North Korean Economy Watch

According to Yonhap:

A United Nations organization supporting child birth has provided US$500,000 worth of medical aid to North Korean mothers and children, a report said Wednesday.

The United Nations Population Fund (UNFPA) shipped drugs and medical equipment for mothers with newborn babies in the North last month, the report by the Washington-based Radio Free Asia said.

The goods were sent to about 300 health facilities in the country and the UNFPA tapped into the U.N.’s Central Emergency Response Fund in order to provide the assistance, it said.

With a budget of $10 million, the UNFPA has been leading a five-year project to help pregnant North Korean women and conduct a census in the communist country since 2011.

Maternal death in the North reached 77 in 2008, up 40 percent from 54 recorded in the 1990s, according to the UNFPA. The rate refers to the number of women dying from child birth-related complications per 100,000 live births.

Read the full story here:
UNFPA provides US$500,000 in medical aid to N. Korean mothers
Yonhap
2013-5-22

According to Bloomberg:

North Korea freed a Chinese fishing vessel and its crew after the boat’s owner posted updates on his microblog account saying that he’d been told to pay a 600,000-yuan ($97,800) ransom to win their release.

The ship and its crew, from the northern city of Dalian, were freed today, the official Xinhua News Agency reported, citing a Chinese consular officer in North Korea. The ship’s owner, Yu Xuejun, said on his Tencent Holdings Ltd. (700) microblog account today that he couldn’t come up with the cash and was “thankful to the Foreign Ministry for its diplomacy.”

…

China, which filed a formal complaint over the detention, is asking North Korea to investigate and “make a full explanation to us,” Foreign Ministry spokesman Hong Lei said today. No ransom was paid to secure the crew’s freedom, China National Radio reported today, without citing anyone.

…

“There is no territorial confrontation between China and North Korea,” the editorial said. “It’s more likely the North Korean military police are using the ambiguity of maritime borders to make a quick buck.”

Last year a North Korean ship seized three Chinese fishing and demanded 300,000 yuan to free each vessel.

Read the full story here:
North Korea Frees Chinese Fishing Boat After Ransom Report
Bloomberg
2013-5-21

According to Yonhap:

Eight out of every 10 North Korean families are suffering malnutrition with little access to protein foods, a U.S. media report said Tuesday.

In its survey of 87 North Korean families from January to March, the World Food Program (WFP) found that 80 percent of them were undernourished mainly due to a lack of protein intake, the Washington-based Voice of America (VOA) said.

About 38 percent of those surveyed were not able to eat high-protein foods during the one week before the survey, such as meat, fish, eggs or beans, said the report, monitored in Seoul.

Quoting the WFP report, the VOA said the North Korean families, on average, eat meat 1.3 days a week or beans 1.2 days per week.

The report also said about 14 percent of the 86 hospitalized North Korean children under age 5 whom its aid workers visited during the January-March period were in serious malnutrition conditions.

Meanwhile, AmeriCares, a U.S. non-profit aid group, is about to send 10.5 tons of drugs in humanitarian assistance to the North this week, another U.S. media report said.

The aid package, which includes antibiotics, stomach medicines and dermatology drugs, will be shipped later this week to six hospitals in Pyongyang and other areas, the Washington-based Radio Free Asia reported. The shipment will also include personal hygiene items like toothbrushes and soaps, it said.

The RFA said the latest aid has no political consideration and is solely for humanitarian purposes.

AmeriCares began its aid to the North in 1997 as the first American private group to do so. Last year, it sent US$7 million worth of medicine for flood victims in the impoverished country.

Read the full story here:
Eight out of 10 N. Korean families undernourished: report
Yonhap
2013-5-7

According to the FBI:

Taiwanese Father and Son Arrested for Allegedly Violating U.S. Laws to Prevent Proliferation of Weapons of Mass Destruction

U.S. Attorney’s Office, Northern District of Illinois
May 06, 2013
(312) 353-5300

CHICAGO—A resident of Taiwan whom the U.S. government has linked to the supply of weapons machinery to North Korea, and his son, who resides in suburban Chicago, are facing federal charges here for allegedly conspiring to violate U.S. laws designed to thwart the proliferation of weapons of mass destruction, federal law enforcement officials announced today.

Hsien Tai Tsai, also known as “Alex Tsai,” who is believed to reside in Taiwan, was arrested last Wednesday in Tallinn, Estonia, while his son, Yueh-Hsun Tsai, also known as “Gary Tsai,” who is from Taiwan and is a legal permanent resident in the United States, was arrested the same day at his home in Glenview, Illinios.

Gary Tsai, 36, was ordered held in custody pending a detention hearing at 1:30 p.m. today before Magistrate Judge Susan Cox in U.S. District Court in Chicago. Alex Tsai, 67, remains in custody in Estonia pending proceedings to extradite him to the United States.

Both men were charged in federal court in Chicago with three identical offenses in separate complaints that were filed previously and unsealed following their arrests. Each was charged with one count of conspiring to defraud the United States in its enforcement of laws and regulations prohibiting the proliferation of weapons of mass destruction, one count of conspiracy to violate the International Emergency Economic Powers Act (IEEPA) by conspiring to evade the restrictions imposed on Alex Tsai and two of his companies by the U.S. Treasury Department, and one count of money laundering.

The arrests and charges were announced by Gary S. Shapiro, U.S. Attorney for the Northern District of Illinois; Cory B. Nelson, Special Agent in Charge of the Chicago Office of the FBI; Gary Hartwig, Special Agent in Charge of Homeland Security Investigations in Chicago; and Ronald B. Orzel, Special Agent in Charge of the U.S. Department of Commerce, Bureau of Industry and Security, Office of Export Enforcement, Chicago Field Office. The Justice Department’s National Security Division and Office of International Affairs assisted with the investigation. U.S. officials thanked the Estonian Internal Security Service and the Estonian Prosecutor’s Office for their cooperation.

According to both complaint affidavits, agents have been investigating Alex and Gary Tsai, as well as Individual A (a Taiwanese associate of Alex Tsai) and a network of companies engaged in the export of U.S. origin goods and machinery that could be used to produce weapons of mass destruction. The investigation has revealed that Alex and Gary Tsai and Individual A are associated with at least three companies based in Taiwan—Global Interface Company Inc., Trans Merits Co. Ltd., and Trans Multi Mechanics Co. Ltd.—that have purchased and then exported, and attempted to purchase and then export, from the United States machinery used to fabricate metals and other materials with a high degree of precision.

On January 16, 2009, under Executive Order 13382, which sanctions proliferators of weapons of mass destruction and their supporters, the Treasury Department’s Office of Foreign Assets Control (OFAC) designated Alex Tsai, Global Interface, and Trans Merits as proliferators of weapons of mass destruction, isolating them from the U.S. financial and commercial systems and prohibiting any person or company in the United States from knowingly engaging in any transaction or dealing with Alex Tsai and the two Taiwanese companies.

In announcing the January 2009 OFAC order, the Treasury Department said that Alex Tsai was designated for providing, or attempting to provide, financial, technological, or other support for, or goods or services in support of the Korea Mining Development Trading Corporation (KOMID), which was designated as a proliferator by President George W. Bush in June 2005. The Treasury Department asserted that Alex Tsai “has been supplying goods with weapons production capabilities to KOMID and its subordinates since the late 1990s, and he has been involved in shipping items to North Korea that could be used to support North Korea’s advanced weapons program.” The Treasury Department further said that Global Interface was designated “for being owned or controlled by Tsai,” who is a shareholder of the company and acts as its president. Tsai is also the general manager of Trans Merits Co. Ltd., which was designated for being a subsidiary owned or controlled by Global Interface Company Inc.

After the OFAC designations, Alex and Gary Tsai and Individual A allegedly continued to conduct business together but attempted to hide Alex Tsai’s and Trans Merit’s involvement in those transactions by conducting business under different company names, including Trans Multi Mechanics. For example, by August 2009—approximately eight months after the OFAC designations—Alex and Gary Tsai, Individual A, and others allegedly began using Trans Multi Mechanics to purchase and export machinery on behalf of Trans Merits and Alex Tsai. Specifically, the charges allege that in September 2009, they purchased a Bryant center hole grinder from a U.S. company based in suburban Chicago and exported it to Taiwan using the company Trans Multi Mechanics. A Bryant center hole grinder is a machine tool used to grind a center hole, with precisely smooth sides, through the length of a material.

The charges further allege that by at least September 2009, Gary Tsai had formed a machine tool company named Factory Direct Machine Tools in Glenview, Illinois, which was in the business of importing and exporting machine tools, parts, and other items to and from the United States. However, the charges allege that Alex Tsai and Trans Merits were active partners in Factory Direct Machine Tools, in some instances procuring the goods for import to the United States for Factory Direct Machine Tool customers.

Violating IEEPA carries a maximum penalty of 20 years in prison and a $1 million fine; money laundering carries a maximum penalty of 20 years in prison and a $500,000 fine; and conspiracy to defraud the United States carries a maximum penalty of five years in prison and a $250,000 fine. If convicted, the court must impose a reasonable sentence under federal statutes and the advisory U.S. Sentencing Guidelines. The government is being represented by Assistant U.S. Attorneys Patrick Pope and Brian Hayes.

The public is reminded that a complaint is not evidence of guilt. The defendants are presumed innocent and are entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.

According to Yonhap:

Trade volume between North Korea and the European Union (EU) more than halved last year from a year earlier after the North sharply cut exports of mineral resources, a news report said Friday.

The trade volume between the two sides came to 69 million euros (US$90.2 million) in 2012, only 43.4 percent of the 159 million euros recorded the previous year, the Washington-based Voice of America (VOA) reported, citing EU data.

The dive came as the North’s total exports to the EU shrank to 24 million euros last year from 117 million euros the previous year, according to the VOA report.

The communist country exported only 3 million euros worth of mineral resources, the main export item, to EU countries in 2012, compared with 71 million in 2011, it said.

North Korea’s imports from EU countries, meanwhile, rose 7.1 percent on-year to 45 million euros last year, led by brisk imports of machinery and electronics goods, according to the report.

Read the full story here:
N. Korea’s trade with EU halves in 2012
Yonhap
2013-5-3

According to Reuters:

Bilateral trade dropped more than 7 percent to $1.3 billion in January-March, with China’s imports from North Korea rising 2.5 percent to $590 million but exports down 13.8 percent to $720 million – excluding fuel, food or other Chinese aid. Annual trade is worth some $6 billion, a fraction of China’s trade with South Korea which last year topped $230 billion.

…

China also supplies virtually all of North Korea’s external energy needs – crude oil, diesel and jet fuel – much of it in the form of off-the-books aid.

While Chinese data showed no exports of crude oil to North Korea in February, deliveries resumed in March, with customs figures showing 106,000 metric tons of supply. China officially supplied 523,041 metric tons of crude oil last year.

The Ministry of Commerce appears to be delaying or possibly cancelling an internal tender to supply North Korea with diesel fuel, two oil trading sources said, while a person close to state-owned Sinochem Group said jet fuel flows were normal. China supplied North Korea with 42,251 metric tons of jet fuel last year, according to customs data, and 31,050 metric tons of diesel.

Another trading source said coal imports from North Korea – typically entering China through Dandong’s Donggang Port after coming down the Yalu River or up the coast – were not affected.

Many Chinese companies are also involved in mining in North Korea. A source at Wanxiang Resources, which has a copper mine in Hyesan in North Korea’s Ryanggang province, said there had been no orders from China to withdraw their workers, although North Korean staff had been asked to attend more political activities, which was hurting production.

Read more in the Wall Street Journal.

Read the full story here:
China steps up customs checks, but North Korea trade robust
Reuters
2013-4-30

According to the AFP (Gulf Times):

The UN Children’s Fund (Unicef), World Food Programme (WFP), World Health Organization (WHO) and the Food and Agriculture Organization (FAO) and UN Population Fund (UNFPA) said they were feeling fallout from North Korea’s isolation.

“Even though the imposed sanctions clearly exclude humanitarian assistance, a negative impact on the levels of humanitarian funding has been experienced,” the agencies said in a statement.

The agencies said they had received just over a quarter of the $147mn they needed for operations in the North this year.

“As a result of the persisting deficit, agencies are unable to respond effectively to the humanitarian needs out of which the most critical and life-saving ones urgently require $29.4mn,” they added.

“The dire funding situation leaves the UN agencies and other humanitarian actors concerned about the continuation of their programmes” in isolated North Korea.

The agencies said there had been “a slight improvement” in the humanitarian situation in the past year. But Unicef said it was running short of cash for basic vaccines and medicines for child killers such as pneumonia and diarrhoea.

The UN estimates that about one-third of North Korean children under five are chronically malnourished.

More analysis in the Washington Post.

Read the full story here:
Aid to North Korea hit by sanctions
AFP
2013-4-29

According to Yonhap:

About 45,800 North Koreans traveled to China, the North’s closest ally, in the January-March period, compared with 40,200 recorded in the same period in 2012, according to the report by the Washington-based Voice of America (VOA), which cited data from China.

The increase is seen as showing that North Korea-China relations have not been disturbed by China’s recent shift to take an active role in implementing the U.N. sanctions against the North, adopted following the country’s December rocket launch and its third nuclear test on Feb. 12.

The majority of the North Korean travelers to China, 48.3 percent, crossed the border to work in the world’s second-biggest economy and 25.8 percent went there for business purposes, according to the report. Only 1.5 percent were on trips to China for tourism.

Out of the total visitors, 78 percent were male North Koreans while 44.5 percent of the total were aged between 45 and 64.

Read the full story here:
Number of N. Korean visitors to China up 14 pct in Q1
Yonhap
2013-4-26

Institute for Far Eastern Studies (IFES)
2013-4-25

After North Korea’s currency revaluation in 2009, North Korean currency is still unstable and North Korean markets near the DPRK-China border are reportedly filled with Chinese merchandise, with transactions being conducted mainly in Chinese yuan.

An online newspaper, the Daily NK, reported that markets in the city of Hyesan (Ryanggang Province) and surrounding areas are using Chinese yuan as the primary currency for transactions rather than local North Korean won.  Rice prices are standard indicators of inflation in North Korea and even rice was reported to be exchanged in yuan.  As the monetary value of domestic currency continues to fall, North Korea is experiencing hyperinflation and North Koreans are showing a preference for the more stable Chinese yuan over won.

With an exception of rice, vegetables, and seafood, manufactured goods including confectioneries, the daily necessities for sale in these markets are mostly from China.  As well, some South Korean items such as instant noodles, Choco Pies, and butane gas are sold openly in the markets.

Border areas have a higher rate of Chinese yuan usage than inland areas, as for years traders have been buying Chinese goods with Chinese yuan to sell in the domestic markets.  However, with the unstable domestic currency, more and more North Koreans have been using Chinese yuan over the last three years.  Some report goods bought with North Korean won must be converted to the CNY exchange rate.

As of mid-April, the exchange rate of 100 CNY to KPW was 130,000. However, Pyongsong and Pyongyang cities used mainly US dollars and local won in equal rates.

A video recording obtained by the Daily NK unveiled the landscape of the marketplace and nearby alley markets of  Hyesan and surrounding areas.  Items for sale include jackets, mufflers, gloves, coats and other winter clothing as well as cosmetics, perfumes, toothpaste, toothbrushes and other daily goods. Transactions were being made in Chinese yuan.

North Korean authorities are waging a crackdown against the use of the yuan in the markets but merchants continue to use yuan in secret.

The high number of Chinese goods in North Korean markets can be attributed to the failed production system of the people’s economy of North Korea, which began to tumble in the late 1990s. As the regime began to invest excessively in its military sector, production in the manufacturing sector declined.

Although North Korean products appear in the markets, most people prefer Chinese goods due to their better quality.

A recent article in the official state economics journal of North Korea, Kyongje Yongu (Journal of Economic Research), criticized the “trade companies for focusing on only one or two countries,” expressing concerns that, “the whole nation may experience political and economic pressure from trade companies that restrict foreign trade to only one country.”

Kim Jong Un has also expressed official disapproval against “import syndrome” of the people and regarded it as an obstacle hindering the development of North Korea’s light industry.

Although no specific country was named, it is believed that China makes up over 80 percent of North Korea’s total foreign trade. North Korea continues to show vigilance against its rising dependence on China.

According to Yonhap:

China’s exports of crude oil to North Korea rose 8.2 percent last month from a year earlier, a report said Wednesday.

China shipped 106,000 tons of crude oil to the North in March, the Washington-based Voice of America (VOA) said, citing data by China’s customs.

The total volume of crude oil export from China to North Korea during the first three months of this year reached 159,000 tons, up 6.7 percent from a year earlier, the report said.

The news outlet confirmed previous media reports that China did not export crude oil to the North in February, which was attributed to the superpower’s tightened implementation of economic sanctions on the communist country for its third nuclear test on Feb. 12.

VOA said, however, that China, the North’s closest ally, had no records of crude oil exports to the North in February in 2012 and 2011.

According to China’s customs, the country shipped a total of 523,000 tons of crude oil to the North in 2012, 526,000 tons in 2011 and 528,000 tons in 2010.

Besides official trade, China is believed to have ship an additional 500,000 tons every year in crude oil assistance to the North.

There are also media reports that Iran is planning on selling oil to the DPRK. According to RT News:

Tehran and Pyongyang are in talks about possible exports of Iranian oil to North Korea, Iran’s oil ministry said on Saturday.

“We have had, and continue to have, negotiations with the North Koreans who have requested to buy Iranian oil. We are discussing the procedure and we don’t have any problem selling them oil,” Iranian Oil Minister Rostam Qasemi told a briefing at an International oil and gas exhibition in Tehran.

The minister admitted that Iran was feeling the strain of sanctions imposed on the country by foreign governments, but said it would not get in the way of the transportation of its oil to “any country, in any part of the world,” AP cites.

A delegation from North Korea is among the participants of the expo in the Iranian capital. A Tehran-Pyongyang oil deal would further develop ties increase between the two states – which are both at odds with the US and the West over their respective nuclear programs and have both been sanctioned over the issue.

Read the full stories here:
China’s crude oil exports to N. Korea up 8.2 pct in March
Yonhap
2013-4-24

Iran plans oil exports to North Korea
RT
2013-4-20