudonym) a resident of Shinuiju attended Chongjin Middle School for children of overseas Chinese in 1981~86. Wang said “At the time, there were about 40 students in each year. Now there is only about 5~6 students.” Nowadays, many Chinese children complete their elementary studies in North Korea, but the general trend is to send the children to China for middle school. She said “In order to enter a Chinese university, students must have completed their middle school studies in China and must be fluent in Chinese. He/she can also go to private institutes in China.”

Fortunes made through trade between North Korea-China during the food crisis

Even until the early 80’s there were no such thing as a wealthy North Korean-Chinese merchant. They were no different to North Korean citizens.

However, in the 80’s, many people began importing and selling goods such as socks, handkerchiefs, hand mirrors and cards from China, literally through their sacks. As the 90’s approached North Korean-Chinese merchants began to experience great wealth, the time where North Korea-China trade fundamentally kickstarted.

Today, Son Kwang Mi (pseudonym, 52) falls under the top 10 wealthiest Chinese merchants in Dandong, characterizing an unique rags to riches story. In the past, Sun lived in Chongjin and was one of the first figures to trade with China in the 80’s.

In the beginning, Son was so poor that she had to sell her watch received as a wedding gift in order to buy goods to sell.

Fortunately, Son found her money smuggling gold. In North Korea, gold is considered a public good or simply put Kim Jong Il’s personal inheritance, so private trade of gold is strictly regulated. Nonetheless, there are still some laborers who export gold secretly and a great number of people still collect gold through dubious ways. In particular, after the 80’s as North Korea began to experience economic decline, more and more people sold gold secretly.

Hence, a small number of Chinese merchants infiltrated the market of secretly trading gold with China. Chinese smugglers were able to take advantage of North Koreans by greatly raise their market margins, as the supply of gold and North Koreans wanting to sell their gold was high yet the demand in North Korea low.

Son said “Of the Chinese merchants in North Korea, 60% earned a great fortune at that time through illicit trade.”

She says that there were two opportunities for overseas Chinese to make a great fortune. The first was in 1985~89 through illicit trade of gold and the second, during North Korea’s mass food crisis in 1995~98.

“During the mass famine, everything in North Korea was in shortage and so Chinese merchants began to provide the daily necessities of life. At the time, if you brought large amounts of goods such as fabric and sugar, you could make a profit of 1 million Yuan (US$137,000),” she said.

Son was fortunate enough not to miss these two opportunities which led her to great wealth and allowed her to possess a fortune of 50 million Yuan (US$6.31 million).

Chinese merchants can relatively enter and exit China freely. Also, with the ability to speak Chinese fluently and the possibility of staying in the homes of many relatives in China, the occupation possesses ideal conditions.

Associated Press (Hat tip DPRK Studies)
3/3/2007

Three North Koreans ended a rare and discrete visit to Oregon this week after visiting Oregon State university scientists, orcharists in the Hood River area, the Nike campus, Gov. Ted Kulongoski and attending a Trail Blazers basketball game.

Because of sensitive six-way talks on North Korea’s nuclear program, Mercy Corps, which hosted the visit, declined to release the officials’ names.

Portland-based Mercy Corps is among a handful of humanitarian agencies running programs involving North Korea, which has no diplomatic relations with the United States.

Over 12 years, Mercy Corps has supplied fish and fruit trees for farm projects in North Korea, which has chronic food shortages.

The North Koreans, representing Mercy Corps’ main partner organization, the Korean American Private Exchange Society, arrived Tuesday and were to leave Saturday.

Mercy Corps President Nancy Lindborg said the three visited OSU, which has made scientists available to advise on the agricultural projects. On the way back they met with Kulongoski. They visited orchards in the Hood River area Friday.

At Nike headquarters near Beaverton, they met with managers who gave a presentation on e-commerce, an Internet activity with undetermined relevance in a socialist nation with limited Web penetration.

“I don’t have a specific point of view to share on their visit and the possible opportunities North Korea may present,” said Bob Applegate, a Nike spokesman.

The visit was perhaps the 10th in a series of low-profile North Korean delegations here over the years, Lindborg said. In North Korea, she said, “Oregon is very well-known.”

At the Rose Garden on Thursday the visitors watched the Trail Blazers dismantle Charlotte.

“They’re fans,” said Lindborg, who also attended the game. “Two of them actually play basketball.”

KCNA
2/8/2007 

Redoubled efforts are being made to build a socialist economic power in the DPRK. The people are turning out in the grand march for perfecting the looks of a great, prosperous and powerful nation, full of confidence in sure victory and optimism.

The DPRK has consolidated the foundation for building an economic power over the last years.

The Workers’ Party of Korea has developed in depth President Kim Il Sung’s idea on economy as required by the developing revolution and thus provided unswerving guidelines for building an economic power.

While implementing the revolutionary economic policies of the WPK such as the line on economic construction in the Songun era with main emphasis on the development of the munitions industry and the policy of putting the national economy on a modern footing and IT, the Korean people have been firmly convinced that they will certainly build an economic power in this land when they work as indicated by the Party.

The army-people unity has developed as the oneness of army and people in terms of ideology and fighting spirit in the Songun era. It constitutes a powerful impetus to the construction of the economic power.

The Kanggye spirit, torchlight of Songgang and the Thaechon stamina have been created while the whole society following the revolutionary soldier spirit. The efforts have brought about a great change in the overall socialist construction.

Through the heroic endeavors, the people replete with faith in the future of prosperity have put industrial establishments, once stopped, on normalization of production and erected many monumental edifices including the Thaechon Youth Power Station No. 4.

An importance has been attached to science. A large army of intellectuals are paving the shortcut to the construction of an economic power with an extraordinary revolutionary enthusiasm.

A solid material and technical foundation for the construction of an economic power has been laid in the country.

All the sectors of the national economy have pushed ahead with the work of perfecting production structures, renovating technique and putting them on a modern footing, with the result that the number of such model factories in technical renovation and modernization as the Pyongyang 326 Electric Wire Factory is increasing as the days go by.

Production bases such as foodstuff factory, chicken farm, catfish farm, beer factory and cosmetic factory, which are directly contributing to the improvement of the people’s living standard, have mushroomed in different parts of the country.

The DPRK, with all the conditions for leaping higher and faster, will demonstrate the might of an economic power in the near future.

Joong Ang Daily
Kang Chan-ho
2/7/2007

Budget allocations by the Bush administration show that the United States plans to continue to pressure North Korea about human rights violations and illicit financial transactions, despite the ongoing North Korean nuclear talks.

In its fiscal plan for the year 2008 released Monday, the U.S. State Department said $20 million had been set aside to support refugees in the East Asian region, including North Korean defectors, while $2 million had been earmarked to support activities promoting democracy in North Korea.

In addition, $668 million will be set aside for radio propaganda broadcasts: The Voice of America and Radio Free Asia will increase their combined broadcast hours targeted to the North by up to 10 hours each day. The State Department is focusing its broadcasts on North Korea, the Middle East, Somalia and Cuba.

In addition, the Treasury Department has budgeted $385,000 to hire two more officials to deal with illicit North Korean financial activities and act in an advisory role to bring more pressure on the communist country.

The budget plan by the State Department also outlined a timeline for the ongoing nuclear negotiations. It projects that should the nuclear talks be concluded, the actual process of dismantling the North’s nuclear weapons should start by early 2008. The plan states that negotiations to dismantle the North’s mid- to long-range missiles would begin next year as well.

Meanwhile, with nations involved in the six-party talks getting ready to convene in Beijing on Thursday to resume nuclear negotiations, Japanese Prime Minister Shinzo Abe said on Monday that without sincere measures taken by Pyongyang regarding Japanese abductees, Tokyo will not come up with the energy aid measures needed to compensate the North.

Officials involved in the nuclear talks have said they intended to take some initial steps toward implementing an international accord reached in September 2005. The Yomiuri Shimbun reported earlier that Pyongyang was looking to get 500,000 tons of heavy fuel per year in exchange for agreeing to stop operations at its Yongbyon nuclear reactor and allowing inspectors from the International Atomic Energy Agency back into the country.

the Economist
2/1/2007

Online dating in Pyongyang? Surely not

KIM JONG IL, North Korea’s dictator, has interests in modern technology beyond his dabbling in nuclear weaponry. In 2000 he famously asked Madeleine Albright, then America’s secretary of state, for her e-mail address. Mr Kim believes there are three kinds of fool in the 21st century: smokers, the tone-deaf and the computer-illiterate.

One of his young compatriots is certainly no fool. “Officially, our computers are mainly for educational and scientific purposes,” he says, before claiming: “Chatting on our web, I also met my girlfriend.”

Internet dating is only one of the surprises about the internet in North Korea, a country almost as cut off from the virtual world as it is from the real one. At one of the rare free markets open to foreigners, brand-new computers from China are sold to the local nouveaux riches complete with Windows software. Elsewhere, second-hand ones are available far more cheaply. In most schools, computer courses are now compulsory.

In the heart of the capital, Pyongyang, visitors are supposed to be able to surf freely through the 30m official texts stored at the Grand People’s Study House, the local version of the Library of Congress. The country’s first cyber café opened in 2002 and was soon followed by others, even in the countryside. Some are packed with children playing computer games.

But the world wide web is still largely absent. Web pages of the official news agency, KCNA, said to be produced by the agency’s bureau in Japan, divulge little more than the daily “on the spot guidance” bestowed by Kim Jong Il. No one in Pyongyang has forgotten that glasnost and perestroika—openness and transparency—killed the Soviet Union.

The local ideology being juche, or self-reliance, the country installed a fibre-optic cable network for domestic use, and launched a nationwide intranet in 2000. Known as Kwangmyong (“bright”), it has a browser, an e-mail programme, news groups and a search engine. Only a few thousand people are allowed direct access to the internet. The rest are “protected” (ie, sealed off) by a local version of China’s “great firewall”, controlled by the Korean Computer Centre. As a CIA report puts it, this system limits “the risks of foreign defection or ideological infection”. On the other hand, North Koreans with access to the outer world are supposed to plunder the web to feed Kwangmyong—a clever way to disseminate technical information to research institutes, factories and schools without losing control.

Yet even today, more and more business cards in Pyongyang carry e-mail addresses, albeit usually collective ones. A west European businessman says he is astonished by the speed with which his North Korean counterparts respond to his e-mails, leading him to wonder if teams of people are using the same name. This is, however, North Korea, and sometimes weeks go by in virtual silence.

In some places, North Korea’s internet economy seems to be overheating. Near the northern border, Chinese cell phones—and the prepaid phone cards needed to use them—are a hot black-market item, despite government efforts to ban them. The new web-enabled phones might soon give free access to the Chinese web which, for all its no-go areas, is a paradise of liberty compared with Kwangmyong. In this region, known for its casinos, online gambling sites are said to be increasingly active.

Last summer the police were reported to have cracked down on several illegal internet cafés which offered something more daring than the average chatting and dating. Despite the signs that North Korea’s web culture is ready to take off, internet-juche remains a reassuring form of control in the hermit regime.