North Korean Economy Watch

Although the article did not offer much new or probing analysis, there were a few data points that I thought it was important to highlight: 

Despite its isolation and prisonlike feel, the Kaesong Industrial Park is booming with construction. The park’s operator, a South Korean developer, Hyundai Asan, hopes to expand it into a minicity over the next 12 years, with high-rise apartments and hotels, an artificial lake and three golf courses.

By that time, the company hopes there will be about 2,000 factories here employing 350,000 North Koreans and producing $20 billion worth of goods a year.

That compares with a manufacturing output of only $366 million in the first half of this year, according to South Korea’s unification ministry.

In the six months through June, the flow of goods in and out of the industrial park accounted for 42 percent of the $881 million in trade between the two Koreas, the ministry said.

and

[…] 72 smaller South Korean companies have already built factories here, looking to tap the North’s supply of low-cost, Korean-speaking labor. So far, only one foreign company has come [–German auto parts maker Prettl Group is building a factory. Two Chinese companies will begin operations soon[, b]ut most companies here continue to be smaller South Korean firms, producing low-tech goods, from frying pans to running shoes, largely for domestic consumption.] (NKeconWatch combined two different paragraphs here)

The piecemeal brand of change is seen in the experiences of SJ Tech, a South Korean maker of car and cellphone parts that built a $4 million factory here four years ago. The company’s first North Korean employees had never even seen a keyboard, much less a computer, said Yoo Chang-geun, SJ Tech’s president. SJ Tech has spent so much time teaching them things like machinery operation and management concepts that Mr. Yoo jokingly calls his factory “North Korea’s first business school.”

But the North Koreans were eager learners, sketching keyboards on paper to teach themselves typing. Now, SJ Tech’s 430 North Korean employees have learned enough to run the factory without South Korean supervisors.

In a telling sign, they have also changed their haircuts to look more like their South Korean colleagues.

Andrei Lankov seems optimistic on the project’s political goals, stating “When North and South Koreans can interact on a daily basis, it is a chance for the North Koreans to see with their eyes that their own propaganda doesn’t make sense.”

A few described how the South Korean-run industrial park was improving lives by paying its workers the equivalent of about $60 a month, three times the average salary in the rest of Kaesong. […]

The South Korean government, which spent more than $150 million subsidizing the park, provides low-interest loans and insurance to companies to offset the risks of investing in the unstable and still hostile North.

Mr. Yoo of SJ Tech said his North Korean employees’ monthly salaries of $75, in contrast to the $2,000 he pays South Koreans, made investing in North Korea entirely worthwhile, despite any risks.

The article seems to take worker compensation claims at face value, but in reality Kaesong workers do not take home their allotted wages.  The DPRK government keeps most of them in taxes and administrative fees.  However, other non-monetary benefits make the jobs highly envied among North Korean workers.  Rumor has it that North Korean workers pay hefty bribes to get these jobs. 

Read the full article here:
Big Dreams for North Korean Industrial Park
New York Times
Martin Fackler
8/20/2008

UPDATE: Herald Tribune/Joong Ang have update and photo of reunion. 

In February 2007 the Joong Ang Daily reported the sad story of Renate Hong, and East German citizen who married a North Korean student at Jena University named Hong Ok-geun.  Shortly after their marriage, Mr. Hong was called back to the DPRK in 1961, and the couple eventually lost touch. 

Early last year, North Korea verified that Mr. Hong was still alive in Hamhung, though remarried and with a new family.   Ms. Hong, still in Germany with two children born of the short relationship, never remarried.  

The couple was finally able to exchange letters with the help of German authorities. When the first arrived from Mr. Hong, it was the first time in 44 years that Renate had heard from her husband since her last letter came back with an “address unknown” stamp in 1963. 

The DPRK government initially denied requests for a reunion, but this week the couple, as well as their children, were allowed to meet in Pyongyang.  According to the Hong family and diplomatic sources in Germany, Renate Hong, 71, and her two sons arrived in Pyongyang on July 25.  This will be the first time the two sons, now 47 and 48, will see their father. 

Read more here:
Joong Ang Daily
Ryu Kwon-ha
2/13/2007

North Korea allows a separated couple to reunite after 47 years
Joong Ang Daily
Ryu Kwon-Ha and Ser Myo-ja
8/5/2008

German travels to NKorea to reunite with husband
Associated Press(Via Huffington Post)
8/5/2008

UPDATE 4: Circus gets coverage in Dutch media.  Story here.  You Tube video of the circus performing in Pyongyang here.

UPDATE 3: Video report of the performance in the Netherlands here. (hat tip to NOS)

UPDATE 2: Werner found out the information for Germany:

In Frankfurt / Germany they will perform from 4th to 28th Sept.

For place, time and tickets please look at:
http://www.ticketcenter.de/Sonstiges/The-Great-Flying-Circus-Nordkorea/Tournee-03248.html

UPDATE 1: Thanks to a reader for finding the information and posting in the comments:

It appears they are going to perform in Amsterdam’s Koninklijk Theater Carré from 08/01/2008 to 08/31/2008. Tickets can be ordered at this URL: http://wereldzomerfestival.theatercarre.nl/actiesite.php. 

ORIGINAL POST: According to Yonhap, the Pyongyang Circus Troupe will be touring Germany and the Netherlands for the next three months, showing off their 10 signature stunts.

From the article:

Formed over 50 years ago, the troupe is one of North Korea’s foremost cultural groups, making a visit to South Korea in 2000 on the eve of the first inter-Korean summit in Pyongyang.

“This is the first time the troupe is giving a solo performance in Europe,” the paper said, adding the tour will help improve relations between North Korea and European nations.

I imagine this is the circus that performs on Kawngbok street in Pyongyang.  There is a second “Korean People’s Army Circus” in Moranbong district.

I do not know where they will be performing, or where to get tickets, so if anyone out there can find out, please let me know.

Read the full article here:
N. Korean circus troupe to tour Europe: report
Yonhap
7/26/2008

North Korea has requested that the German Red Cross continue providing medical aid beyond ithe 2009 deadline.

The request was made when Rudolf Seiters, president of the German Red Cross, visited Pyongyang on April 22-26 and met with Kim Yong-nam, chairman of the Presidium of the Supreme People’s Assembly to discuss his group’s overrall programs to aid the communist state.

The German group has sent medical kit that includes pain-killers, antibiotics and nutritional injections, as well as medical equipment such as blood pressure cuffs and stethoscopes to some 2,000 local hospitals and clinics across North Korea since April last year. About 8.8 million North Korean residents benefited from the aid, Koch said.

The German government has provided 4 million euros (US$6.2 million) worth of aid to the North every year since 1997, the spokeswoman added.

Read the full article below:
German Red Cross asked to continue helping N.K.: report 
Yonhap
5/1/2008

Last August I posted an excerpt from Andrei Lankov’s book, North of the DMZ, on the preservation of Kim il Sung’s body in Kamsusan Memorial Palace.  This year, the Daily NK (here and here) provides some new information on Kim il Sung’s imposing presence on the North Korean landscape.

First some statistics:

1.  There are approximately 70 Kim il Sung statues in North Korea (large statues a la Mansu Hill in Pyongyang).

2.  There are approximately 30,000 plaster busts.

3.  There are approximately 140,000 monuments and memorials

4.  There is allegedly one Kim Jong il statue in Pyongyang (although the Daily NK is the only source I have ever heard make this claim). 

5.  The first Kim il Sung statue was at the Mangyongdae Revolutionary School on 10/24/1948.  The second was in front of the Changjeon School in 1949. The most recent is at Kim il Sung University in 1996. 

Apparently all of the statues are made of bronze, but are coated in a gold paint every two years to prevent them from corroding.  The gold paint is allegedly imported from Germany (Can any German readers/speakers find out which German company supplies the paint?  How much? And at what cost? ).   

All of the likenesses of the Great Leader are exclusively constructed by the Mansudae Art Studio’s “Number One Works Department”  in Pyongyang.  The workers in this group are tested annually by a deliberation committee so they can be certified to work on Kim statues, etc.  These individuals are the only ones legally allowed to reproduce the leader’s image in North Korea.

Once a Kim statue is completed, it is transported by numerous agencies (security, party, and artists) to its destination where it is erected.  Lamps are supposed to shine on the statues from 10:00pm until 4:00am.  Local citizens are charged with keeping the area around the statue tidy (which can be verified on Google Earth).  In the event of an emergency (such as a war), many statues allegedly have dedicated bunkers in which they can be stored.

As has been chronicled before on this website, North Korean embassies generally secure their own  operating funds.  Although this might seem odd to western observers, it is an innovative model that has its benefits (i.e. the embassies earn a profit and economic considerations play a large role in determining whether an embassy is worth the cost).  There is also a downside to this model, and that is that more than one North Korean diplomat has been caught in some sort of shady smuggling or tax avoidance scheme.

The staff at the DPRK’s embassy in Germany, however, have been quite entrepreneurial in managing their real estate holdings.  They are converting their old offices into hotel space:

The Cityhostel Berlin will initially have 37 rooms at a charge of 20 Euros ($31) per head a night, Sankei reported. A reception with a grand piano is being built and a Korean restaurant is due to open in May, the newspaper said.

The embassy buildings, occupying 8,160 square meters (87,788 square feet), were built in the 1970s during the Cold War and are located in old East Berlin, Sankei said. Staff numbers at the embassy were cut after the Cold War ended and the building being converted was previously leased to corporations, Sankei said.

Update 4/5/2008:
From the Daily Telegraph:

A spokesman for the North Korean embassy dismissed the reports as Japanese propaganda, however.

“The rumours about this hostel are based on Japanese media reports, but they are not correct,” the spokesman said.

“The Japanese media are very much influenced by their government and they probably gave out this wrong information because they are our enemies.”

but…

On its website, City Hostel notes that it signed a contract in December to occupy the building, which it describes as “formerly the consulate of North Korea”.

Read the full articles here:
North Korea Converts German Embassy Into Hostel, Sankei Reports
Bloomberg
Hideko Takayama
3/25/2008

Enjoy your stay… at North Korean embassy
Daily Telegraph
Harry de Quetteville
4/5/2008

According to Business Week German auto parts manufacturer, Prettl, became the first non-Korean firm to start building a plant inside a joint inter-Korean factory complex in North Korea–breaking ground Wednesday.  Kim Min-kyung with the Kaesong Industrial District Management Committee claims the factory will be open in December and employ 550 North Koreans.

Other facts:

Two Chinese companies also signed contracts last year to run factories in the area but have not started construction, Kim said.

A total of 69 South Korean companies are currently operating in the zone, employing some 23,220 North Korean laborers, according to the management committee.

The full article can be found here:
German firm breaks ground in North Korea
Business Week
3/5/2008

Daily NK
Yang Jung A
7/24/2007

The North Korean Embassy in Berlin has leased its premises of the building in order to pay for its expenses, the Sankei Shimbun reported on the 24th.

According to the newspaper, an 5 stories building, 8160㎡ in area was leased out by the North Korean Embassy to a total of 15 companies including a design company and psychology association.

The North Korean Embassy did not publicize any external advertisements. However, a Germany affiliate is apparently conducting all the paperwork at an office located at the entrance of the building, the newspaper informed.

During the Cold War, North Korea constructed a large scale embassy in Berlin for propaganda and ostentation like other socialist blocs at the time.

However, with the fall of East Germany and the amalgamation with West Germany, the majority of socialist forces receded including the North Korean embassy. Now there are only a dozen or so employees working at the embassy and 70% of the building vacant.

The area is on lease for 8 Euros per ㎡ which is considerably cheaper than other locations in the busy area of Brandenburg Gate which costs at least $10~15 Euros.

Daily NK
Yang Jung A
6/21/2007

Kim Jong Il underwent a Percuteneous Transarterial Coronary Angioplasty (PTCA) performed by German doctors in mid-May.

An inside Japanese source well acquainted with North Korea reported by telephone on the 20th that Kim Jong Il received medical treatment from doctors of the Berlin Heart Center in mid-May and was back at work a day later.

This source said that North Korean authority asked the German doctors to closely examine Kim Jong Il’s health and perform surgery if necessary. The examination revealed a myocardial infarction, but no other serious heart condition.

According to the doctors, Kim’s health was not bad except for kidney hypertrophy and some symptoms of diabetes. After examination he received the relatively simple PTCA treatment instead of surgery.

PTCA expands a narrow artery by inflating a tiny balloon. The balloon is introduced into the artery through catheter. It is an effective treatment for coronary artery diseases without the use of thoracotomy, and results in high success rates and few complications. Patients need just a couple of days’ rest. Dr. Jung Yong Suk, a heart specialist at the Sunrin Hospital in Handong University, explained to the Daily NK that “PTCA is a medical treatment for coronary arteries supplying blood into the heart. If Kim Jong Il required the procedure, he may have some problem in his coronary arteries, but it is uncertain if it is a stricture of the heart or myocardial infarction.”

The Japanese source said that the “German doctors promised to keep Kim Jong Il’s procedure a secret and to coordinate a faked story with North Korea authority.” Therefore, the spokesperson of Berlin Heat Center revealed that 6 members of the center stayed in Pyongyang from May 11th to the 19th, treating only three laborers, a nurse, and a scientist.

A North Korea expert speculated that Kim Jong Il might be addressing health concerns prior to the year end South Korean Presidential Election and further nuclear negotiations. Many groundless reports have circulated regarding possible Kim Jong Il heart surgery. A Japanese magazine, Shukan Gendai, claimed that Kim Jong Il received coronary artery bypass surgery for myocardial infarction.

Original claim:
Kim Jong-il had artery surgery in May
Korea Herald
6/14/2007

North Korean leader Kim Jong-il was operated on by a team of German doctors last month to open a blocked artery, a person connected to the Kim regime said.

While doctors from German Heart Institute Berlin arrived in Pyongyang prepared to perform major surgery on Kim, they found only one clogged artery, the person said. The 65-year-old Kim, who suffers from diabetes and high blood pressure, recovered well from the surgery, said the person, who asked that his name not be used because North Korea wanted the operation kept secret.

The person said while other members of North Korea’s elite go abroad for medical treatment, only Kim is important enough to have a team brought into the country. Barbara Nickolaus, a spokeswoman for the institute in Berlin, confirmed that the doctors had been in Pyongyang, and said they were there to treat three workers, a nurse and a scientist.

Kim’s health has been the subject of repeated recent speculation. Chosun Ilbo, South Korea’s biggest daily newspaper, said late last month that South Korean and U.S. intelligence agencies were checking reports Kim was suffering from heart, kidney or liver disease.

The Japanese weekly magazine Shukan Gendai said on June 8 a team of six doctors from Berlin was in Pyongyang from May 11 to 19 and conducted heart-bypass surgery on Kim.

The North’s official Korea Central News Agency said Kim visited factories in North Pyeongan Province near the border with China and spoke with workers on June 7, or less than three weeks after the German doctors left North Korea.

NK Daily, a Seoul online news organization staffed by defectors from North Korea, reported on June 11 it had confirmed the report with an “inside source” in North Korea who said the apparently vigorous Kim’s June 7 schedule lasted until 1 a.m.

Since the 1970s, when he was unofficially designated as successor to his father, Kim Il Sung, Kim Jong-il’s health has been the subject of speculation.

“Kim does have diabetes and high blood pressure,” said C. Kenneth Quinones, a retired U.S. State Department Korea specialist who teaches at Japan’s Akita International University. “But there is no firm evidence that either has worsened recently.”

Kim, who has three sons in their 20s and 30s, hasn’t publicly said whether one of them or someone else will be his successor in the world’s only communist dynasty.

U.S. Concern

“The State Department is concerned about his health, at least until he publicly designates an heir,” Quinones said.

Kim’s failure to keep to his usual quota of appearances, such as visits to work units to deliver what the official Korea Central News Agency calls “on-the-spot guidance,” often triggers speculation.

Given North Korea’s nuclear program, all reports about Kim’s health have to be taken seriously, said Michael Breen, author of “Kim Jong-il: North Korea’s Dear Leader,” a biography.

“One day the reports will be true,” Breen said. “So we can never ignore them.”

Chosun Ilbo reported in May that Kim had been on official activities 23 times between Jan. 1 and May 27, half the number reported during the same period in 2006.

At an April 25 military parade, Kim’s eyeglass lenses were different from his usual sunglasses, leading to speculation his diabetes had worsened, making his eyes more sensitive to sunlight, the newspaper said. That was a “false alarm,” Quinones said. He said Kim was actually wearing “transition” lenses that turn darker according to the sun’s brightness.

South Korea’s National Intelligence Service concluded Kim’s health probably wasn’t in serious decline, according to a person who spoke with service agents.

At the April parade in Pyongyang, South Korean agents watched Kim review troops for two hours with no signs of fatigue, a sign his health isn’t fragile, said the person, who asked not to be named because of the sensitivity of the information.

Chain-Smoker

Kim is a former chain-smoker whose lifestyle — including a reported fondness for cognac and delicacies — may contribute to his diabetes and high blood pressure. His father died, reportedly of cardiovascular disease, at 82 in 1994.

Questions about the younger Kim’s health were heightened during a long disappearance in the late 1970s, prompting speculation he was dead or seriously incapacitated from injuries in a car accident caused by people opposed to a hereditary succession.

After his formal elevation to succeed his father in 1980, the official media portrayed him as a tireless worker for the people’s welfare even at the risk of his own health.

Kim looked pale and thin at the ceremony designating him as successor, causing North Koreans to write critical letters to officials for failing to take care of his health, official media reported at the time.

Kenji Fujimoto, a Japanese chef who served Kim at his Pyongyang palace, said in a pseudonymous book he wrote about the experience that the North Korean leader would complain about the medicine he had to take.

In the book, “The Private Life of Kim Jong-il,” Fujimoto quoted Kim as saying, “Do I have to keep taking these pills every day until I die?” (Bloomberg)

For international readers: The Congressional Research Service is an organization that puts together issue briefs and legislative histories for congressional staff.  They are one of the first places US Congressional staff go to learn about a topic.

In April, the Congressional Research Service published a document on the North Korean Economy.  The full report, as well as some past reports, can be downloaded here.

Executive Summary

This report provides an overview of the economy of the Democratic People’s Republic of Korea (DPRK) or North Korea, its external economic relations, attempts at reform, and U.S. policy options. Along with the United States, North Korea’s major trading partners — China, Japan, South Korea, and Russia — form the socalled “six parties,” who are engaged in talks, currently restarted, to resolve issues raised by the DPRK’s development of nuclear weapons.

The economy of North Korea is of interest to Congress because it provides the financial and industrial resources for Pyongyang to develop its military, can be used as leverage in negotiations, constitutes an important “push factor” for potential refugees seeking to flee the country, creates pressures for the country to trade in arms and illegal drugs, is a rationale for humanitarian assistance, is tied to Pyongyang’s nuclear program, and creates instability that affects South Korea and China. The North Korean threat to sell nuclear weapons material could be driven in part by Pyongyang’s need to generate export earnings. The dismal economic conditions also foster forces of discontent that potentially could turn against the Kim regime — especially if knowledge of the luxurious lifestyle of communist party leaders becomes better known or as the poor economic performance hurts even Pyongyang’s elite.

Economic conditions in North Korea currently seem to be improving but have been dismal for those out of the center of power. Mass starvation — eased only by international food aid and other humanitarian assistance — has stalked the countryside. Over the past 15 years, industrial production in North Korea has shrunk considerably. The country has embarked on a program of economic reforms that include raising wages, allowing prices to better reflect market values, reducing dependence on rationing of essential commodities, trimming back centralized control over factory operations, and opening foreign trade zones for international investment.

North Korea has extensive trading relationships with China and South Korea and more limited trade with Japan and Russia. Because of U.S. economic sanctions and lack of normal trade relations status, U.S. imports from North Korea in 2006 were nil, while U.S. exports consisted of $3,000 worth of books and newspapers.  The DPRK has been running an estimated $1.8 billion deficit per year in its international trade accounts that it funds primarily through receipts of foreign assistance and foreign investment as well as through various questionable activities, such as sales of weapons, transporting and producing illegal drugs, and counterfeiting brand name products and currency.

U.S.-led financial sanctions on North Korea have disrupted that country’s trade. In the six-party talks, economic assistance (including fuel oil) is a major bargaining chip. Economic policy options include increasing or easing economic sanctions, preventing shipments of illicit cargo, normalizing relations with Pyongyang, negotiating a trade agreement, allowing the DPRK to join international financial institutions, and removing the country from the terrorism list. This report will be updated as conditions warrant.