North Korean Economy Watch

UPDATE 2:

The U.N.’s North Korea Chutzpah
Wall Street Journal, Page A17
Melanie Kirkpatrick
6/12/2008 

UPDATE 1:
Cash for Kim
Wall Street Journal, page A20
6/3/2008

(Excerpt) You have to read to page 347 of yesterday’s report on the United Nations Development Program’s antics in North Korea before reaching the recommendation that is likely to cause a panic in Turtle Bay: Give member states access to the internal audits, now secret, of UNDP programs.

That simple principle – let the funders see how their money is spent – is anathema in the international aid community and was at the heart of the U.S. exposé last year of the UNDP’s slipshod operations in North Korea. If the U.S. hadn’t blown the whistle, it would be business as usual. This latest report – by three experts appointed by the UNDP – is a wake-up call for more accountability throughout the U.N.

In yesterday’s report, the auditors write that they “are unable to confirm the total size” of the UNDP program in North Korea between 1997 and 2007 – an amazing indictment of UNDP financial practices. They calculate total expenditures between $57.1 million and $72.3 million, which roughly accords with what the U.S. had estimated and far exceeds the UNDP’s guess.

Where did all this money go? The auditors conclude that 38% of disbursements were to “government agencies.” Its review of “selected” projects finds that the documentation for 77 projects – or 74% – was so poor that they could not determine “whether the ultimate beneficiary is consistent with the payee name indicated in the financial system.” That is, nobody knows where the money went – except perhaps Kim Jong Il.

Also notable is the report’s findings on dual-use technology. Of the 151 pieces of equipment reviewed by the auditors, 95 were on the U.S. Commerce Department’s control list and required an export license. Many were “controlled by the U.S. for national security and anti-terrorism reasons . . . and were of heightened concern.” The UNDP hadn’t obtained the required licenses. The auditors add that when the UNDP pulled out of North Korea in March 2007, it left this equipment behind. The UNDP failed to obtain the required “retransfer authorization,” the report dryly notes. Translation: Retrieval was impossible because the North already had the stuff.

ORIGINAL POST: A three-member UN investigative committee, led by Miklos Nemeth, a former Hungarian prime minister, issued a report claiming allegations that North Korea diverted aid money from the United Nations Development Program are not supported by the evidence.

From the New York Times:

There was no sign that millions of dollars were mismanaged, diverted elsewhere or unaccounted for, the report said, countering accusations made in early 2007 by the United States Mission to the United Nations. Although the report acknowledged that some information the panel had sought was unavailable, the review’s conclusion was that the money had been “used for the purposes of the projects.”

The controversy surrounding the accusations led the development program to suspend its operations in North Korea in March 2007. They have remained suspended because of differences over whether the government should choose local employees who work for the agency.

The report, which surveyed the disbursement of more than $23 million between 1999 and 2007, recommended that the development program pay closer attention when it adapts its general guidelines to “a challenging environment” like North Korea. The dense 353-page report appeared to concur with what the program had maintained all along, that the American allegations were baseless. But it recognized some sloppy practices, like tossing $3,500 in defaced counterfeit $100 bills into the bottom of its safe in Pyongyang and forgetting about them for more than a decade.

Here is the report (hat tip DPRK Studies)

Here is some background information from the UNDP.

Here is the Washington Post coverage.

Here are the initial findings from a US Senate report (detailing the accusations).  Here is the initial UNDP response (preceding the above report).

Read the full NY Times article here:
North Korea Didn’t Dupe U.N. Office, Report Says
New York Times
Neil MacFarquhar
6/3/2008

From the Choson Ilbo:

The UN World Food Program is asking Seoul to send food aid to North Korea. North Korea asked the WFP for food aid in mid-May, and the WFP sent a letter to South Korea last Monday, the Ministry of Unification said on Sunday.

-and-

Seoul gave about 100,000 tons of corn to North Korea every year through the WFP from 2001 to 2004. In 2007, Seoul sent about 32,000 tons of food, including soybean and corn, to the North through the WFP.

Read the full article here:
WFP Asks Seoul for Food for N.Korea
Choson Ilbo
6/2/2008

UPDATE: Photos here (h/t Mateusz)

From Radio Prague (hat tip to David):

The Prague Transport Authority announced on Tuesday that the first of twenty reconditioned trams would be shipped to North Korea this week. The North Korean government are paying about 13 million crowns – that’s just over 800,000 U.S. dollars – for the second-hand trams, one of Prague’s most instantly recognisable symbols. But as Rob Cameron reports, they’re not the first Czech trams to be sent abroad, and not even the first to be sent to North Korea.

In the unlikely event you were to find yourself waiting for a tram at Pyongyang’s Mangyongdae station, you might well be surprised to see a Czech tram trundling along the rails towards you. But Czechs trams have long been a feature of life in the North Korean capital. The first – a fleet of new T4 trams – arrived in 1991, in time for Kim Il Sung’s 79th birthday. (The T4 is the chunky, rather boxlike model from the 1990s that runs on the number 3 line in Prague, for example.)

But the latest consignment heading for Pyongyang this week are reconditioned T3s, the older, iconic red and cream trams that date from the 1960s. The T3s were first produced by the CKD Tatra Smíchov factory in Prague (the T stands for Tatra). In all, a staggering 14,000 T3s were produced in Smichov and exported all over the Soviet bloc, as part of the Comecon system of allocating entire industries to individual communist countries.

Read the full article here:
Iconic red and cream Prague trams get new lease of life in Pyongyang
Radio Prague
Rob Cameron
5/6/2008

This site has covered the strange saga of Park il Woo (Steve Park), Korean entrepreneur and spy, who has been spearheading efforts to bring DPRK soju into the United States (History: Part 1, Part 2, Part 3).

This week, Joseph Goldstein, Staff Reporter of the New York Sun, picks up the story and fills us in on Mr. Park’s prosecution, conviction, and future plans. 

Here are the story’s bullet points:

1. Park was being paid by South Korean officials and providing them with updates about his business trips to North Korea.  He pleaded guilty to lying to lying to FBI agents about his relationship with these South Korean officials. (NKeconWatch: I am not sure if the charge was lying to the FBI or of being an unregistered foreign agent–or both).

2. William Pauley III, U.S. District Court in Manhattan, sentenced him 18 months’ probation, though the crime carries a maximum penalty of five years.  Shortly after pleading guilty, prosecutors for the Manhattan U.S. attorney’s office agreed to lift a prohibition that barred him from contacting the South Korean officials for whom he was accused of spying.

3. Jennifer Rodgers (prosecutor’s office) gave her permission to allow Park to travel to North Korea “on business” for two weeks beginning May 30, according to court papers filed by Park’s attorney.  Court documents don’t mention the nature of the business that Park intends to conduct while in North Korea. But it is likely connected to Park’s long-standing efforts to import North Korean soju, a liquor made from corn and rice, into America.

And what lies ahead for Mr. Park…

Park’s import company, Korea PyongYang Trading U.S.A., is partnering with a New Jersey company, Tang’s Liquor Wholesale, to distribute the drink across New York, New Jersey, Pennsylvania, Virginia, and Maryland, according to Korean press reports.

Bottles of Pyongyang Soju are expected to retail for just more than $10. The drink is made in a factory North Korea’s capital and uses water pumped up from more than 500 feet underground, Yonhap reported.

Park told Yonhap that it was the first product North Korea actively sought to export to America. He said he would soon try to import North Korean beer as well, according to Yonhap.

So it looks like the DPRK is admitting a known South Korean spy into the country for the purposes of boosting exports… 

The whole story is worth reading here:
Bizarre Turn Seen in Case of Korea Spy
The New York Sun
Joseph Goldstein
5/27/2008

From Reuters:

North Korea has greatly reduced malaria infections at home but mosquitoes carrying the disease are crossing the heavily armed border and infecting hundreds each year in the South, a provincial governor said on Tuesday.

Kim Moon-soo, governor of Gyeonggi province which surrounds Seoul and shares a border with North Korea, visited the communist state this month to discuss food aid and ways to keep malaria in check.

Kim said there were about 60,000 civilian infections in North Korea in 2003 while in 2007 the number was reduced to an estimated 7,430.

In his province, 677 people were infected last year with malaria by mosquitoes that had crossed the no-man’s land Demilitarized Zone buffer dividing the two countries technically still at war.

The infection rate in the province, though, has fallen since 2001 when several thousand people were infected, according to South Korean government statistics.

South Korea has worked with the World Health Organization since 2001, when an estimated 300,000 civilians were infected in the North, to eradicate malaria on the peninsula.

Seoul said earlier this month it would provide aid valued at $1.8 million to combat malaria in the North.

Read the full article here:
North Korea fights off malaria as disease heads South
Reuters
Jon Herskovitz
5/27/2008

From Radio Free Asia: 

Under a new U.S. law, 53 North Korean refugees have now been admitted to the United States[.]

[A Korean-American minister active in North Korea since 1994, Phillip] Buck, said nine other North Koreans have obtained the same protection in Beijing and will soon immigrate to the United States as well.

Not too long ago, Chang, Haggard, and Noland released a study (here) on the desired destinations of North Koreans living under the radar in China. Among the most educated, the US was their number one choice.

The full article can be found below:
Sisters Fear for Defectors
Radio Free Asia
Wonhee Lee
5/21/2008

Institute for Far Easter Studies (IFES)
NK Brief No. 08-5-22-1
5/22/2008

Earlier this month, the South Korean government announced that it would seek to relax regulations concerning cooperative ventures and exchanges with North Korea. Currently, South Korean companies, organizations or individuals wishing to enter into business agreements with North Korean partners were required to get government permission not only for the project, but for the individuals involved in the project.

On May 8, the Ministry of Unification announced plans to abolish the system granting (or denying) permission to individuals involved in these ventures, and to maintain only the system through which it grants authority to carry out specific projects.

Cross-border traffic faced similar red tape, as permission was required not only for goods being imported or exported, but for the importers and exporters themselves. The new plan includes measures for these import and export regulations to be loosened so that it is only the goods that need review, not the people involved in the trade. In addition, trucks and other equipment used to carry goods across the border will be certified for a period of five years, more than twice as long as the current two-year licensing system.

The government is also moving to ease requirements calling for South Korean citizens to report all contact with North Koreans, and instead to require reports on conversations only if the topic falls outside that of the approved project.

Reflecting the growing amount and diverse nature of inter-Korean cooperative projects, and the ROK government’s policy of encouraging such exchange, this new proposal is aimed at reducing the red tape and paperwork hassles necessary to launch and carry out these projects by reducing the amount of information required by the applicant and the volume of cross-checking required by government offices. At the same time, the proposal calls for the introduction of fines for those found to be filing false applications or reports.

If this proposal does not get mired in the Cabinet or other committees, it is expected to reach the floor of the National Assembly sometime in June.

From the British Council:

English Teacher Trainers, DPRK (North Korea)
Based Pyongyang, reference OA08007

You must read the Information about the Job before you make an application. It contains vital information on how to apply, our selection procedure, and the application deadline, as well as job-specific information.

Senior English Teacher Trainer – £29,361 a year

English Teacher Trainer (three posts) – £25,772 a year

Contract from 1 September 2008 to 31 August 2009 (with the possibility of extension)

Benefits including free accommodation, pension provision, medical insurance and regular flights to Beijing and the UK

JOB SUMMARY
The British Council/Foreign and Commonwealth Office English language project in the DPRK aims to deliver high-quality programmes in teacher/trainer training and to develop the curriculum and related materials as well as assessment systems at three leading institution in Pyongyang. This high-profile project has been running since 2000, and we are now seeking four experienced English language teaching professionals to fill the above posts, which will be based at these institutions.

You will have: a diploma-level qualification in TEFL (e.g. UCLES DTEFLA/Cambridge ESOL DELTA, Trinity College London Dip TESOL); a minimum of three years’ ELT and teacher training experience overseas; and course/curriculum planning and materials development experience. An MA in TEFL/Applied Linguistics (or equivalent) and experience of content and language integrated learning (CLIL) and of teaching ESP are desirable. Additionally, for the Senior English Teacher Trainer post you will have knowledge of testing, and people and project management experience is desirable.

Note: local restrictions mean that UK passport holders only can be considered for these posts. These are unaccompanied posts, although in exceptional cases the DPRK authorities might agree to a married couple.

WHO WE ARE
The British Council is the UK’s international organisation for educational opportunities and cultural relations. We work in 110 countries and territories reaching millions of people each year, and increase appreciation of the UK through the arts, education, science, government and sport.

HOW TO APPLY: Visit their website.

UPDATE: 
The Daily NK brings us up-to-date on the DPRK’s  anti-corruption drive.  The Daily NK analysis, however, gives the impression that Kim Jong Il is clamping down on the military, which again raises speculation that this policy is driven by concerns greater than financial leakage:

A source from Shinuiju reported in a telephone interview with Daily NK on May 14th that, “Director Jang Sung Taek has been staying at the Yalu River Hotel in Shinuiju since March, and has been directing inspections at Shinuiju Customs covering imports and exports made by rail, foreign currency-making activity organizations, and trade companies belonging to the army.”

“This inspection is decidedly different in scale and scope from previous inspections which are usually carried out every spring at Shinuiju Customs and various trading companies. The inspection usually targets simple private corruption as well as all fields related to business with China,” said the source.

The inspection group reportedly consists of some 100 agents dispatched from the Ministry of Administration, the Central Prosecutor’s Office, the National Security Agency, the People’s Safety Agency, and the Imports & Exports Guidance Bureau of the State External Economic Affairs Commission. Some 50 other agents were sent as reinforcements in late April.

…

The inspection group withdrew all trade certificates with exception of those certificates belonging to the families of anti-Japanese guerilla fighters, and those certificates issued by the Ministry of Finance or the Shinuiju Municipal Administrative Committee.  Therefore, presently at Shinuiju Customs, all import items without trade certificates issued by the above mentioned three groups have to be sent back to China.

The whole article is worth reading here.  If any readers have a thoughtful take on these events, please share them.

ORIGINAL POST:
North Korean Economy Watch has thoroughly covered news of the DPRK’s anti-corruption drive (here, here, here, here, and here).  We have speculated as to whether this campaign is motivated by primarily fiscal concerns or whether it is a broader realignment of state, party, and military portfolios necessary for a policy/personnel change within North Korea’s socialist system.

Hideko Takayama at Bloomberg highlights the fiscal aspect of the anti-corruption campaign and is the first to announce the Kim Jong Il’s brother-in-law is leading it:

Jang, 62, was sent to Beijing and the Chinese city of Dandong near the border with North Korea in February to root out corruption at North Korean corporations operating in China, the businessmen and officials said.

Jang, who was dismissed from Kim Jong Il’s power circle in 2004, was rehabilitated in December 2005 and appointed to be Director of Administration of the Workers’ party last October, an official at Chosensoren, a North Korean organization in Japan which acts as a de facto embassy, said, requesting anonymity.

The leader’s brother-in-law is also responsible for the State Security Department, the People’s Security Ministry and the Central Prosecutor’s Office, according to the Chosensoren official. In addition, Jang runs a campaign against what the government calls anti-socialist activities.

Jang’s mission was to find and punish people who were diverting profits that were supposed to be repatriated to the North Korean capital, Pyongyang.

“Jang is familiar with how the business is done outside the country and knows all about money and corrupt ways of making money,” Lee Young Hwa, professor of developing economies at Osaka’s Kansai University, said. “His assignment is like sending a thief to catch a thief.”

Read the full stories here:
Kim’s Brother-in-Law Heads North Korea Anti-Corruption Campaign
Bloomberg
Hideko Takayama
5/2/2008

Shinuiju Inspectors Investigate Corruption
Daily NK
Jung Kwon Ho, Park In Ho
5/16/2008

From the Associated press (via the Herald Tribune)

North Korea is offering China US$100,000 (€64,500) to help earthquake survivors.

The North’s Korean Central News Agency said Saturday the country made the offer to China’s government, which is scrambling to cope with the aftermath of Monday’s magnitude 7.9 quake. It did not elaborate.

Read the full article here:
North Korea offers US$100,000 in aid for Chinese earthquake survivors
Associated press (via the Herald Tribune)
5/17/2008