North Korean Economy Watch

According to Bloomberg:

China suspended government exchanges with North Korea after Kim Jong-Il’s regime last week tested a nuclear device and fired short-range missiles, Yonhap News said.

China has halted plans to send officials to North Korea and won’t accept visits from Kim’s government either, the Korean- language news agency said today, citing unidentified diplomatic sources in Beijing.

China’s foreign ministry has said the country “resolutely opposes” North Korea’s nuclear test. China on May 25 agreed with the U.S., Japan and Russia to work toward a United Nations Security Council resolution censuring North Korea. The U.S. and Japan want the statement to call for cutting the communist country’s global financial ties, UN diplomats said.

This is slightly more significant than the “tough talk” Beijing is dishing out to the DPRK in the Chinese press. According to Voice of America:

China’s state-run media these days are running stories bluntly criticizing North Korea.  

Tuesday’s English edition of the Global Timesnewspaper quotes Chinese North Korea analyst, Zhang Lianggui, as saying the catastrophe of a mishandled North Korean nuclear test is “an unprecedented threat” to China.

Monday, the paper quoted Tsinghua University professor Sun Zhe as saying North Korea’s nuclear test has apparently spoiled the traditional bonds between the two countries, saying Pyongyang no longer follows Beijing.

 And according to Reuters:

The top item on the Chinese website of Beijing’s embassy in Pyongyang is a condemnation of North Korea’s nuclear test.

That, and a recent blast of blunt criticism of North Korea in China’s state-run press, suggest the rancor that officials feel toward their communist neighbor — anger likely to bring Beijing behind a U.N. resolution condemning the May 25 test and threatening fresh sanctions.

North Korea’s second nuclear test took place 85 km (53 miles) from China’s border, and the tremors from the blast forced many schools on the Chinese side to evacuate, wrote Zhang Lianggui, a prominent Chinese expert on the North.

He warned of catastrophe if Pyongyang mishandles a nuclear test.

“Future generations of the Korean people will have no place of their own, and China’s reviving northeast will burst like a bubble,” Zhang wrote in the Global Times, a popular tabloid, on Tuesday.

“This is an unprecedented threat that China has never faced in its thousands of years.”

The web page of the PRC embassy in Pyongyang is here.  I do not see any of this language on their page.  The top line states “DPRK top leader inspects industrial, farm facilities” and the main story says “Year of China-DPRK friendship aims at enhancing bilateral ties.”  Additionally, in the section devoted to Chinese media on the DPRK, the last story was posted on July 4, 2007.

Read the full story here:
China Suspends North Korea Exchanges, Yonhap Reports
Bloomberg
Kyung Bok Cho and Dune Lawrence
5/31/2009

China Withholds Talk Tough Toward North Korea 
VOA News
6/2/2009

China anger with North Korea echoes in the press
Reuters
6/2/2009

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.

by Michael Rank

Chinese traders are using fake documents to export goods to North Korea, the Chinese embassy in Pyongyang warns on its website.

The terse, two-sentence statement dated April 4 gives no details of the forged “[North] Korea export licences” scam, but says the North Korean authorities have confirmed the documents are fake and urges “relevant companies not to be easily deceived.”

Perhaps the biggest surprise is that the Chinese embassy in Pyongyang has a website at all, and a fairly active one at that. It has plenty of links, on Chinese-North Korean economic, cultural and educational ties, speeches by the ambassador and that sort of thing but not a lot of hard news or useful information.

There is no Chinese comment on the recent North Korean missile test, which is perhaps eloquent in itself, though there is a profile of the current ambassador, Liu Xiaoming, who spent much of the 1990s in the Chinese embassy in Washington (he was minister counsellor 1998-2001) and also in the North American section of the Chinese Foreign Ministry.

There’s also a list of all Chinese ambassadors to the DPRK since 1950, with photographs and brief biographies.

The Chinese website is here and there’s even an English version though it hasn’t been updated since February.

According to Yonhap:

South Korea’s unification ministry on Tuesday closed its bureau on humanitarian aid to North Korea and created a new one to better analyze Pyongyang’s internal politics as part of government restructuring.

The Cabinet approved the ministry’s proposal to shut down its Humanitarian Cooperation Bureau and set up the tentatively-named Political Analysis Bureau, Kim Jung-tae, assistant minister for planning and coordination, said in a press briefing.

Additionally, the South Korean government seems to be laying the political and regulatory groundwork to apply more economic pressure on DPRK.  Again, according to Yonhap:

“The process of monitoring items exported to North Korea has no order of priority, raising concern that there could be a chance of strategic materials going to North Korea,” the audit agency said after an investigation requested by the National Assembly.

Strategic materials refer to equipment or technology used to make nuclear or biological weapons or missiles that are prohibited from being carried into the North. Such materials or items that may fall into that category are sometimes overlooked as the ministry’s checklist, generally used by the tax agency and other government agencies, is too broad, it said.

The ministry failed to spot and investigate packages of black powder, an explosive mixture of sulfur, that were transported into North Korea by a local firm last year, the agency said, though it could not say whether black powder is a strategic material.

The audit agency also found that 270 used computers were exported to North Korea in a possible violation of the law. The computers were initially destined for China, but their owner changed the destination to North Korea without informing the government, it said.

Other computers that were subject to return to the South were not brought back in time, it noted. South Korean law allows citizens to bring computers to North Korea on condition that they bring them back within a year.

The ministry failed to keep track of more than 2,000 computers taken to a joint industrial complex in the North’s border town of Kaesong over the past year by South Korean workers, it said.

The Unification Ministry said in a statement that some of the items noted by the customs agency were not strategic materials, but added it will “prepare a manual to effectively control” such items.

Inter-Korean trade volume reached US$1.82 billion last year, the audit agency said. More than 186,000 South Koreans, not counting over 303,000 who toured North Korean resorts, visited North Korea for business and aid projects during the period, up 18 percent from the previous year, it said.

Read the full stories here:
Unification ministry closes N. Korea aid unit, bolsters intelligence
Yonhap
Kim Hyun
5/12/2009

Audit agency questions lax monitoring of North Korea trade
Yonhap
5/13/2009

Irish Times
Clifford Conan
5/5/2009

Long-term allies China and North Korea have signed an agreement to set up a rail route between the two countries to encourage tourism, the latest sign of lively cross-border trade between the two neighbours.

The line will run between Tumen City in China’s Jilin province and North Hamgyong province in North Korea, Chinese state media reported yesterday. The route will be operated by two travel agencies, one from China and the other from North Korea. Both sides plan to hold an inauguration ceremony for the route’s trial operations later this month.

DPRK citizens forbidden from entering Google offices?
According to this article in Britain’s Daily Mail:

When you visit the shiny headquarters of Google UK, just a stone’s throw from Victoria Station in London, the receptionist asks you to log-in on a computer with a touch screen.

How else would you sign in? This is one of the centres of the cyber universe.

And then something strange happens. Before you can be issued a pass, the computer asks you to enter into a ‘ nondisclosure agreement’ with Google Inc., a 499-word document.

You must agree not to disclose any confidential information that you might stumble upon while in the building.

In particular, the Participant (that’s you) ‘hereby certifies that he/she shall not  –  directly or indirectly  –  sell, export, re- export, transfer, divert, or otherwise dispose of any hardware, software, source code or technology . . . without obtaining prior authorisation from Google and the appropriate government authorities’.

In addition, you must even certify that you are not a citizen of Cuba, Iran, North Korea, Sudan or Syria.

Some readers will recall a similar incident with LinkedIn a few weeks back (which has since been resolved).

Jackie Chan
Following Jackie Chan’s comments that he believed Chinese people “need to be controlled,”  some Hong Kong residents created a Facebook group dedicated to sending him to the DPRK.  If you are a member of Facebook, check out the group page here.

Great Photos
(Hat tip to David) The Boston Globe posted a great set of photos from North Korea’s boder with China.  I am not easily impressed with photos of the DPRK, but these are good.

(Addition Al Jazeera)
Last night Scott Snyder and Alejandro Cao de Benos were on Al Jazeera’s Riz Khan.  Part 1 here.  Part 2 here.

Anna Louise Strong (November 24, 1885 – March 29, 1970) was a twentieth-century American journalist and activist best known for her reporting on and support for communist movements in the Soviet Union and the People’s Republic of China.

In 1949 she wrote a pamphlet for Soviet Russia Today titled, “In North Korea: First Eye-Witness Report” (Many will be familiar with the DPRK equivalent, Korea Today, which has survived long enough to be published on the internet)

The text is relatively short, but since this is exam season, I will not get around to it for a couple of weeks.  Enjoy.

(hat tip Alina)

In response to the DPRK’s rocket launch, the UN Security Council issued a presidential statement containing the following:

The Security Council reiterates that the DPRK must comply fully with its obligations under Security Council resolution 1718 (2006).

The Security Council demands that the DPRK not conduct any further launch.

The Security Council also calls upon all Member States to comply fully with their obligations under resolution 1718 (2006).

The Security Council agrees to adjust the measures imposed by paragraph 8 of resolution 1718 (2006) through the designation of entities and goods, and directs the Committee established pursuant to resolution 1718 (2006) to undertake its tasks to this effect and to report to the Security Council by 24 April 2009, and further agrees that, if the Committee has not acted, then the Security Council will complete action to adjust the measures by 30 April 2009.

(Read the full text of the statement here) 

Today the Security Council followed up this statement (and resolution 1718) by voting to blacklist three North Korean companies.  According to Reuters (via the Washington Post):

The North Korea sanctions committee met a Friday deadline set by the Security Council on April 13 to produce a list of goods and North Korean entities to be blacklisted under Security Council resolution 1718, passed after Pyongyang’s October 2006 nuclear test.

The three companies put on the list are Korea Mining Development Trading Corp., Korea Ryongbong General Corp. and Tranchon (Tanchon) Commercial Bank, according to a copy of the committee’s decision obtained by Reuters.

The decision said the three companies were linked to the military and active in procuring equipment and financing for North Korea’s ballistic missile and other weapons programs.

The blacklisting prohibits companies and nations around the world from doing business with the three firms, but the impact of the action might be largely symbolic.

One Western diplomat said the three blacklisted firms had subsidiaries that also would be subject to U.N. sanctions.

Committee members also decided to ban the import and export of items on an internationally recognized list of sensitive technologies used to build long-range missiles capable of delivering weapons of mass destruction.

The US imposed sanctions on three North Korean companies in the Federal Register earlier this year.  Of these three companies, one has made the UNSC list: the Korea Mining and Development Corporation.  I can only speculate as to the fate of the other two mentioned in the US Federal Register, Mokong Trading Corporation and the Sino-Ki company. 

Read more below:
UNSC Presidential Statement

U.N. committee puts 3 North Korea firms on blacklist
Reuters (via the Washington Post)
Louis Charbonneau
4/24/2009

US Senator Sam Brownback (R-KS) has introduced legislation which would require the the US governmet to add the DPRK back to its list of state sponsors of terror.  If passed by the legislature and signed by the president, this would reverse the decision by Republican President George W. Bush, who had the DPRK removed from the list in October of last year. 

The bill is S. 837.  It has been referred to the Senate Committee on Foreign Relations.  I am not a political insider, so I do not have any insight into how long it will remain there or if it has any chance of passing a committee vote.  Joshua will probably be following the bill closely will be actively seeking the bill’s passage, so we can expect updates at One Free Korea.

I cannot offer any analysis of the proposed legislation since the Government Printing Office has not yet published the bill’s text (so it is not on line at the moment). You can track the bill’s progress here.  Thomas has a list of cosponsors, etc.

UPDATE: Joshua has a link to a copy of the Senate bill as well as information on the corresponding House bill.

Writing in Reuters, Lucy Hornby and Tom Miles point out that the DPRK faces greater economic uncertainty from falling commodity prices than from new sanctions.  Below I have posted excerpts and charts:

Lower commodity prices may prove more painful to North Korea than the tightened sanctions, which will likely blacklist certain firms known to deal in military goods.

“Sanctions won’t have a big effect, they won’t change their actions,” said Shi Yinhong, a professor of international relations at Renmin University in Beijing.

“There will be no impact on trade with China, which is mostly grains and basic materials … Sanctions may have some influence on luxury goods, but only a weak effect on overall trade volume.”

The isolated country’s $2 billion annual trade with China, equal to about 10 percent of the North’s annual GDP, is its most important economic relationship.

North Korea profited from strong prices for minerals and ores over the last few years, ramping up exports of zinc, lead and iron ore to resource-hungry China.

Most of those exports have dropped again since last summer, in line with sharp decreases in metals prices buffeted by the global economic crisis.

The North’s mineral deposits could be worth $2 trillion, according to an estimate by the South’s Korea Resources Corporation. But dilapidated infrastructure and a broken power grid hinder mining and the transport of minerals out of the country.

The irregular pattern of North Korea’s alumina imports implies that its smelter only runs in fits and starts. Other ore exports are equally ragged, possibly indicating that North Koreans are only digging the easily accessible ores.

Chinese companies that have tried to invest in North Korean mines complain of constant changes in regulations and report that the North tries to tie mining access to commitments to build mills and other industrial projects.

“China and North Korea are friendly neighbors and we will continue to develop friendly cooperative relations with North Korea,” Chinese foreign ministry spokeswoman Jiang Yu said on Tuesday after the North’s withdrawal from the six-party talks.

Diplomats’ expectations that China might use trade to influence its prickly neighbor rose when China cut off crude oil shipments in September of 2006, as North Korea prepared to test a nuclear bomb. It had tested ballistic missiles that July.

In fact, energy trade data shows that China is reluctant to apply trade pressure. Increased oil products shipments offset the brief cut in crude supplies in 2006.

“The imposition of these sanctions (in 2006) has had no perceptible effect on North Korea’s trade with the country’s two largest partners, China and South Korea,” wrote Marcus Noland, of the Washington-based Peterson Institute for International Economics.

Data since early 2006 show that Chinese crude shipments have in fact been overwhelmingly consistent, at 50,000 tons a month.

North Korea has imported very little Chinese grain since the 2008 harvest, reflecting the better harvest. Flooding and a disastrous harvest in 2006 and 2007 required heavy imports of grains from China in those years.

Chinese corn shipments to North Korea since August have dropped to 2,670 tons, from 136,595 tons in the previous twelve months and 32,186 tons in the year before that.

Rice and soybean shipments show a similar pattern.

Read the full story below:
Little leverage left for North Korea sanctions
Reuters
4/14/2009
Lucy Hornby and Tom Miles