North Korean Economy Watch

UPDATE 2: (hat tip to a couple of appreciated readers) Park Soo-me reports on the proliferation of South Korean films in the DPRK:

“It’s safe to assume that a majority of North Korean residents have watched a South Korean film or a soap opera at least once,” said Kim, who left North Korea in 2004, and established a think-tank in Seoul called the “North Korea Intellectuals Solidarity.”

The group, which frequently communicates with their inside contacts in the North, recently broke revealing news that a group of North Korean students were caught watching “Haeundae,” a mega-hit South Korean disaster film locally released just over a month ago, at a computer lab inside a Pyongyang college.

The defector group cited an anonymous source in Pyongyang who told their reporter that the government is tightening a crackdown of digital files, as South Korean films smuggled through China are endangering the North’s dictatorial regime.

A student identified only as “Choi” said he had downloaded the film at his relative’s house in Cheongjin, a city about 50 miles from the Chinese border. He was arrested for promoting the ideology of his enemy state, not for circulating a pirated film.

Since the late 1990s, South Korean dramas and films were illegally traded in the North through local businessmen frequenting the Chinese borders. The phenomenon is not unlike that from the young Soviets in the 1970s, who secretly acquired rock ‘n’ roll records and American videotapes through its black market, despite the country’s ban on the cultural products of the capitalist state.

Last year, an insider from another defectors’ group based in Seoul broke news that DVD compilations of South Korean adult films and TV dramas are becoming popular in the North, as the sales of the average South Korean soap opera has declined in recent years. Such DVDs were found in a North Korean market in Cheongjin, the group said through its newsletter.

The situation in the North has gotten to the point where Oh Yang-yeol, a professor at the University of North Korean Studies in Seoul, published a paper on “Hallyu in North Korea: Now and Future.”

The term hallyu recalls the Korean wave of pop culture that hit Southeast Asia in the early 2000s. Oh’s paper stresses the spread of South Korean fashion, drama and music among the younger generation of North Koreans.

In a separate release by the Korean Institute of National Unification, experts have quoted North Korean defectors who have testified that South Korean melodramas like “Autumn in My Heart” and “Winter Sonata” have become a such hit in the North that a special squad was once organized to crack down on the violators.

But not all dramas smuggled into the North are soft, touchy-feely soap operas. Among the works that have been found and blacklisted by the Northern authorities include films like Park Chan-wook’s “Joint Security Area,” a story which is essentially built around a forbidden friendship between solders from the North and South who are stationed in the Demilitarized Zone that divides the two countries.

On the distribution side, South Korean films and TV dramas are appearing in the North faster and with a broader reach, as evident in the recent case of “Haeundae.”

“In the past, it normally took up to six months for a South Korean film to arrive in the North,” Oh said. “Now, it takes little over a month. In wealthier neighborhoods in Pyongyang we start to see local girls imitating the hairstyle and fashion of South Korean celebrities who starred in the latest TV dramas.”

Irritated by the spread of hallyu — often referred to as the “yellow wind” in the North — authorities have tightened censorship regulations and house inspections to encourage “ideological discipline.” But there is a limit as to what they can do.

Although limited to a privileged few, more computer-savvy Koreans in Pyongyang are finding easier alternatives to enjoy pop culture from the outside world, making the North’s isolation more difficult. Internet access is limited to an Intranet for most people in the North. But USB drives are becoming more common among local college and middle school students, and frequent traffic between North Korea and China is increasing opportunities for cross-border smuggling of pirated films from Hollywood and Seoul.

Read the full story below:
Pop culture making inroads into North Korea
Hollywood Reporter
Park Soo-mee
10/8/2009

UPDATE 1: Although the Donga Ilbo previously reported that the DPRK was growing more tolerant of foreign films (below), Channel News Asia reports the DPRK is clamping down:

The student in Pyongyang was caught on September 5 while watching a digital copy of “Haeundae” with his dorm friends, the North Korea Intellectuals Solidarity said in a newsletter posted on its website.

The student allegedly acquired a file of the film at a relative’s house in the northeastern port city of Chongjin and downloaded it onto his college computer, it said.

The case prompted authorities to launch an extensive probe aimed at preventing the spread of the movie, the group said, quoting a “correspondent” in the North.

The inspection revealed that tens of thousands of North Koreans have secretly seen foreign films, it said.

Defectors say South Korean pop songs and movies are popular in the isolated communist country, despite a steady campaign to weed out what state media has termed “decadent foreign culture and ideals”.

In December 2007, three North Koreans including a schoolteacher were sentenced to death for smuggling illegal adult films from China and South Korea, according to Good Friends, a Seoul-based aid group working in the North.

ORIGINAL POST: According to the Donga Ilbo:

Recently, the North has televised the shows “International Common Sense,” “Animals in the World,” and “Foreign Culture,” programs which had been abolished long ago. Those programs even show the daily lives of Westerners.

A few days ago, a video clip was aired in which North Korean singers in military uniform played the guitar and sang Italian songs. When broadcasting sports, Pyongyang used to simply air competitions in which North Korean athletes participated, but when airing the IAAF World Championship in Athletics in Berlin last month, the North summarized footage of major events and televised them.

North Korea’s attitude toward foreign movies has also changed. CD-ROMs containing foreign movies have been manufactured by the state-run Hana Electronics, which has sold them across the nation. Most of the CD-ROMs include foreign movies aired by Mansudae TV, which serves Pyongyang only.

A CD-ROM is priced at 1,500 North Korean won (41 U.S. cents) and a DVD goes for 7,500 won (2.07 dollars). CD-ROMs of cooking game programs as well as those on the lives of famous soccer players such as Diego Maradona and Franz Beckenbauer are also on the market.

The North has also embraced world-famous animated films. The Disney productions of “Cinderella,” “Pinocchio,” “Sleeping Beauty” and “Robin Hood” are available across the nation. The popular American cartoon “Tom and Jerry” is called “The Magic World of a Mouse” in the North.

The proliferation of foreign movies has also led to an increase in secret movie rental stores. Government-manufactured CD-ROMs can be rented out at 300 won (eight cents) per day and illegal movies can be borrowed at 500 won (14 cents) per day.

Yet most foreign programs broadcast in North Korea are created in China, which, in turn, has encouraged North Koreans to adopt the Chinese way of life. Mansudae TV routinely broadcasts Chinese soap operas like the drama “Unnamed Hero” and “Vertical Blow,” which shows the training of China’s special forces.

Despite the apparent liberalization of North Korean television, Pyongyang has toughened its punishment for those watching South Korean TV programs. In the past, punishment for watching a South Korean program was usually avoided through a bribe but the offense is now considered more severe than a drug-related crime.

Read the full story here:
N. Korea Growing More Tolerant of Foreign Movies
Donga Ilbo
9/19/2009

The Choson Ilbo recently posted an article which contained several interesting facts.  Quoting from the article:

A W35 million price tag for the Internet connection to transmit a five-minute piece of footage is only one of the endless list of inconveniences that make up daily life in North Korea (US$1=W1,163). Kristine Kwok, a reporter for Hong Kong’s South China Morning Post who accompanied Chinese Premier Wen Jiabao on his visit to North Korea on Oct. 4 to 6, recounts them in a story titled “Life in the Hermit Kingdom.”

“Accessing the Internet is a distant dream for North Korean citizens and an expensive luxury for visiting foreigners,” Kwok wrote. “Filing a news report of Wen shaking hands with North Korean leader Kim Jong-il would cost a TV station the equivalent of HK$233,472. The North Korean Foreign Ministry eventually decided to pay all the Internet fees for the reporters –much to their relief.”

The report said North Korea’s 24 million people are barred from the Internet, with connections available only in some hotels, where sending a picture costs around W68,000 and a single email W3,400. North Korea has set up road blocks along the information super highway and is committing “robbery,” Kwok added.

The last time I visited the DPRK, I recall that emails and phone calls from the Yangakdo Hotel are exorbitant–also, there are no phone books available and switch board operators (yes, they still have them) are of no help. If you don’t know the number you need to call you have to get creative.  But, with prices like that you would think the DPRK would like more journalists to visit!

Also mentioned in the article is Pyongyang’s new fast-food Samtaesong Restaurant, which I blogged about here when it opened.  According to the article “Samtaesong” translates to “three big stars”.  I am going to go out on a limb and guess that those three stars are the “Three Stars of Paektu: Kim il Sung, Kim Jong Suk, and Kim Jong il.”  now you can show your loyalty to the three stars while eating a burger, which is much more pleasant than standing silently in line formation under the hot sun for hours on end while political leaders you have never met read long speeches to you.

Also, “The most expensive item on the menu is ‘crispy chicken,’ which costs 3 euros, while a hamburger costs between 1.2 to 1.7 euros. That is high given the fact that North Korea’s per-capita GDP was US$1,000 last year, but AFP said Samtaeseong sells 300 burgers each day.”

Read the full article here:
Int’l Press Gets Glimpse of N.Korea’s Daily Grind
Choson Ilbo
10/13/2009

According to the Los Angeles Times:

Dale Salwak, who teaches English literature by day and performs as a magician at night, knows that arranging for North Korean illusionists to visit the U.S. is no easy trick.

Salwak teaches English literature by day at Citrus College and performs illusions at night at places such as Hollywood’s Magic Castle. His skill at floating mysterious zombie balls in the air and turning silk scarves into exploding flowers earned him an invitation earlier this year to visit the secretive Asian nation.

His six-day stay in Pyongyang in April prompted him to attempt to organize an exchange program that will lead to visits by North Korean magicians to this country.

Officially, the 62-year-old Salwak was attending the 26th Spring Friendship Art Festival, which is held biannually by the Kim Jong-il government to promote “friendship, solidarity, exchange and cooperation” among musicians, dancers, acrobats and other performers.

Salwak’s invitation was arranged by several South Korean magicians who were acquainted with him. He was the only American among 680 performers from Asia and Europe. [This last fact is not true. See here.]

“When I arrived, I was told to ‘act as if you’re always being watched, because you are.’ We were given a list of dos and don’ts — ‘don’t express your feelings, don’t talk about politics’ — and told we’d have to turn over our cellphones. We weren’t allowed to take telescopic camera lenses, we could bring no books or magazines. We turned over our passports when we arrived.”

Salwak was assigned two young college-student “managers” who were at his side every time he stepped from his hotel. They spoke fluent English and translated when he spoke with others. They also supervised the two-minute phone calls he was allowed to make from the hotel.

Nonetheless, he came to respect his escorts. “I knew how I behaved, what I said, would reflect on my managers,” he said. “So I was extra careful.”

The visitors had no direct contact with regular Pyongyang residents, although they saw blocks-long lines of people waiting for buses as their group was driven through the capital, he said.

Salwak said the visiting magicians took in several North Korean magic shows and performed twice themselves. He said he staged his own impromptu 20-minute card-trick exhibition for two dozen dining room workers when he showed up early for breakfast at the hotel.

He said he hopes to arrange for the North Korean magicians’ American visit in time for them to attend a planned International Brotherhood of Magicians convention next July in San Diego. He said there will be no restrictions on where they go or whom they talk to.

“I’ve started by writing a letter and sending it through the appropriate channels. We’ll see what happens,” Salwak said.

Along with giving North Koreans an opportunity to perform here, Salwak envisions holding a forum so that the visitors can discuss their views of the performing arts and their role in it.

Read the full story below:
La Verne professor wants to pull some diplomacy out of his hat
Los Angeles Times
Bob Pool
10/9/2009

UPDATE: Although South Korea has signaled willingness to increase spending in North Korea (below), it appears they have come nowhere close to spending their current budget.  According to Yonhap:

South Korea has so far this year spent less than 5 percent of its annual budget earmarked to promote reconciliation with North Korea, the Unification Ministry’s data showed Wednesday.

The meager spending of the inter-Korean cooperation budget mirrored stagnant economic exchanges yet to be enlivened despite a recent thaw in political relations.

The data showed that South Korea has set aside 1.16 trillion won (US$990.94 million) for this year’s inter-Korean cooperation budget, which includes 43 billion won transferred from last year, to support joint business projects and provide industrial and humanitarian aid to the North.

The budget spending as of the end of September amounted to 55.9 billion won, 4.8 percent of the total, according to the data.

In a detailed breakdown of expenditures, the ministry spent 10.6 billion won, or 11.3 percent of the 93.8 billion won budget earmarked for the South Korean-run factory park in the North’s border town of Kaesong. Planned projects to build a dormitory for North Korean workers and modernize roads there have also not begun. The Kaesong park hosts about 110 South Korean firms with 40,000 employees from the North.

Humanitarian aid was the area in which funds were held back most. Out of the earmarked 819.8 billion won, the ministry has spent a meager 0.9 percent, or 7.7 billion won, so far. Unification Minister Hyun In-taek said in a parliamentary audit Tuesday that Seoul will decide when to resume its rice and fertilizer aid, crucial to food supplies in the North, after “considering the climate of future inter-Korean relations.”

For social and cultural exchanges, the ministry spent 2.2 billion won, or 25.3 percent of the earmarked 8.7 billion won. Loans for inter-Korean cooperation projects amounted to 11.3 percent, or 21 billion won out of 186.6 billion won.

ORIGINAL POST: According to Yonhap:

South Korea’s government proposed a 30 percent increase in its budget spending aimed at supporting inter-Korean economic cooperation projects for next year, the finance ministry said Tuesday.

According to the Ministry of Strategy and Finance, the budget set aside for inter-Korean economic cooperation next year will amount to 398.2 billion won (US$339.6 million), compared with 304.6 billion won assigned for this year.

Citation:
Seoul proposes 30 pct increase in budget for inter-Korean economic cooperation
Yonhap
10/6/2009

According to the Financial Times:

North Korea’s mineral wealth is receiving close scrutiny, with South Kor­ea’s government this week valuing reserves at $6,000bn (€4,070bn, £3,670bn). Encouraged by data on metals, Goldman Sachs last month predicted the economy of a unified Korea could rival Japan’s by 2050.

…

Trade with China is growing, reaching $2.8bn last year from about $2bn in 2007. But military authorities in North Korea are perceived as hostile to the changes in society and infrastructure that foreign investment could bring.

“If the North opens its mineral resources to foreign countries, that is tantamount to taking a military, social and political gamble, jeopardising their security,” said Lim Eul-chul, of Seoul’s Institute of Far Eastern Studies.

A South Korean diplomat closely involved with nuc­lear talks doubted Pyong­yang would allow China to make big investments inside its border. “They cannot permit that kind of influence,” he said.

Although they were long communist allies, North Korea and China have a mutual mistrust, partly tied to territorial claims.

Still, limited foreign investment in the sector is not impossible. Colin McAskill, executive chairman of Koryo Asia, says he has signed a letter of intent and memorandum of understanding to invest in North Korean metals and argues his model would not interfere with sovereignty issues that concern Pyongyang.

Switzerland’s Quintermina has posted reports on its website saying it is looking to extract magnesite in North Korea.

Chinese investors are believed to have some metals interests and are also involved in coal mining.

“The Chinese companies that have tried to do business in North Korea complain a lot that the regulations change frequently and that the power supply is erratic,” said a Chinese academic in Beijing.

One quote in this article struck me as a little off:

A South Korean diplomat closely involved with nuc­lear talks doubted Pyong­yang would allow China to make big investments inside its border. “They cannot permit that kind of influence,” he said.

First of all, China has already made plenty of investments inside the DPRK and the Chinese government and companies already exert influence.  There is a difference between having influence and being in control.  Secondly, China is the largest market for North Korean exports.  Even though they might not “own” the North Korean assets from which they purchase the goods, the North Koreans are limited in terms of who will/can trade with them.  In this sense China earns surplus through either bulk purchase discounts or monopsony power.

Read the full story here:
China eyes N Korea’s mineral wealth
Financial Times
Christian Oliver
10/6/2009

July 1, 2009
Download the full report here. Download other CRS reports here.

Summary: The United Nations Security Council unanimously passed Res. 1874 on June 12, 2009, in response to North Korea’s second nuclear test. The resolution puts in place a series of sanctionson North Korea’s arms sales, luxury goods, and financial transactions related to its weapons programs, and calls upon states to inspect North Korean vessels suspected of carrying such shipments. The resolution does allow for shipments of food and nonmilitary goods. As was the case with an earlier U.N. resolution, 1718, that was passed in October 2006 after North Korea’s first nuclear test, Res. 1874 seeks to curb financial benefits that go to North Korea’s regime and its weapons program. This report summarizes and analyzes Res. 1874.

On the surface, financial sanctions aimed solely at the Democratic People’s Republic of Korea (DPRK, the official name of North Korea) and its prohibited activities are not likely to have a large monetary effect. Governments will have to interpret the financial sanctions ban of the resolution liberally in order to apply sanctions to the bank accounts of North Korean trading corporations. A key to its success will be the extent to which China, North Korea’s most important economic partner, implements the resolution. In summary, the economic effect of Resolution 1874 is not likely to be great unless China cooperates extensively and goes beyond the requirements of the resolution and/or the specific financial sanctions cause a ripple effect that causes financial institutions to avoid being “tainted” by handling any DPRK transaction. A ban on luxury goods will only be effective if China begins to deny North Korea lucrative trade credits.

Provisions for inspection of banned cargo on aircraft and sea vessels rely on the acquiescence of the shipping state. In the case of North Korean vessels, it is highly unlikely that they would submit to searches. Resolution 1874 is vague about how its air cargo provisions are to be implemented, in contrast to the specific procedures set forth regarding inspecting sea-borne cargo. While procedures are specified for sea interdictions, the authority given is ambiguous and optional. Further, DPRK trade in small arms and ammunition is relatively insignificant, and therefore the ban on those exports is unlikely to have a great impact.

UPDATE: I have since found out that DPRK art was influenced by Russian art until 1968 when Kim Il Sung gave a speech about art having “Korean context.”  After this production of chosunhua (Korean ink painting)  increased.

ORIGINAL POST: When I visited the DPRK in 2004, one of the destinations on the itinerary was the Museum of American War Atrocities in Sinchon.  This museum is flanked by two large murals, and below I have posted a picture of the mural on the right side of the museum:

(click for larger version)

The caption at the bottom of the mural reads “Let’s take revenge a thousand times on the US imperialist wolves.”

This painting and many others are available in the book North Korean Posters: The David Heather Colleciton by Prestel Publishers.  This weekend, however, I received a copy of Soviet Posters: The Sergio Grigorian Collection also by Prestel Publishers, and after turning only three pages I saw this image:

(click for larger version)

This poster bears such a resemblance to the North Korean mural above that I believe it is fair to say the North Koreans “borrowed” the sentiment for their own people.  The woman’s face is nearly identical aside from the fact that she has been made Korean and her dress has been converted into a hanbok.  The face, from the nose down, and hands are identical.

The Russian poster is by Konstantin Ivanov and the caption reads “Lets avenge the people’s suffering.”  It was published in 1943, and according to Soviet Posters:

The image of the motherland, born before the war, gained momentum during the conflict (WWII).  Mothers called their soldier-sons to kill and conquer the enemy, and to free the land from the dangers of Nazism.

Can any readers from China or Russia identify any other North Korea copies?

According to the Associated Press:

A U.N. development agency has resumed operations in North Korea after a more than two-year pause following allegations of fraud.

The North’s Korean Central News Agency said a ceremony Wednesday marked the return of U.N. Development Program to the country.

UNDP withdrew its operations in March 2007 following allegations that the agency had left itself open to exploitation by the communist regime for money laundering and other illicit purposes.

A U.N. audit cleared UNDP of wrongdoing in June last year, saying the agency knew of no improper financial dealings.

Yonhap news agency reported that UNDP decided to restart its North Korea projects after Pyongyang guaranteed independent auditing and administrative changes to ensure the transparent use of funds.

1. Previous UNDP posts here.

2. Previous DPRK aid posts here.

Read the full article here:
Scandal-hit UN program resumes aid in NKorea
Associated Press
9/30/2009

UPDATE 2: Last month, South Korea seized a North Korean shipment to Syria which contained hazmat suits “to guard against nuclear, biological or chemical infection”. The four containers that were confiscated in Busan contained the Russian-made suits (or North Korean-made but copied from Russian designs). The report’s lead says that the items were related to chemical weapons, but the rest of the report doesn’t explain why it believes it was chemical-related and not biological or nuclear.

UPDATE 1:  South Korea also searched containers shipped by the DPRK on a Panamanian ship.  According to Yonhap:

South Korea confiscated and searched containers shipped by North Korea on a Panama-registered freighter last month but reportedly found no suspicious cargo, according to sources Monday.

The National Intelligence Service (NIS) and relevant authorities on Sept. 22 ordered an inspection of the ship docked in the southeastern port of Busan and searched the four containers, a government official said, requesting anonymity.

The official said authorities found some kind of protective clothing but did not elaborate further.

A port official in Busan also confirmed that the NIS ordered the search, saying it received tips that the containers could be carrying hazardous material. The ship carrying the containers had arrived from China last month.

“Nothing particular was discovered from the search, but I’m aware that the government is still in the process of confirming the results,” the port official said, refusing to elaborate.

ORIGINAL POST: Last August the Indian government detained and searched a North Koren vessel that was anchored in Indian waters.  This week, the Indian government stopped and searched a second vessel anchored in Indian waters.  According to the Telegraph (of India):

The Indian Coast Guard detained a North Korean vessel for the second time in two months but gave the all-clear to the ship found anchored without permission off the Kerala coast today.

A spokesperson for the navy and the Coast Guard, Commander Roy Francis, said the Hyangro was found stationary in Indian waters when it was supposed to be sailing to Karachi, Pakistan. Coast Guard and naval personnel boarded the ship but found it was carrying no cargo.

The Hyangro was surrounded by two Coast Guard vessels and a naval warship after fishermen reported its presence to the authorities.

The captain of the ship told the investigators he had dropped anchor “because of technical problems in the ship’s tanks that were leaking”. The ship had last made port in Colombo. It is owned by the Pyongyang-based Sinhung Shipping Company.

A navy source in Delhi said later this evening that the crew of the Hyangro had been cleared after questioning. The entire crew of 44 was North Korean.

A UN resolution empowers member countries to inspect North Korean cargo being transported by sea, land or air.

More here.

Read the full article here:
North Korea ship
The Telegraph (of India)
10/4/2009

Last year we reported on an effort to bring Russian natural gas to South Korea via a pipeline that could either go through North Korea or across the East Sea (aka Sea of Japan).  If the pipeline was to cross the DPRK, they stood to gain by leasing the land for the pipeline.

According to news this week, the plan has been indefinitely shelved.   According to the story:

Plans to import Russian natural gas through a North Korean pipeline have been shelved due to strained inter-Korean relations, the head of South Korea’s state-run energy company said Tuesday.

Korea Gas Corp (KOGAS) (KSE:36460) president Choo Kang-soo said unless North Korea specifically asks for the pipeline to be built on its soil, Seoul will not pursue the piped natural gas (PNG) project but opt to import liquefied natural gas (LNG) directly from Russia by ship.

“An understanding has recently been reached with Russian partners on this issue,” the chief executive said, adding that recent developments like the nuclear standoff raised the importance of creating a “controllable schedule” for getting the gas on time.

He pointed out that the inability to control cross-border issues has made the PNG plan less viable.

Under a blueprint announced in 2008, Seoul said it wanted to import 7.5 million tons of Russian gas starting in 2015 to ensure a steady supply of fuel. Seoul had previously relied heavily on imports from Southeast Asian countries, which have since hiked up prices.

The deal, valued at more than US$100 million, called for a pipeline running from Russia’s far east to South Korea through North Korea.

Choo hinted that because Russia is eying both the Japanese and Chinese markets, it also prefers to transform its natural gas into LNG for overseas sales.

KOGAS, meanwhile, said that the total amount of fuel that will be imported from Russia will equal 20 per cent of South Korea’s projected natural gas needs in 2015. In 2007, the country bought 7.8 million tons of gas for home use alone, with more being spent on power generation and various fuel needs.

Russia has an estimated 38 billion tons of natural gas and announced plans to spend US$28 billion to link the Krasnoyarsk, Irkutsk, Yakutsk and Sakhalin gas fields into a unified gas supply system that can facilitate exports.

Statistically speaking, natural resource exports are bad news for good governance and economic development.  This is because resource-dependent governments never need to develop the policies and institutions necessary to promote sustained entrepreneurship in the private economy from which they can extract tax revenue. Since non-democratic countries are supposed to love natural resource exports because they essentially translate into free hard currency, I am surprised the DPRK could not set politics aside and cash in on this deal.

Also, what does this say about Russia’s relationship with the DPRK?

Read the full story here:
S Korean plan to import Russian natural gas via N Korea on hold
TradingMarkets.com
9/29/2009