North Korean Economy Watch

Yonhap
8/25/2007

North Korea has started building fences along its border with China in an apparent attempt to forestall defections of its hard-pressed citizens, local residents said Sunday.

The move comes amid growing international criticism of China which sends back home North Korean border trespassers under an agreement with Pyongyang.

Some human rights activists have been pressuring Beijing not to repatriate North Korean refugees, threatening to launch a campaign to boycott the Beijing Olympics in 2008.

About a month ago, North Korean workers were spotted erecting wire fences along a 10-kilometer area near a narrow tributary of the Yalu River, a major border-crossing point, local residents said.

China already built fences along its side of the border late last year.

“North Korea started building a dike early this year and building posts about a month ago,” one resident said.

An increasing number of North Koreans are fleeing their impoverished communist homeland, hoping to defect mostly to South Korea. Some of them travel as far as Vietnam and other Southeast Asian countries via China for safe passage to South Korea.

More than 10,000 North Korean defectors have so far arrived in South Korea amid reports that up to 300,000 North Korean refugees are roaming in China on their way to South Korea and other countries away from their impoverished homeland.

Asia Times
Andrei Lankov
8/16/2006

By Chinese standards, the city of Yanji is rather small, with a population of nearly 400,000. About a third of them are ethnic Koreans: Yanji is the capital of Yanbian autonomous prefecture in the northeastern province of Jilin.

From the first few minutes in Yanji it does not feel completely like China. The streets and shops have signs both in Korean and Chinese, the people (well, many of them) speak Korean among themselves, and restaurants advertise dog meat, a traditional Korean delicacy. But it also feels different from South and North Korea. Yanji is much too poor if compared with the South and much too rich if measured against meager North Korean standards.

The Korean migration began as a trickle in the 1880s, and by the early 1920s it had developed into a large flow. Some of those settlers fled the persecution of the Japanese colonial occupiers at home, but many more were attracted by lands easily available to migrant farmers in what then was known as Manchuria.

An overwhelming majority, some 80%, came from the areas that after 1945 became parts of North Korea. During the Chinese Civil War, most local Koreans sided with the communists, and this helped boost their standing after 1949. The local Koreans were officially recognized as a “minority group”, and in 1952 the entire area was made into an autonomous prefecture, with the Korean language co-official with Mandarin.

Yanbian is a large area, roughly half the size of South Korea, but its current population is merely 2.2 million. South Korea has 48 million people, so the density of population in Yanbian is remarkably low. Indeed, while traveling through the area one can drive for few kilometers without encountering any signs of human settlement – a picture that is unthinkable in most of South Korea or coastal China.

In 1945 about 1.7 million Koreans lived in China, overwhelmingly in its northeastern area. About 500,000 of those chose to move back to Korea in the late 1940s, but a million or so decided to stay. Nowadays, the Korean population has reached 2 million, of whom some 800,000 reside in Yanbian.

Economically, the area has not been very successful – perhaps because it is landlocked, so the import-oriented development strategy does not really work there. The breathtaking economic growth of the past two decades in the country as a whole has changed the looks of the local cities and towns, but Yanbian is still poor by contemporary Chinese standards. Sometimes in the villages around the city one can even see a derelict hut with a thatched roof – a sight that is almost impossible to see more prosperous areas of China. Still, changes are everywhere: the old gray buildings of the Mao Zedong era are being demolished and giving way to new, posh apartment complexes. Construction is everywhere, the number of hotels is astonishing, and good roads criss-cross the area, though motor traffic is still very thin.

Beijing’s policy toward ethnic Koreans has always been somewhat contradictory. On one hand, the Chinese central government follows the Leninist principles it learned from the Soviet Union. According to these principles, the ethnic minorities should be given manifold privileges, often at the expense of the majority group.

Indeed, this is frequently the case with the ethnic Koreans. But there were periods of unease and even open persecution, especially in the crazy decade of Mao’s Cultural Revolution beginning in 1966. A middle-aged ethnic-Korean businessman told me, “Back in the late 1960s, I seldom saw my parents. Because they were members of an ethnic minority, they had to go to ideological-struggle sessions every day and had to stay until very late.”

However, that period was an exception. The same person, who said he is not a fan of the current Chinese system, still admitted when asked about discrimination: “Discrimination? Well, almost none, to be frank. They appoint some Han Chinese officials to supervise the administration, but basically I don’t think Korean people here have problems with promotions or business because of their ethnicity. Sometimes being a minority even helps a bit – it’s easier to get to a university if you come from a minority group.”

It is clear that many Korean community cultural institutions rely on generous subsidies from the central government. The Chinese state sponsors a large network of the Korean-language schools, so until recently nearly all Korean children received secondary education in their ancestors’ tongue. If they wish, they can attend Yanbian University, where ethnic Koreans are given preferential treatment for the entrance exams.

The local television network broadcasts in Korean and the newsstands in the area sell a number of Korean-language periodicals. Some of these publications hardly need sponsorship, since they deal with the ever popular topics of sex, crime and violence, but many others, such as high-brow literary magazines or rather boring local dailies, would go out of business without their state subsidies.

A local law requires every street sign in the prefecture to be written in both Korean and Chinese, and it explicitly stipulates that Korean letters should not be smaller or placed below the Chinese characters. This even applies to advertisements.

The Korean heritage (or rather those parts of the heritage that are deemed politically safe) is much flaunted in the area because it is one of factors that make Yanji attractive to potential tourists. So Korean restaurants are everywhere and local advertisements frequently use images of beautiful girls clad in the Korean national dress or hanbok.

However, it would be a mistake to depict the Chinese policy in the area as an ideal to be emulated. The potential threat of irredentism has never been completely forgotten, and it is an open secret that radical Korean nationalists have dreamed about annexing this area since at least the early 1900s. They often say Yanbian is actually a “third Korea” (the other two being North and South), so it should be included into a Greater Korea that they believe will emerge one day.

Until recently such threats were not much pronounced, since the impoverished and grotesquely dictatorial North Korean regime could not inspire much longing for the lost homeland among the Chinese Koreans. Perhaps most local Koreans share the feelings of a middle-aged Korean with whom I had a long talk in the town of Tumen on the North Korean border. While pointing to the barren hills of North Korea, easily seen from a restaurant window, he said, “I am so lucky that my grandparents chose to get out of that place. I think we all would be dead had our grandfather stayed there. It is such an awful place. I do not understand how they manage to survive in North Korea.”

This seems to be the common feeling toward North Korea. There might be a lot of genuine sympathy, as demonstrated in the late 1990s at the height of North Korea’s great famine, when there was widespread grassroots support for the illegal migrants from that country. However, in most cases the North Korean regime is seen by local Koreans as an object of contempt and ridicule, and its unwillingness to emulate the Chinese example is often mentioned as the major reason for the disastrous situation of the country.

However, in 1992 China established formal diplomatic relations with prosperous South Korea, and soon the Yanbian area was flooded with South Korean business people, missionaries, students and tourists. These people were usually attracted by the opportunities to do business without dealing with a language barrier, but some of them began to preach the nationalist gospel as well. Their work was made much easier by the fact that South Korea came to be seen not as a land of destitution but one of prosperity and opportunity. South Korean nationalists love to stress that the lands of Yanbian once were part of the ancient Korean kingdom of Koguryo that lasted 700 years, from 57 BC to AD 668. Koguryo is presented by them – as well as many other Koreans outside of the area – as the most successful of the three ancient Korean kingdoms.
 
Therefore, Chinese authorities are on guard against this nationalist fervor and ensure that a Korean-language education does not mean an education in the spirit of Korean nationalism. At the Korean schools, children study exactly the same curriculum as their peers in the Chinese-language schools. Their textbooks are exact translations of the Chinese textbooks used at the same levels.

“We are a minority group of China, China is our country, so there is no need to study Korean history or literature,” one ethnic Korean told me. “When they teach national history at our schools, it means the history of China, and China only.”

As a result of this policy, the younger generations of Koreans are increasingly out of touch with their Korean heritage. Ko Kyong-su, a professor at Yanbian university, himself an ethnic Korean, remarked: “Nowadays, the Korean youngsters here do not learn about Ch’unhyang and Hong Kil-dong [characters from Korean classical novels] until they enter college, and only then if they chose to specialize in Korean studies.”

To what extent does this dualistic policy of support and restrictions work? This is a somewhat difficult question, but it seems that the overwhelming majority of the local Koreans indeed see themselves as “hyphenated Chinese”, not as proud overseas citizens of either Korean state. Their loyalties are, in most cases, firmly with Beijing.

Still, it is clear that the ongoing nationalist propaganda produces some response. A number of times my Korean conversation partners inquired whether I had seen the Koguryo remains, and once a woman in her early 30s, a fellow traveler on a train from Yanji to Shenyang, said nostalgically, “Two thousand years ago this used to be Korean land. We were so big then!”

This is not exactly a feeling that Chinese authorities would like to nurture, so it comes as no surprise that in official publications, Koguryo is mentioned as a “minority regime” that once existed as a part of multi-ethnic but unified Chinese nation. This nation, according to Beijing propagandists and court historians, existed since time immemorial.

In spite of all those problems and potential challenges, until recently Yanbian prefecture could be seen as a poster case for China’s “nationality politics”. Indeed, unlike the situation in Russia, Japan or the United States – three other major countries with sizable ethnic-Korean communities – the Korean-Chinese have remained fluent in their ancestors’ language, though they overwhelmingly belong to the third or even fourth generation of immigrants. They are also quite socially successful. If measured by such indicators as life-expectancy and infant-mortality rates, Koreans are the second-most-prosperous ethnic group in China. Their educational achievements are also well above average.

However, nowadays things are not that rosy – at least if judged from Korean nationalist perspectives. Beginning in the mid-1990s, the ethnic Korean population of Yanbian began to shrink, with its share dropping to 36.3% in 2000 (from 60.2% in 1953), and is still falling.

Local Korean schools are being closed for the lack of students, and Korean parents are increasingly unwilling to send their children to the ethnic schools. Until a decade ago, more or less every Korean family chose to educate their children at a Korean school, but this is not the case anymore. The number of children enrolled in Korean schools in 2000 was merely 45.2% of the 1996 level. In the 1990-2000 period, 4,200 Korean teachers, or some 53% of the total, left their jobs because of school closures. This does not mean Koreans are more poorly educated – on the contrary, the past two decades have witnessed a great education boom. But their education is increasingly conducted in Mandarin, not Korean.

Contrary to what many China-bashers want to believe, this process is not a result of some deliberate discrimination or the cunning policies of Beijing. No doubt some Chinese policy planners might feel a bit of relief when they see how a potentially “separatist” area is losing its explosive potential, but it seems they have done nothing to speed up such development. Rather, Koreans are becoming the victims of their own social success.

In the past, the aspirations of the average ethnic Korean was to graduate from a high school, settle down in his or her local village, and become a good farmer who could afford to have rice on the table for every meal. Now, success is increasingly associated with a university degree. However, the university education is in Mandarin, as are the entrance exams. Korean parents know that Chinese-language schooling gives their children better educational advantages.

This process is easy to see even without statistics. It is clear that a large proportion of younger people speak Korean, but it is also clear that many youngsters do not feel too comfortable when communicating in their parents’ tongue, and are happy to switch back to Mandarin at the first opportunity. It was instructive to see two Korean families who sat next to me on a train: the youngsters, in their 20s, spoke Korean to the parents but preferred Mandarin among themselves.

Another part of the crisis is the low fertility rate of the ethnic Koreans. The Koreans’ birth rate has always been lower than that of the Han Chinese, even though, as an ethnic minority, they are exempt from the “one-child policy”. In 2000, the average Korean woman in Yanbian had 1.01 births in her lifetime. This again reflects the higher education levels of the ethnic Koreans: better-educated groups tend to have less children.

Migration is also taking its toll. A large number of ethnic Koreans have moved away from their village communities. Some of them even went to South Korea – either for good, or just to make some money doing unskilled jobs. But for most of them the destinations of choice are the large Chinese cities, such as Shenyang or Beijing. While in the city, Korean settlers tend to maintain close relations with other Koreans, but they still live in a Chinese-language environment, and speak little Korean. The chances of marriage with a Han Chinese are high, and children from such marriages are usually monolingual – Mandarin.

So it seems that the days of the “Third Korea” are numbered. Even the infusion of South Korean money is not enough to reverse the unavoidable process of assimilation. Koreans are not subjected to forced Sinification; they are making a rational choice, even if it is one that Korean nationalists do not approve of. If things continue as such, in a few decades only hanbok-clad girls and the obligatory signs in Korean shops and restaurants will remind one of the Korean community that once thrived in Yanbian. But I hope it will always be a good place to feast on dog meat.

Again, while trapsing through the jungle of YouTube videos on North Korea, I stumbled on this clip shown on Japanese television which was secretly recorded in a North Korean market.  Since my Japanese ranges from rusty to nonexistent, I do not know where it is.

What does this clip teach us?  That some North Koreans are becomming more sophisticated shoppers/ consumers–looking to the outside world to get a sense of what’s fashionable.  Chinese entrepreneurs are hard at work building brand loyalty for western companies that are not yet aiming for the DPRK market.  Chinese knockoffs of Nike, the North Face (mislabeled “the Nice Face”), and fake designer apparel are all on display.  I imagine no North Korean citizen expects to ever see these goods in the local Public Distribution Office. 

Japanese narration highlights (thanks, Tony):

• Are the North Koreans familiar with these western brands? Some are familiar and others are not so sophisticated.
• These items sell really fast.  You can buy a Rolex Watch (knock off) for 800 Yen (appx. $8 or appx 2,400 North Korean Won).
• The narrator contrasts lifestyles.  He compares shoppers that can afford these market goods with others in the same village who cannot.

Joong Ang Daily
Gary Samore
8/6/2007

China’s biggest concern seems to be that the February agreement signals an American surrender to North Korean nuclear weapons.

On a recent trip to Beijing, I was able to meet with senior Chinese officials and experts to discuss recent developments on the Korean Peninsula since the Feb. 13, 2007 six-party nuclear agreement.

What I learned surprised me.

As I expected, the Chinese are genuinely pleased the Bush administration has shifted its policy toward North Korea, dropping demands for complete and immediate disarmament and retreating from confrontation and the goal of regime change. From Beijing’s standpoint, the February agreement averted a crisis on the Korean Peninsula and established a framework for negotiating additional disarmament steps through the six-party talks. Beyond the nuclear issue, the Chinese support the establishment of a regional peace and stability mechanism for Northeast Asia built around the six-party talks.

Aside from these expected positive views, however, I learned China also has some reservations and concerns about recent events on the peninsula.

Before the February agreement, China was the central player in the six-party nuclear negotiations. Much to Beijing’s anger, Pyongyang went ahead with its nuclear tests in the face of Chinese protests, undercutting the perception that China could control North Korea’s behavior. Now that the United States and North Korea have developed a direct line of communication, and the United States and South Korea have patched up their relations, China is no longer at the center of the action. Although Beijing will continue to host the talks, China is feeling sidelined.

As a result, my Chinese hosts emphasized the importance of China and the United States working together to guard against efforts by North Korea to play one big power against the other. For example, the Chinese suggested Washington and Beijing should engage in informal contingency planning to respond to possible political instability on the peninsula, although Chinese experts said they do not believe that the house of Kim Jong-il is in immediate danger of collapse.

Adding to Chinese unease is the reappearance of Russia on the scene. China preferred that the Banco Delta Asia issue be resolved by the U.S. Treasury reversing itself and giving the Macao bank a clean bill of health, which would allow it to survive and continue to service North Korea’s financial needs, as a number of other Chinese banks already do. Instead, the Russian government stepped in, making available a Russian bank to transfer the $25 million from a U.S. Federal Bank to North Korea. In Beijing’s view, Moscow’s willingness to broker the financial deal looks suspiciously like a broader Russian attempt to reassert influence in Northeast Asia. And ― Chinese experts were quick to point out ― Pyongyang would welcome an opportunity to give Russia a bigger role, reducing North Korea’s dependence on China.

Aside from these political maneuvers and machinations, China’s biggest concern seems to be that the February agreement signals an American surrender to North Korean nuclear weapons.

Having complained for years that the Bush administration was demanding too much, the Chinese now say they fear Washington is secretly prepared to accept North Korea as a nuclear-weapons state. Pointing to the example of India, one senior Chinese official complained that the U.S. nonproliferation policy is weak and inconsistent: “Washington strongly opposes proliferation before a nuclear test, but once a test has been conducted, the U.S. accepts the country as a nuclear power.”

Another Chinese official bitterly complained that Beijing committed to work with the United States after the 1998 Indian nuclear tests, but the United States betrayed China, recognizing India as a nuclear power and even encouraging India to develop its nuclear strike capabilities against China itself. If the United States recognizes and accepts North Korea as a nuclear power, the Chinese fear it will inevitably provide a pretext for Japan ― and then South Korea ― to go nuclear, creating additional nuclear-armed rivals on China’s borders. Additional proliferation in Northeast Asia might even extend to Taiwan, which could dramatically complicate Beijing’s hopes to achieve national unification.

In response to these Chinese concerns, I explained that India and North Korea are not comparable cases. India is a democracy, a major country and a rising economic power, that shares many interests with the United States. North Korea is none of these things. Moreover, the United States does not want to see Japan and South Korea develop nuclear weapons. America’s strategic presence in Asia is based in part on its role as a security guarantor, including its nuclear umbrella for Japan and South Korea. If Tokyo and Seoul decide to develop nuclear weapons, they would have less need of U.S. protection, and Washington’s influence in Asia would diminish.

Moreover, while Washington may benefit from political rivalries and suspicions among the Asian powers, it does not want to see a nuclear arms race that could destabilize the region and damage U.S. economic and political interests. Finally, if nuclear weapons spread in Asia, they would severely damage the international nonproliferation regime, perhaps leading to the collapse of the nuclear Nonproliferation Treaty.

For all these reasons, Chinese fears and suspicions that the United States is about to formally accept North Korean nuclear weapons are not accurate. Nonetheless, my Chinese hosts are right in one respect: The Bush administration’s policies have helped create a nuclear-armed North Korea, which cannot be easily undone. As one Chinese expert said, “Bush has let the nuclear tiger out of its cage.”

As much as we hope the six-party talks will make further progress toward disarmament, most experts think North Korea will be very reluctant to give up its nuclear weapons until it feels completely secure and free from the threat of U.S. hostility. This is not likely to happen anytime soon. Pyongyang has already indicated it will demand a treaty to end the Korean War, full normalization of diplomatic relations with Washington, the lifting of U.S. economic sanctions and substantial economic assistance ― including nuclear energy assistance ― before it gives up its nuclear deterrent.

So whether we like it or not, we probably have no choice but to manage the threat from a nuclear-armed North Korea for the time being. It may be years before disarmament can be achieved. In the meantime, we must work to reduce the risk that North Korea will use or transfer nuclear weapons or that additional countries in the region will feel compelled to develop their own nuclear weapons for defense.

While recognizing this reality, the United States and other countries must continue to insist on the ultimate objective of complete North Korean nuclear disarmament. We must resist North Korea’s demands that it be treated like India, as a nuclear power that receives full political and economic benefits from the international community. Eliminating North Korea’s nuclear weapons will be difficult, but we must be patient and persistent.

Korea Herald
8/5/2007

China will begin shipping 50,000 tons of heavy fuel oil to North Korea in mid-August as part of the 950,000 tons promised in exchange for the North’s disabling of its nuclear facilities in the second phase of denuclearization agreement, informed sources here said Sunday.

The agreement, signed February 13 by the two Koreas, China, Russia, Japan and the U.S., also commits North Korea to declare all of its nuclear programs.

South Korea completed Thursday the shipment of 50,000 tons of heavy fuel oil to the North in exchange for the North shutting down its nuclear facilities in the first phase of the denuclarization agreement.

“We understand China will begin providing 50,000 tons of heavy fuel oil to the North in mid August,” a diplomatic source here said. “A working group dealing with energy and economic aid slated for Aug.7-8 in Panmunjeom will decide on detailed measures of the provision.”

The working group is one of five groups launched under the February nuclear deal. Other groups deal with denuclearization, normalization of ties between North Korea and the U.S. and Japan and the establishment of a peace regime on the Korean Peninsula to replace the current armistice that ended the 1950-53 Korean War.

Yonhap
8/1/2007

Pyeonghwa Motors Corp., a South Korean automaker with exclusive rights to produce cars for the North Korean market, said Wednesday it has been in talks with Chinese automaker Brilliance Automotive Holdings Ltd. to assemble trucks in North Korea, a company official said Wednesday.

In North Korea, Pyeonghwa Motors is assembling some 600-700 vehicles, including sport-utility ones, sedans and mini buses, a year at its plant in Nampo, near the capital Pyongyang.

The North has requested Pyeonghwa Motors to produce trucks for farmers and factory workers, the official said.

“We will soon select a truck model after consultations with North Korean and Chinese sides,” the official said on the condition of anonymity, citing protocol.

If the North Korean plant begins production of trucks, annual vehicle sales of Pyonghwa Motors in North Korea will exceed 1,000 units, the official said.

The North’s economy went into a steep decline in the early 1990s after the collapse of the Soviet Union, according to reports released by South Korea’s Bank of Korea.

However, since the late 1990s, the North Korean economy has been growing again, helped by an influx of foreign aid and better weather, the South’s central bank said.

Daily NK
Kim Min Se
7/17/2007

Only six, seven years ago, drugs inside North Korea secretly circulated among a portion of the upper-level officials and the specially affluent class, such as Chinese emigrants. Opium or heroine, produced in North Korea, were sold abroad to make foreign currency.

North Korea produces and exports drugs at the national level. Events where North Korean vessels and diplomats, through drug transport or charges of sales, are prosecuted by third-party countries is common. South Korean government, in the midst of North Korea’s breakdown in foreign currency supply in 1998, has deduced at one point that foreign-currency earners through illicit drug sales and illegal activities had amassed 100 million dollars.

From year 1970, North Korea’s drug sales, which secretly began on a small-scale, by the decree of Chairperson Kim Jong Il, rose in reality as a national enterprise and began official productions. In the August of same year, Chairperson Kim named the opium seed cultivation work as “White Bellflower Business.”

Further, he bestowed the appellation, “White Bellflower Hero,” to the person who sold over 1 million dollars of drugs, and ordered, “For the acquisition of foreign currency, export opium on a large scale (information reported by the National Intelligence Service, Lee Jong Chan former Chair at the inspection of National Intelligence Service on November 6, 1998).” As for North Korea’s drug production factories, the Nanam Pharmaceutical Factory in Chongjin and Hamheung’s Heungnam Pharmaceutical Factory are well-known.

Drugs, which are costly to average civilians preoccupied with making a living, were considered as a portion of the special class’ acts of aberration. The North Korean government, besides the foreign-currency earners, strictly inspected acts of drug circulations, so one could not even dream about this as a means of making money.

After the collapse of national provisions, drug sales also increase.

However, the food shortage brought a huge change to North Korea’s drug production and circulation. When the planned-economy system, where the nation was in charge of the provisions, broke down, the citizens started doing sales for survival. In North Korea where means of making money are not abundant, the place where one can smell money is at the market.

The revitalization of the jangmadang (black market) and general markets gave citizens in the cities a certain of opportunity to make a living. Further, they learned the mentality that money is best for survival. The custom began to spread where the citizens went through thick and thin if it meant working at a money-making job. Drugs infiltrated this opening.

Drugs that are most highly circulated in North Korea are philopon and heroine. The center of philipon productions is in Hamheung, South Hamkyung.

Hamheung is considered as a chemical industry synthesis base within North Korea where companies related to the chemistry branch can be abundantly found.

The representative place is the 2.8 Vinyl Chemical Complexes. Besides this, there are Hamheung Chemical Industry College (in its 5th year), the Heungnam Fertilizer Factory, and the Heungnam Pharmaceutical Factory, which are the providers of North Korea’s top chemical researchers.

The reason why Hamheung became the main place of philopon production

The raw materials for the vinyl complex are limestones of the Ounpo Mine in Hongwon-gun and the raw materials of the Heungnam Fertilizer Factory are ramrods of Huhcheon-gun and emulsified steel of the Manduk Mine.

For this reason, many chemistry-related researchers and workers are residing in Hamheung. The problem is that after the food provisions were cut off, they turned their eyes to Philopon production when making a living became difficult.

They can produce high-quality philopon, if they just have a good laboratory and raw materials. In particular, outside demand for Philopon was explosive in early 2000, when there were no huge restraints in the North Korea-Japanese trade and when the North Korea-Chinese trade became active.

Hamheung citizen Choi Myung Gil (pseudonym) said, “In the initial stage, if the businessmen provided raw materials and funds to researchers, they made high-quality Philipon and kept half of the profit. Do poor researchers have any money? They made them because businessmen received orders from China and Japan and sold them. Also, there was nothing to fear because bribes kept the mouths of the National Security Agency and the Social Safety Agency shut. There is nothing one cannot do with money, so what kind of a researcher would crush such a money-making scheme?”

Mr. Choi said, “The cost of production of philopon is no more than 3,000 dollars per kilogram in North Korea. If one sells this, he or she can receive 6,000 dollars on the spot. Manufactured Philopon can be handed over to middlemen or if it directly enters Shinuiju and is given to dealers, it can bring in from 9,000 to 10,000 dollars.”

He said, “My friend, who worked as a researcher in the Hamheung Branch Laboratory, also lived poorly, but became wealthy overnight by making philopon. I also am benefitting from him. There are many people who have become wealthy in Hamheung by making philopon.”

Ultimately, when the North Korea-Chinese traders bring the raw materials from China, the Hamheung chemical researchers make the philopon and the merchants take these to China for sale. In this process, the Chinese crime syndicate have also intervened.

Daily NK
Kim Min Se
7/17/2007

Researcher Raphael Pearl at the U.S. Congressional Research Service (CRS) maintained that recently, the Chinese crime syndicate has interfered in North Korean drug manufacturing and deals. Through the steady appearance of the up and coming wealthy class who have amassed a lot of money through sales, a significant amount of drugs began to be circulated in China.

North Korea-Chinese businessman Kim Myung Guk (pseudonym), who is in charge of North Korean mineral exports, frequently enters Hamheung to get minerals (uranium concentrate). Presently, Mr. Kim is in Dandong, China to meet Chinese businessmen.

Mr. Kim said, “The philopon from Hamheung is the best. In Pyongyang, Shinuiju, and Chongjin, Hamheung-made philipons are the most trusted. So I frequently receive requests to deal Hamheung philopon from other businessmen.”

Mr. Kim said, “It got to the point that the Chinese government requested inspection of the Hamheung factory, so the North Korean authorities carried out partial abolition. Nowadays, there is hardly anyone among the North Korean businessmen who do not know about the fact that Hamheung is the center of drug production.”

The Chinese government, when North Korean drugs started coming in on a mass-scale, pointed out the Heungnam Pharmaceutical Factory in Hamheung as a drug production factory in North Korea and demanded the abolition of the factory.

With exports to the outside closing, the great enterprise sold in North Korea

Currently in Shinuiju, philopon made in Hamheung is being sold for 9,000 to 10,000 dollars per kilogram. Drug dealers bring these into China and resell them at three times the higher price to Chinese drug dealers.

However, foreign sales of North Korean drugs is significantly decreasing as a whole.

In recent years, PSI and other international surveillance network have been strengthened regarding North Korea’s illegal actions, so drug exports have remarkably decreased. Further, North Korea-Japan relations have become worsened, so it seems to have exerted an influence on control of North Korean drug sales.

In Dandong, Chinese-North Korean businessman Kim Jong Man (pseudonym), who does trade with North Korea, said, “North Korea, before it ceased trade with Japan due to bad relations, sold a lot to Japan. It is a well-known fact that they were sold at high prices to Japanese yakuza via regular traders.”

However, with the worsening of relations, most avenues for drug sales have been closed. Also, the Chinese government, while proclaiming an all-out war with drugs recently, have significantly intensified control and inspections.

The Chinese government has shown a strong intention to control by broadcasting live via China’s CCTV the trial process of drug criminals through recent unconventional circumstances.

Mr. Kim said, “Due to the circumstances, the significant decrease in North Korean drugs going into China, compared to a year or two ago, can be felt.” Such an atmosphere is collectively acknowledged by other businessmen.

Inevitably, since routes for foreign sales have been closed, drug sales are increasing inside North Korea recently.

If such a trend continues, the day when North Korea will become one of the handfuls in the world known for its drug production and consumption does not seem too far off.

Daily NK
Yang Jung A
7/9/2007

A North Korean insider source said on the 5th that the North Korean government sold the fishery licenses of coastal waters at Chulsan, North Pyongan during the crab catching season between May and July for a moderate price.

Chinese marine traders who bought the fishery licenses from North Korea are large marine companies based on Donggang in Lianoning.

The ship-owners and fishermen of North Korea, due to a huge decline in fishes with the Chinese ships’ competitive entry into Chulsan’s offshore waters after receiving the North Korean government’s fishery licenses, are supposed to be going through a hard time.

The source said, “Recently, with the exclusion of the neighboring sea off the coast of Chulsan near the People’s Army’s marine head where the fish farms are located, the fishery licenses to the offshore of the Chulsan-Donggang (China) have been sold to Chinese businessmen. Tens of Chinese fishermen have bought the rights.”

The source said, “The organization in charge who has issued the fishery licenses is not the marine products association, but the No. 64 naval squadron in charge of the this region’s seashore boundary.

Donggang in Liaoning in China located in the mouth of Yalu River, is a small-size city across from Bidan Island.

He said, regarding the price of the fishery licenses, “A small boat is 1,000 Yuan (US$133) per day and a large boat which can accumulate over 100 ton is around 7,000 Yuan (US$ 922) in Chinese currency.”

He added, “The rumors say besides the costs of the licenses, a lot of money has been handed over to North Korea in the negotiations process.”

“Due to monopolizing of the Chinese fishing boats, North Korea’s ships anchored at decks of Donggang are barely seen. North Korean businessmen who have smuggled marine products using small-size boats are having a difficult time because they cannot go out to sea where the current is rough and a lot of gas is required.”

North Korea’s fishermen are saying they have no choice but to go out to the far sea, because they cannot go near the oceanic region operated by Chinese ships.

The source also said, “Chinese ships surreptitiously attacking North Korean ships in their permitted region and beating people have been occurring frequently.”

The Korea Martime Institute, in a report which was announced early this year, said, “The C
hinese government is promoting advancement of North Korea’s operations when the complaints of the country’s fishermen climaxed due to the reduction of ships in the Yungeun Sea and the decline in their income.”

On one hand, besides the oceanic operation rights, the situation is that China’s direct investment in North Korea’s resource development, such as the mining rights being handed over to China, is increasing.

China, instead of investing 70 hundred million Yuan at Musan Mine in 2005, is exercising its 50-year mining licenses to take 10bn tons of iron ore annually.

Yonhap
7/2/2007

In a sign of burgeoning economic ties, a group of South and North Korean officials jointly visited South Korean companies in China and Vietnam, the Unification Ministry said Monday.

The delegation consisting of seven South Koreans and as many North Koreans working at a joint management office of the Kaesong industrial complex visited the companies in Shanghai, Shenzen, Guangzhou, Hanoi and Ho Chi Mihn City for 10 days from June 19. They were given tours and received briefings on the companies’ operations, the ministry said.

“It was a good opportunity for North Korean economic officials to learn from rapidly developing socialist countries,” a senior ministry official said, asking to remain anonymous. “They must have shared the need to further promote inter-Korean economic ties.”

It marks the first time that South and North Korean officials made an overseas trip together to assess the development of South Korean companies, the official added.

In the North Korean border city of Kaesong, a capitalist enclave, South Korean businesses use low-cost skilled North Korean labor to produce goods. Monthly production in the complex exceeds US$10 million.

Currently, 23 South Korean companies employ about 15,000 North Korean workers at the site developed on a trial basis. These include construction workers and workers at a management office. The number of North Korean workers is expected to increase to more than 350,000 when the complex becomes fully operational in 2012.