North Korean Economy Watch

UPDATE 75 (2011-12-5): The ROK will donate US$5.65 million to N. Korea through the UN. According to Yonhap:

South Korea said Monday it will donate US$5.65 million (about 6.5 billion won) for humanitarian projects in North Korea through the U.N. body responsible for the rights of children.

The donation to the United Nations Children’s Fund, or UNICEF, will benefit about 1.46 million infants, children and pregnant women in North Korea, according to the Unification Ministry, which is in charge of relations with the North.

Seoul’s contribution will be used to provide vaccines and other medical supplies as well as to treat malnourished children next year, said the ministry.

There have been concerns that a third of all North Korean children under five are chronically malnourished and that many more children are at risk of slipping into acute stages of malnutrition unless targeted assistance is sustained.

“The decision is in line with the government’s basic stance of maintaining its pure humanitarian aid projects for vulnerable people regardless of political situation,” Unification Ministry spokesman Choi Boh-seon told reporters.

South Korea has been seeking flexibility in its policies toward the North to try to improve their strained relations over the North’s two deadly attacks on the South last year.

Despite the South’s softer stance, North Korea recently threatened to turn Seoul’s presidential office into “a sea of fire” in response to South Korea’s military maneuvers near the tense western sea border.

South Korea donated $20 million for humanitarian projects in North Korea through the UNICEF between 1996 and 2009.

Last month, the South also resumed some $6.94 million worth of medical aid to the impoverished communist country through the World Health Organization.

…

Separately, South Korea also decided to give 2.7 billion won ($2.3 million) to a foundation to help build emergency medical facilities in an industrial complex in the North Korean border city of Kaesong.

UPDATE 74 (2011-12-2): The Choson Ilbo reports that the DPRK’s food prices are rising after the 2011 fall harvest, however, the price increase is not due to a shortage of output, but rather political directives. According to the article:

The price of rice in North Korea is skyrocketing, contrary to received wisdom that it drops after the harvest season. According to a source on North Korea on Wednesday, the rice price has risen from 2,400 won a kg in early October to 5,000 won in late November.

North Korean workers earn only 3,000-4,000 won per month.

This unusual hike in rice price seems to be related to preparation of next year’s political propaganda projects.

A South Korean government official said, “It seems the North Korean government is not releasing rice harvested this year in order to save it up” for celebrations of regime founder Kim Il-sung’s centenary next year, when the North has vowed to become “a powerful and prosperous nation.”

UPDATE 73 (2011-11-24): According to the Daily NK, DPRK television is calling on people to conserve food:

With barely a month left until 2012, the year in which people were promised a radical lifestyle transformation to coincide with the North Korea’s rebirth as a ‘strong and prosperous nation’, programs calling upon people to conserve food are now being broadcast by Chosun Central TV and the fixed-line cable broadcaster ‘3rd Broadcast’.

Chosun Central TV is broadcasting the programs as part of ‘Socio-Culture and Lifestyle Time’, which begins directly after the news on Thursdays at 8:40pm. The majority of the content is apparently now about saving food.

A Yangkang Province source told The Daily NK on Wednesday, “Recently the head lecturer from Jang Cheol Gu Pyongyang Commercial University, Dr. Seo Young Il, has been appearing on the program both on television and the cable broadcasting system, talking about saving food.”

In one such program, Professor Seo apparently noted, “In these days of the military-first era there is a new culture blossoming, one which calls for a varied diet,” before encouraging citizens to eat potatoes and rice, wild vegetables and rice and kimchi and rice rather than white rice on its own, and then adding that bread and wheat flour noodles are better than rice for lunch and dinner.

It is understood that older programs with titles such as ‘A Balanced Diet is Excellent Preparation for Saving Food’ and ‘Cereals with Rice: Good for Your Health’ are also being rebroadcast, while watchers are being informed that thinking meat is required for a good diet is ‘incorrect’.

Whenever North Korea is on high alert or there is a directive to be handed down from Kim Jong Il, both of Chosun Central TV and the 3rd Broadcast are used to communicate with the public. For this reason, some North Korea watchers believe the recent food-saving campaign may reflect a particularly weak food situation in the country going into the winter.

According to the source, one recent program showed a cookery competition involving members of the Union of Democratic Women from Pyongyang’s Moranbong District. During which, one woman was filmed extolling the virtues of potato soup, saying “If we follow the words of The General and try eating potatoes as a staple food, there will be no problem.”

Read all previous posts on the DPRK’s food situation this year blow:

(more…)

By Michael Rank

North Korea’s orphanages are full of malnourished children and food shortages in the isolated nation look set to get much worse, said a recent visitor who knows the country well.

Former member of the European Parliament Glyn Ford said shortages of food were affecting “tens of thousands of children, not just orphans, and there may be millions of people under threat of malnutrition” in North Korea.

Ford visited two orphanages in Hamhŭng (Hamheung), the country’s second largest city, where he was shown children who were extremely thin and clearly malnourished, and this had been confirmed by a European Union aid team. Each orphanage had about 300 children.

Ford said he had been encouraged by an EU pledge last month to provide emergency food aid worth 10 million euros ($14.3 million) to more than half a million people at risk of dying from serious malnutrition in North Korea, and that France and Germany had since added to this, making the assistance worth 14-16 million euros ($20-$22.8 million).

But at one of the orphanages he was told they had run out of EU food in June, and the children were suffering as a result.

The European Commission said the objective of the aid package was to lift around 650,000 people, mainly in northern and eastern provinces of the country, out of the hunger zone during the most difficult period of the worst year for food production in recent times. Food assistance will reach children under five who have already been hospitalised with severe acute malnutrition. Children in residential care will also be fed, as well as pregnant and breastfeeding women, hospital patients and the elderly.

An EU mission found in June that state-distributed food rations, upon which two thirds of the North Korean population depend, had been severely cut in recent months from 400g of cereals per person per day in early April to 150g in June: less than 400kCal – a fifth of the daily average nutritional requirement and equivalent to a small bowl of rice.

Ford told NKEW in a telephone interview that while there were clear signs of widespread hunger there was no sign, so far at least, of mass starvation, as happened in the 1990s, when hundreds of thousands, possibly millions, of people died.

He also said that despite the food shortages there were also signs that economic reforms of recent years were having a strong impact, and that in all populated areas roads were lined with rows of private stalls. “These blue plastic stalls are everywhere,” Ford said, adding that they were giving rise to

“kiosk capitalists” who were bucking the traditional, Stalinist economic system.

“This is a society where there are rich North Koreans. There are new cars and expensive consumer items in the shops. There is an economic elite rather than a Party elite,” he added.

Ford also visited the Kaesong (Gaeseong) Industrial Complex just north of the Demilitarised Zone, which he said consisted of large areas of waste land where plans for expansion had come to nought due to increased tension between North and South Korea.

The complex looked “a little bit sad”, he said, and the optimism that prevailed when he last visited it two or three years had dissipated. He said the zone continued to employ about 45,000 North Koreans, little changed from his previous visit, and hopes that it would employ 400,000 by 2015 now seemed highly unrealistic. “It was new then but the shining glow has gone off a bit,” he said, adding, “I noticed the gaps between the factories more than the factories themselves.” (Ford cited a goal of 400,000 workers eventually employed in the zone, but in 2006 a target of 700,000 was mentioned on the BBC’s Newsnight programme).

The complex, in operation since 2004, has around 120 factories, all South Korean-run, processing food and assembling clothing and machinery for export to the South.

Ford also said it seemed likely that the North Korea would open an embassy to the EU in Brussels before long, with a reciprocal EU embassy in Pyongyang. Although Pyongyang and the EU established diplomatic relations in 2001, embassies have not been opened due to French resistance, as France and Estonia are the only EU countries that do not have full diplomatic ties with North Korea.

France has cited human rights violations in its refusal to open an embassy in North Korea, but it has recently softened its line and has announced plans to open a “cooperation bureau” in Pyongyang. Ford said North Korea had long wanted to set up an embassy in Brussels and this now finally seemed likely, possibly by the middle of next year.

Ford, a British Labour Party MEP until 2009, spent about 12 days in North Korea, returning last Saturday. He has almost certainly visited North Korea more often than any other western politician, having been almost 20 times over the last 15-16 years. He was a member of the European Parliament’s Korean Peninsula delegation and in 2008 has published a book, North Korea on the Brink: Struggle for Survival.

Addendum: In January 2009 Ford hosted the first ever delegation from the Workers’ Party of Korea (WPK) delegation to visit Britain, when he pressed them to agree to reopen the dialogue that was  broken off in 2005.

According to the Korea Herald (4/26/2011): The EU has announced it is maintaining the policy established last year.

Antiquated North Korean airliners have been banned from operating in European countries for six years in a row as part of the European Union’s prohibition on 21 states that have failed to meet its safety standards, a U.S.-funded private radio station reported Tuesday.

Under the EU ban, Pyong­yang’s Air Koryo can only fly two new airliners it purchased from Russia last year to the E.U. member states, according to Radio Free Asia.

Read the full story here:
EU prohibits N. Korea’s aged planes for six years
Korea Herald
4/26/2011

According to the Daily NK (3/31/2010): Recently purchased Tupolev’s allowed to fly to EU.

Air Koryo, North Korea’s flag carrier, has been given back partial permission to fly in EU airspace following the quarterly update to the EU’s list of banned airlines.

The lifting of restrictions against the airline is highly conditional, only allowing for entry by two of the airlines’ mostly Soviet-era fleet.

According to European Commission press release IP/10/388 which was released yesterday, March 30th;

“With this update, the Air Koryo licensed in the Democratic People’s Republic of Korea, subject to an operating ban since March 2006, is allowed to resume operations into the EU with two aircraft which are fitted with the necessary equipment to comply with mandatory international standards and following appropriate oversight by its authority. The rest of its fleet remains barred from operating into the EU.”

The two aircraft permitted to operate in EU airspace are a Tupolev Tu-204-300 delivered to Air Koryo in 2007 and currently serving on the Pyongyang-Beijing route, and a Tu-204-100B.

European Commission Vice-President Siim Kallas also said in yesterday’s statement, “Safety comes first. We are ready to support countries that need to build up technical and administrative capacity to guarantee the necessary standards in civil aviation. But we cannot accept that airlines fly into the EU if they do not fully comply with international safety standards.”

It is unclear whether Air Koryo plans to exercise its right to enter the EU, though there have been rumors that it plans to begin some kind of service between Pyongyang and Berlin.

Read the full article here:
Two Air Koryo Jets Back in EU Good Books
Daily NK
Chris Green
3/31/2010

According to Yonhap (3/25/2010):

The European Union is expected to relax its four-year ban on the North Korean state carrier, Air Koyro, from all operations in its member states, a source at the European Commission said Wednesday.

Air Koryo has been on the EU’s blacklist of airlines failing to meet international safety standards since the list was first put together in 2006. Currently, five individual carriers, including Air Koryo, and all carriers from 15 countries — 228 companies in total — are on the blacklist.

The EU’s Air Safety Commission met last week to review the list and recommended that the restrictions on the North Korean airline be relaxed to “Annex B,” which means that the carrier can operate in the region under “specific conditions,” the source said.

Air Koryo officials attended last week’s meeting to brief the commission on the safety measures they have taken so far, the source said. It was unclear what conditions would be imposed for Air Koyro if the ban is relaxed.

The Air Safety Commission is an advisory panel without decision-making power, but its recommendations are usually reflected when the blacklist is updated. The list is revised three times a year, with this year’s first update slated for late this month.

Read the full story here:
EU expected to relax ban on N. Korean carrier Air Koryo
Yonhap
3/25/2010

According to Yonhap (1/9/2010):

Air Koryo, North Korea’s air carrier, has been banned from offering flight services to Europe for a fifth year after having failed to meet international safety requirements, U.S. international broadcaster Radio Free Asia (RFA) said Saturday.

The North Korean carrier has been involved in the list of carriers prohibiting from flying to the 27 members of European Union that was released this year, RFA said.

Air Koryo reportedly has a fleet of about 20 planes made between the 1960s and 1970s in the Soviet Union.

Read the full story here:
N. Korean airline banned from flying to Europe
Yonhap
1/9/2010

According to KBS:

The Voice of America says that North Korea’s exports to the European Union more than doubled year-on-year in 2010 as the communist country exported petroleum products worth 55 million euros to the Netherlands in the first half of last year.

Quoting data from Eurostat, the statistic agency of the EU, the broadcaster said that North Korea’s exports to the EU surged from 50 million euros in 2009 to over one hundred million euros last year.

However, the North’s imports from the EU inched up only about two million euros from 70 million euros in 2009 to 72 million euros in 2010.

I am pretty swamped at the moment.  I did a quick search for the original data source with no success. If you have any idea where to find it, please let me know.

Read the full story here:
NK’s Exports to EU Doubled in 2010
KBS
3-22-2011

According to the Choson Ilbo:

The European Union has decided to renew and extend its list of people and entities in North Korea who are subject to restrictive measures.

One individual and six entities were added to the list due to their involvement with the North’s nuclear arms program or other weapons-related activities.

The measures include both a visa ban and an asset freeze. The list, which currently contains 18 individuals and 12 entities, was published in the EU Official Journal on Thursday.

The EU says “the decision also limits financing activities and trade” with Pyongyang, particularly of arms and related materials that could be used in the development of weapons of mass destruction.

The official EU publication, featuring all of the specifics, can be found here (PDF).

Read the full story here:
EU Extends Visa Bans and Asset Freezes on N.Korea
Choson Ilbo
12/24/2010

According to Bloomberg:

North Korea’s use of international banks to facilitate nuclear weapons-related trade requires financial institutions to step up their vigilance, the European Union said.

North Korea exports $100 million in weapons and missiles each year in violation of United Nations sanctions, a UN panel wrote in a report released on Nov. 10. The EU said it’s concerned that some of the country’s trade involves prohibited nuclear technologies.

The 27-nation EU today urged all members of the International Atomic Energy Agency to “exercise particular vigilance over exports and financial transfers” in order “to prevent a contribution to proliferation-sensitive activities.”

Tensions with North Korea have increased in recent weeks. The country has built a new facility for extracting uranium, the key ingredient for nuclear weapons, a U.S. scientist reported on Nov. 20. Three days later, North Korea fired artillery at Yeonpyeong island, killing soldiers and civilians.

North Korea’s new nuclear facilities “could bolster its pursuit of a weapons capability and increases our concerns about prospects for onward proliferation of fissile material and of sensitive technologies to other parties,” U.S. Ambassador Glynn Davies said in a statement at IAEA’s meeting in Vienna.

The U.S. has been pressuring banks to cut ties with the North Korea’s regime, State Department documents posted today on WikiLeaks.org showed.

Reputation

Austria’s Financial Market Authority told the U.S. that it “exercised additional surveillance regarding North Korean financial activities” and that one bank cut ties with the country “to maintain its good reputation,” according to a February 2006 cable.

The U.S. and Japan will hold a week of naval drills beginning tomorrow. The aircraft carrier USS George Washington will join a force of about 400 aircraft and 60 warships. Drills will include responding to ballistic missile attacks on Pacific islands, the Joint Staff of the Japan Self-Defense Forces said in a statement.

“We will not accept North Korea as a nuclear-weapon state,” Davies said. “We seek an immediate halt of all nuclear activities in North Korea, including enrichment.”

Recent posts about the DPRK’s nuclear program can be found here. 

Recent posts on Yonpyong can be found here.

Read the full story here:
North Korean Use of Bank Transfers for Atomic Work Alarms Europe
Bloomberg
Jennifer M. Freedman, Andrew Atkinson
12/2/2010

Back in 2007 a German breeder of large rabbits expressed concern that some rabbits he sold to the DPRK had been eaten.  You can read about it here.

Well, the rabbit story is back.  According to Radio Free Asia:

The fate of dozens of giant rabbits sent to North Korean to start breeding a cheap source of protein for the famine-hit poor is still unknown, leading to speculation that they may already have been eaten by officials in the isolated Stalinist state.

“I am not aware of [exactly] what happened after we sent the rabbits,” said Jin Sook Lee, the director of the German charity, the German Overseas Korean Cooperation Association. “I don’t even know if they are being used to boost the food supply.”

She said the intended breeding program had run into difficulties once the German-bred outsize rabbits arrived in the isolated Stalinist state, where some sectors of the population still face malnutrition.

To ensure the successful expansion of the giant rabbit population, rabbit cross-breeding and species hybridization were needed, Lee said.

But many female rabbits failed to get pregnant, and of the rabbit kittens that were born, many were deformed, she added.

Boosting ‘rabbit-breeding’

Several charities have raised money to send giant rabbits to North Korea to boost the food supply, as the animals yield up to 10 kilos (22 lbs) of meat.

While the uber-bunnies normally breed as rapidly as their smaller cousins, the French humanitarian group Premier Urgence said it had send staff to North Korea to boost “rabbit breeding skills” among officials in charge of the farms.

The charity, which has received around U.S.$1.5 million in European Commission assistance funds for North Korea, said last November it planned to send a further 200 giant rabbits purchased in neighboring China to North Korea.

Chinese media have meanwhile reported comments made to the German magazine Der Spiegel by the original breeder of giant rabbits Karl Szmolinsky, who has had no information from North Korean officials since he sent 12 rabbits to boost the breeding farms in 2007.

“The only conclusion I can come to is that my rabbits made a nice meal for someone,” an online Chinese farmers’ news service quoted him as saying.

“I would really like to go over there and give them a hand.”

Premiere Urgence said in November that it had sent giant rabbits to seven farms in the country, including Ryongsung in Pyongyang, Youngtan in Northern Hwanghae province, Mikok, and Chungjong in Northern Pyongan province.

Livestock failures

Premiere Urgence said it planned to help the North Koreans improve giant rabbit reproductive rates by sending equipment and working on rabbit-farming skills.

The group said in November it had already dispatched three international staff members to Pyongyang, including a French and a Dutch national, while seven local staff members were already in the office, tasked with technical and clerical duties.

In an attempt to overcome severe food shortages, the North Korean authorities have already experimented with chicken, cow, and pig farming.

However, because of the decrepit state of North Korea’s facilities and the lack of technical skills, most attempts to raise livestock for food appear to have failed.

Director Lee said that sending giant rabbits from Europe was very expensive, costing about U.S. $100 per animal.

The first two rabbits to travel to North Korea paid a fare of U.S. $1,300, with vaccinations and veterinary fees on top of that.

She said her group had given up further plans to send giant rabbits to North Korea.

Experts also said the giant rabbits require more than one kilo (2.2 lbs) of carrots and potatoes daily, hard to come by in impoverished North Korea.

Szmolinsky, 67, of the eastern German town of Eberswalde near Berlin, was first approached by North Korean officials in 2006 after he won a prize for breeding Germany’s largest rabbit.

According to the United Nations, North Korea suffers widespread food shortages, and many people “struggle to feed themselves on a diet critically deficient in protein, fats, and micronutrients.”

Each of Szmolinsky’s rabbits produces around seven kilos (15 lbs) of meat, and under normal conditions should be able to produce 60 offspring a year.

Read the full story here:
Giant Rabbits’ Fate ‘Unknown’
Radio Free Asia
Noh Jung-min
4/19/2010

The EU has issued a list of 12 DPRK officials who will be denied entry visas to member countries.  According to the Choson Ilbo:

The EU has imposed sanctions targeting North Korea’s top leadership over the country’s nuclear weapons development. Twelve officials were blacklisted, many of them thought to be leader Kim Jong-il’s closest advisers.

The list includes Vice Marshal Kim Yong-chun (74), the minister of the armed forces, as well as Jang Song-taek (64), the director of the North Korean Workers Party’s Administration Department who is Kim Jong-il’s brother-in-law. Six of 13 members of the powerful National Defense Committee were blacklisted.

At a session of the Environment Council in Brussels on Dec. 22, the EU approved new sanctions against North Korea, including an entry ban on individuals and goods. EU regulations are binding on the 27 member states and overrule individual national laws.

The four other blacklisted committee members are O Kuk-ryol, the deputy chairman of the National Defense Commission; Jon Pyong-ho, the secretary of the Central Committee and head of the Committee’s Military Supplies Industry Department; Paek Se-bong, the chairman of the Second Economic Committee of the Central Committee; and Ju Kyu-chang, the first deputy director of the Defense Industry Department. Also on the blacklist are Hyon Chol-hae, the deputy director of the General Political Department of the Armed Forces, and Pak Jae-gyong, the deputy director of the Logistics Bureau of the Armed Forces.

So Sang-guk, the chair of the Physics Department at Kim Il Sung University who laid the technical groundwork for the North’s nuclear development, and Pyon Yong-rip, the president of the State Academy of Sciences, were also blacklisted.

The legal statement issued by the EU can be found here on page 16. The complete list of officials affected by the travel ban are listed here on page 3.  The UN Security Council sanctioned five individuals in 2009.

The EU also maintained its ban on Air Koryo.  According to Yonhap (h/t The Marmot):

Air Koryo, North Korea’s air carrier, has been banned from offering flight services to Europe for a fifth year after having failed to meet international safety requirements, U.S. international broadcaster Radio Free Asia (RFA) said Saturday.

The North Korean carrier has been involved in the list of carriers prohibiting from flying to the 27 members of European Union that was released this year, RFA said.

Air Koryo reportedly has a fleet of about 20 planes made between the 1960s and 1970s in the Soviet Union.

UPDATE: Here are the EU regulations adopted on Dec 22, 2009. Thanks to Mike.

From GPI:

PDF Brochure here.

In the current financial and economic situation, companies face many challenges. They must cut costs, develop new products and find new markets. In these fields, North-Korea might be an interesting option. Since a few years, it is opening its doors to foreign enterprises. The labor costs are the lowest of Asia, and its skilled labor is of a high quality. It established free trade zones to attract foreign investors and there are several sectors, including textile industry, shipbuilding, agro business, logistics, mining and Information Technology (computer games, animation) that can be considered for trade and investment. Heineken is an example of a  Dutch company, active in North-Korea. Its beer is now widely available (see photo).

In order to explore these business opportunities, a Dutch trade delegation visited North-Korea in September. See a report of this mission here. Are you interested as well? Then join our upcoming mission in May 2010, when we will also visit the annual Pyongyang Spring International Trade Fair. This fair can also be used by European companies to come in contact with potential buyers and suppliers in North-Korea, by using a booth. It is also possible for us to organize individual business tours, for participants from a single company.

With best regards,

Paul Tjia (director)
GPI Consultancy
P.O. Box 26151
3002 ED Rotterdam, The Netherlands
E-mail: paul@gpic.nl
tel: +31-10-4254172
fax: +31-10-4254317
Web: www.gpic.nl

No doubt the potential costs of North Korea’s economic transition occasionally keep South Korea’s finance minister awake at night…particularly when the international credit rating agencies review South Korea’s sovereign debt rating.  So it is only rational that South Korea would seek to spread these potential costs as widely as they can. 

Last week South Korea made a small pitch to the European Bank for Reconstruction and Development to facilitate the DPRK’s transition :

“I strongly recommend North Korea as a next candidate to become a recipient country, once it decides to transform itself into a market economy,” Young Geol Lee, vice minister of strategy and finance, said in a speech. “Please bear in mind that North Korea has great potentials as a future client of the EBRD.”

Read more here.