North Korean Economy Watch

Korea Times
Andrei Lankov
9/9/2007

On Aug. 24, 1962, the Soviet Ambassador to Pyongyang, Vasilii Moskovski, met the North Korean foreign minister, Pak Song-chol. The issue to be discussed was nuclear non-proliferation, one closely related to the nuclear test ban treaty, then in preparation. Moscow was an enthusiastic backer of the treaty, and wanted support from its allies. Relations with North Korea were deteriorating fast, but still some supportive gesture from the North was hoped for.

However, Comrade Pak was straightforward: a non-proliferation treaty was a bad idea. He explained the reasons for his skepticism. He asked a Soviet diplomat: “Who can impose such a treaty on countries that do not have nuclear weapons, but are perhaps successfully working in that direction?” Having said that, the North Korean foreign minister continued, “The Americans hold on to Taiwan, to South Korea, and South Vietnam, they blackmail the people with their nuclear weapons, and so rule over those lands and do not intend to leave. Their possession of nuclear weapons, and the lack thereof in our hands, objectively helps them, therefore, to eternalize their rule.”

Indeed, soon Ambassador Moskovski learned that the North Koreans were trying to acquire nuclear technology. As a matter of fact, recently de-classified Soviet papers confirm that in late 1963 Moskovski heard something to this effect more or less every month.

In August 1963 the East German ambassador informed Moskovski that “the [North] Koreans … are asking whether they could obtain any kind of information about nuclear weapons and the atomic industry from German universities and research institutes.”

In September 1963 Soviet geologists, then employed as technical consultants to the North Korean uranium mine, told Ambassador Moskovski that “the Korean side incessantly tries to obtain information about the deposits and quality of the uranium ore mined in the Soviet Union.” They also noticed that the amount of the uranium ore extracted in the North far exceeded the modest demands of its small-scale research program.

In October 1963, another Soviet scientist told the ambassador about a recent conversation on the same subject with a Korean engineer. The engineer asked whether Koreans were able to create an atomic bomb. The Soviet scientist said that the economy of the DPRK could not cope with such a task. But, according to an Embassy document, “the Korean said that it would cost much less in the DPRK than in other countries. If we tell our workers, he declared, that we are taking up such a task, they will agree to work free of charge for several years.”

This new evidence, recently obtained and published by Balazs Szalontaj and Sergei Radchenko, finally confirms what has been long suspected by many (and known to the few) _ from its inception, the North Korean nuclear program was military in its nature.

Actually, North Korea was to some extent involved in nuclear politics as early as the 1940s. It has large deposits of a particular monazite, a mineral that was seen as potentially useful for the Soviet nuclear program. The Soviets demanded payments in monazite for their sales to the North. Eventually, the engineers were disappointed with the properties of the mineral, and abandoned their plans to use it as a source of nuclear material. Russia still does not know what to do with the large stockpiles of monazite it still has from the 1940s.

The North Koreans were mining for uranium as well. There were two major quarries operated with Soviet technical support. The quality of the uranium remained low, but its production was still seen as necessary for the sake of the future.

In 1959 the DPRK signed an agreement on nuclear research with the USSR (soon afterwards, a very similar agreement was signed with China as well). The Soviet Union was becoming very strict about non-proliferation, and the agreement was probably seen as a potential safeguard, to make sure that North Korean ambitions would not result in a military nuclear program.

Needless to say, such a program was indeed what they wanted, and the North Koreans had many ways to outsmart the Soviet supervisors _ not least, by skillfully exploiting the deepening rivalry between Moscow and Beijing, and so it was that Soviet assistance helped Pyongyang launch its first research reactor in 1965.

It seems that the nuclear weapons were not much feared _ generally, in line with Mao’s mad dictum about the `paper tiger.’ In 1962, for example, the East German ambassador had a remarkable talk with Yi Chu-yon, then a Politburo member and one of North Korea’s top leaders.

Yi Chu-yon suggested that it was a good time to start a Third World War. He said that “now, when the USSR has such powerful means of waging war, with missiles that can strike all ranges, perhaps it would be better not to wait, but to strike the imperialists.” Yi Chu-yon received some support, since, according to the East German diplomat, “other Korean comrades who accompanied us also insistently advocated a military resolution of all contradictions between capitalism and socialism.”

Hence, North Korean nuclear ambitions have remained a constant for nearly half a century. However, it took a couple of decades to get things moving. The North was, indeed, too poor for such an undertaking, and no amount of drum-beating nationalism could compensate for lack of resources and technology. At the same time, none of the great power allies was enthusiastic about helping Pyongyang arm itself with nukes.

Nonetheless, work continued, and by the early 1980s the first rumors of the North Korean nuclear weapons project began to spread along the people in the know.

Yonhap
Sohn Suk-joo
9/6/2007

Inter-Korean trade surged 36.1 percent in the first eight months of this year, compared with the same period of a year earlier, the Unification Ministry said Thursday.

The two-way trade volume increased to US$1.05 billion in the January-August period, up from $775.52 million in 2006, thanks to brisk trade of fishery items and light industry products made at a joint industrial complex in the North Korean border city of Kaesong.

The industrial complex is the crowning achievement of a landmark summit between the leaders of the two Koreas in 2000. South Korean businesses use cheap North Korean labor to produce goods in Kaesong where some 26 South Korean factories employ about 15,000 North Korean workers.

“Inter-Korean commercial trade increased 37.1 percent to $809.71 million, while non-commercial trade rose 32.8 percent to $245.41 million during the same time span,” the ministry said in a statement.

Korea Herald
Jin Dae-woong
9/6/2007

Mohamed Ali Alabbar, chairman of the biggest real estate company in the Middle East, visited North Korea yesterday, stirring speculation about his interest in a possible development project in the isolated country.

The Unification Ministry said the chairman of the United Arab Emirates’ state-run Emaar Properties PJSC flew to Pyongyang on his way to the Chinese coastal city of Dalian to attend a global business forum.

During the one-day stop-over, Alabbar visited a world peace center at the Pyeongchon district of Pyongyang, the ministry said. Sources said the visit also included a tour of hotels in the city.

Ahead of his trip to Pyongyang, Alabbar stopped in Seoul to receive an honorary doctoral degree in law from Sun Moon University affiliated with the Family Federation for World Peace and Unification. He flew to North Korea over the West Sea.

Alabbar is well known for his key role in transforming Dubai into a world-famous tourist city. He is a senior aide to Dubai’s Ruler Sheikh Mohammed bin Rashid al-Maktoum and leads the Dubai-based Emaar Properties, the Middle East’s biggest developer by market value.

Korea Herald
9/5/2007

A Boeing 747 carrying 75 tons of emergency relief goods worth $8 million arrived in Pyongyang last week by a direct flight from the United States, while denuclearization talks between the two countries were making progress in Geneva.

Officials here say it was the first time that a full planeload of U.S. emergency relief materials were delivered to North Korea since Pyongyang began accepting private U.S. donations in the mid-1990s after severe floods hit the country. The airlift, provided by Samaritan’s Purse, a North Carolina-based Christian charity organization, consisted of medicine, medical supplies, antibiotics, temporary shelter materials and other items needed for the relief of flood victims.

U.S. transport authorities gave their permission for what was known as “the first direct flight from continental U.S. to North Korea since the Korean War.” Airlifted supplies included goods purchased with a $50,000 grant from the U.S. government, according to a press release from Samaritan’s Purse, currently represented by Franklin Graham, son of the late evangelist Billy Graham. A dispatch from the (North) Korean Central News Agency said Pyongyang’s Foreign Minister Pak Ui-chun met the American visitors who delivered the relief materials.

The American charity group’s swift, large-scale delivery of emergency aid was a noteworthy gesture of friendship, shown in response to the disastrous floods last month. After years of extreme antagonism over the North’s nuclear armament, such a people-to-people exchange of goodwill is inspiring.

The Graham family has special relations with North Korea: Billy Graham’s wife, Ruth Bell, attended Pyongyang Foreign School in the 1930s, Billy Graham visited North Korea twice in the 1990s and other family members traveled to the country in recent years. At a time when diplomatic relations are being explored between the two countries, such personal ties can prove valuable in promoting mutual understanding. Many hope “swords into ploughshares” will not remain a biblical prophecy.

Daily NK
Han Young Jin
9/4/2007

Distribution with “Korea” Trademark…”Rice Cookers Popular”

In the North Korean jangmadang (market), South Korean products are drawing huge popularity among citizens and are publicly being sold, relayed an internal source on the 30th.

The source said, “In the Pyongyang, Shinuiju, Hamheung, Chungjin, and other large-scale jangmadangs, South Korean products with the “Made in Korea” label is fairly popular among wealthy people.”

In the past, South Korean products were secretly sold in the North Korean market. When selling South Korean products, we sold them after removing the product label, “Made in Korea.” However, recently, only products with the label are recognized as South Korean products of good quality and sold at a high price.

The source added, “‘Made in Korea’ lends credibility to the people. Without this, people do not believe that the product is a Korean-made good. The label has to be there because Chinese products are disguised as South Korean goods.”

The South Korean product which is most sold in North Korea is the electric rice-cooker (Cuckoo), instantaneous water heaters, cosmetics, aromatics, computers, toothpaste, medical goods and a variety of sweets. Also, North Korean citizens have a lot of confidence in South Korean medicine. South Korean-made medicine or sweets are not discarded even after the expiration date.

He said, “Because Chinese-made products are no good, people who have money usually used Japanese products. In the place where Japanese products became rare, Korean-made products are now occupying that place.”

In Dandong, China, Kim Chi Duk (pseudonym), who is engaging in North Korea-Chinese trade met with the reporter and retorted, “Currently in Chosun (North Korea), Japanese-made products are still counted as number 1. Then there are South Korean-made products, then Chinese-made products. Poor people, even when the quality is lower, use Chinese-made products and those with money use South Korean products or Japanese-made products. What is the issue if one is buying with his or her money?”

He said, “Those with some amount of money use at least one or two South Korean products.”

The source relayed, “Currently in the Shinuiju market, South Korean toothpaste is 5,000 won (USD1.85), 1 set of aromatics (machinery and 2 bottles of gas) is 30,000 won (USD11.1), and one pack of Time cigarettes (tax-exempt) 3,000 won.” However, “Time,” a kind of South Korean cigarettes are counterfeit goods made in China, so is offered at a cheaper price than their domestic price.

Mr. Kim said, “Those who trade in North Korea request for South Korean-made goods, but I do not know whether they plan to export them or to use them. The authorities do not allow American-made goods, but is there anyone who doesn’t like the dollar? If it is not a big issue, they use everything.”

Daily NK
Kim Min Se
9/1/2007

The news of one Chinese trader resolving all issues with the “certification of gifts,” while passing through a high-level North Korean customs’ confiscation of goods and demand of open bribes, has received recent spotlight.

In the latter half of the 90s, a businessman who has been exporting and importing North Korean cultural and daily necessities while coming and going from North Korea met a reporter on the 30th in Dandong and relayed this anecdote, “I have returned to China after having received “honored” treatment from all customs officials under the Shinuiju customs director. That is the first time I received such treatment in the 10 years I have been conducting the trade business.”

The story of the businessman has also apparently become noteworthy news in the Dandong customs office in China.

The businessman is supposed to have earned huge gains by handling North Korean porcelain since the latter half of the 90s. Thus, for long-term gains, he supported the arts and culture projects for the idolization of the Kim father and son in North Korea under his company’s name.

Subsequently, a North Korean writers’ company recently invited him and showed him several sights in North Korea and relayed a gift (edibles) under Kim Jong Il’s name afterwards.

The businessman, after eating the goods he received as gifts in the hotel he was staying in at the time, left with the “certification of gift” in his bag as his souvenir.

He said, “At the time, in Chosun (North Korea), I acquired quite a bit of North Korean silk for gift-giving to close acquaintances, such porcelain and paintings of famous artists. However, the cargo was heavier than expected, almost one carload (2.5 tons trucks). From Pyongyang to Shinuiju, I arrived without much mishap because transportation was provided, but passing through customs was not an easy feat.”

“The North Korean customs unpackaged all goods, so they started going through my stuff as soon as I arrived. Also, they started going through the bag I was carrying and the eyes of the inspector became fixed as the goods were taken out one by one. He had seen the “gift certification” inside a red case.”

Further, he added, “The customs officer verified the name of the certification and my passport and quickly went into an office with the ‘certification.’ Shortly after, the customs director came out and ushered me into a reception area and asked about the context for my receipt of the gift.”

At the time, the customs director had said, “You are a distinguished person who has done a huge work for our country. We did not recognize that. Please let us know if there is anything you are uncomfortable with. Whatever it is, we will help you.”

Then, he is supposed to have ordered the lower level officers, “Using the customs car, make sure that this person’s luggage arrives safely in China without any damage.”

He said that a single piece of Kim Jong Il’s “gift certification” carrying so much weight was beyond the expectations of not only himself but the Chinese customs personnel.

Another related source of the Dandong customs office said, “We were surprised that a single piece of the “gift certification” could wield such power. This event became a famous anecdote within the Dandong customs office.”

Yonhap
8/31/2007

North Korea’s foreign minister Friday met with a U.S. delegation bringing emergency medical supplies to help North Korean victims of recent floods, the North’s official news outlet said.

The reclusive country has appealed to the international community for assistance to cope with massive flooding caused by heavy downpours that left at least 600 people dead or missing and about 100,000 people homeless in early August. The United Nations is seeking US$14 million to provide North Korea with food, medicine, drinking water and other emergency goods.

“Foreign Minister Pak Ui-chun met with guests from the United States who visited with emergency medical aid equipment donated by the U.S. administration and the non-governmental organization Samaritan’s Purse with regard to flood damage at the Mansudae Assembly hall,” said the one-sentence report carried by the Korean Central News Agency. It did not identify the U.S. guests.

Washington has so far pledged US$100,000 for the U.N. initiative, equally distributing the funds to two non-governmental relief organizations, Mercy Corps and Samaritan’s Purse, to deliver emergency aid to North Korea.

The heaviest rain in 40 years swept North Korea, which is poorly equipped to cope amid wide-spread deforestation. The severe damage caused the second inter-Korean summit to be postponed from late August to early October.

Korea Times
Andrei Lankov
8/30/2007

At 10:00 in the morning of July 4, 1974, Lee Hu-rak, the director of the Korean Central Intelligence Agency (KCIA), convened a special press conference. It was just the place to drop a bombshell. He told the journalists that in May and June, secret high-level exchanges had been conducted between the North and South Korean governments.

Lee himself went to Pyongyang, while Seoul was secretly visited by Kim Yong-ju, the younger brother of then North Korean President Kim Il-sung. In those days Kim Yong-ju was considered as a likely heir to the North Korean dictator (Kim Jong-il was still too young).

The visits themselves were a sensation since for the two decades following the end of the 1950-53 Korean War there were virtually no government-level contacts between the two Koreas. These secret talks produced a document which is known as the “July 4 Declaration” to the Koreans, but in English language publications it is usually referred to as the “1972 Declaration.”

The declaration stated that both Korean governments were committed to eventual unification, and that this unification should be reached independently (without the involvement of foreign forces), peacefully and with respect to their political and ideological differences.

Frankly, it was not very precise wording. However, in one regard the document was important indeed: for the first time in decades it stated that both Korean states, at least theoretically, were ready to coexist and negotiate.

The declaration produced much hype in the international media, and was welcomed as a “great breakthrough.” Of course, this was not the case, and all long-time Korea watchers knew only too well that from time to time some events would be presented by the world media as a “great turning point” _ only to be forgotten or made irrelevant in few years.

Still, the 1972 Declaration was surely a sign of new times: grudgingly, each Korea began to accept existence of the other side. Not its right to exist, God forbid, but merely its physical existence as a rather unpleasant but unchangeable fact.

This turn took place just after the worst period of confrontation, when the two Koreas seemed to be on the eve of a second Korean War. In 1968 North Korean commandos stormed (unsuccessfully) the presidential office of Cheong Wa Dae in Seoul, and they waged campaigns in the mountain ranges along the eastern coast of South Korea.

Seemingly influenced by the success of the Vietnamese Communist guerrillas, the North Korean strategists believed that a Communist revolution could be started in the South as well.

However, by 1970 Kim Il-sung and his coterie finally realized that their hopes for a Vietnam-style uprising in the South were unfounded. Perhaps, the news from Germany where the Eastern and the Western states finally recognized each other, also had some impact: Koreans always paid attention to events in Germany, another divided country.

South Korea changed its strategy as well. Since 1948, the South Korean state had not made a secret of its willingness to use all means, including military ones, to achieve unification and the “liberation” of the North from “Communist slavery.” (The North Korean leaders, in their turn, vowed to save Southerners from “Capitalist hell”).

However, on August 15, 1970, President Park Chung-hee said that unification should be achieved peacefully. He addressed the North Korean leaders (the same people who tried to kill him two years earlier) and urged them to engage in peaceful economic competition.

This statement reflected a new confidence in Seoul: throughout the first decade of the dictatorial but efficient rule of Park, South Korea’s economy was booming. The South Korean leaders thought they would win the economic competition. We know now that they were correct in this assumption.

Hence, negotiations made sense, at least as a way to win time. Indeed, for a short period after the 1972 Declaration there were a number of exchanges and contacts. The Red Cross societies of both Koreas were engaged in the negotiations of a painful question: the arrangement of meetings between members of separated families.

For all practical purposes, in those years the Red Cross societies acted as major channels of dialogues, hence both sides staffed these NGO-type bodies with high-level officials. The first rounds of talks led to nothing, but even the fact that both Koreas were willing to talk was seen as a great novelty after 25 years of division, war, and propaganda.

In 1973, the ROK government made it clear that it would tolerate the participation of North Korea in international organizations. Shortly before that, the principle of mutually exclusive international recognition had also been dropped: a foreign country could henceforth have ambassadors stationed both in Seoul and in Pyongyang.

However, the declaration did not change as much as newspaper readers worldwide were led to believe in those July days. Neither side was going to compromise too much. Domestically, both sides continued with their propaganda war, an enterprise, which was quite hysterical in the South and much worse in the North.

The generals planned future military operations, and secret services were conducting their silent war with the same zeal. Nobody was willing to give in, and talks were interrupted in 1973. They resumed only a decade later, and by that time the situation in and around Korea had changed dramatically.

Prof. Andrei Lankov was born in St. Petersburg, Russia, and now teaches at Kookmin University in Seoul.

Choson Ilbo (Hat Tip DPRK Studies)
8/30/2007

Three South Korean terrestrial TV stations agreed in July to pay tens of millions to North Korea annually for footage from North Korea’s state-run Korean Central Broadcasting Station. An SBS executive said South Korean TV stations have used TV pictures aired by KCBS for free, but in July, the Korean Foundation for South-North Economic and Cultural Cooperation, as a proxy of the North Korean TV station, concluded negotiations with three TV stations whereby SBS will pay about W20 million every year to KCBS through the foundation. MBC will pay slightly more than that, and KBS will pay about W30 million.

The foundation, chaired by United New Democratic Party member Im Jong-seok, was established in 2004. It held talks with the three terrestrial networks for a year and a half. In the talks, the three argued it was unreasonable for South Korean TV stations to pay for North Korean footage in programs that aim at promoting mutual understanding, and they generally rejected the idea of unilaterally paying North Korea when the North does not pay South Korean broadcasters for footage.

Reuters
(Hat tip DPRK Forum)
8/29/2007

Nigeria will send a high-level delegation to North Korea to discuss attracting investment in Nigerian energy and natural gas, President Umaru Yar’Adua has said.

Nigeria is the fifth largest oil supplier to the United States and an ally of Washington, but it also maintains warm relations with the secretive Stalinist state as a fellow member of the Non-Aligned Movement.

“I will direct the minister of state for energy to visit your country for discussions on energy and gas, a sector where we have an emergency,” Yar’Adua told the outgoing North Korean ambassador to Nigeria, King Pyong Gi, on Tuesday.

Yar’Adua, who took office in May, intends to declare a state of emergency in energy and power to accelerate development of the sector, which has been mismanaged and starved of investment for decades.

Yar’Adua promised to encourage high-level visits between the two countries, the state-run News Agency of Nigeria said.

In 2004 North Korea, which tested a nuclear device for the first time in October 2006, offered to share missile technology with Nigeria as part of a wide-ranging military cooperation agreement. It is unclear if it went ahead after Washington opposed it.

Ambassador Pyong expressed North Korea’s support for Nigeria’s bid for a permanent seat at the U.N. Security Council, the agency said.