North Korean Economy Watch

Yonhap
5/11/2007

An external audit report on United Nations activities in North Korea will be presented to a general meeting of the United Nations next week, a Washington-based radio station reported Friday.

Citing an informed source, Radio Free Asia said that an audit report is being made of the relevant documents and information without the inspectors visiting the communist country. The audit of all U.N. operations in North Korea began in March amid U.S. allegations that U.N. aid money was being diverted to the North’s regime.

The U.N. Development Program (UNDP) said it has completed the process of wrapping up all of its operations in North Korea, and its two remaining staff members were supposed to leave Pyongyang last week.

The agency suspended operations on March 1 because North Korea failed to meet conditions set by its executive board following suspicions that the aid money might be diverted for illicit purposes, including the development of nuclear weapons. It withdrew seven of its nine international staff in mid-March.

U.N. Secretary-General Ban Ki-moon ordered an external audit of all U.N. operations in North Korea that began on March 12.

The UNDP’s office equipment and materials are currently being safeguarded by the World Food Programme in Pyongyang and will be available to the auditors, officials from the international body said.

Office of Foreign Asset Control
(hat tip to Mr. Lukacs, with whom I visited Turkmenistan with Koryo Tours)

[Code of Federal Regulations]
[Title 31, Volume 2]
[Revised as of July 1, 2003]
From the U.S. Government Printing Office via GPO Access
[CITE: 31CFR500.563]

[Page 543]
 
                  TITLE 31–MONEY AND FINANCE: TREASURY
 
 CHAPTER V–OFFICE OF FOREIGN ASSETS CONTROL, DEPARTMENT OF THE TREASURY
 
PART 500–FOREIGN ASSETS CONTROL REGULATIONS–Table of Contents
 
 Subpart E–Licenses, Authorizations and Statements of Licensing Policy
 
Sec. 500.563  Transactions incident to travel to and within North Korea.

    (a) All transactions of persons subject to U.S. jurisdiction, including travel service providers, ordinarily incident to travel to, from, and within North Korea and to maintenance within North Korea are authorized. This authorization extends to transactions with North Korean carriers and those involving group tours, payment of living expenses, the acquisition of goods in North Korea for personal use, and normal banking transactions involving currency drafts, charge, debit or credit cards, traveler’s checks, or other financial instruments negotiated incident to personal travel.
    (b) The purchase of merchandise in North Korea by persons subject to U.S. jurisdiction, and importation as accompanied baggage, is limited to goods with a foreign market value not to exceed $100 per person for personal use only. Such merchandise may not be resold. This authorization may be used only once in every six consecutive months. As provided in Sec. 500.206 of this part, information and informational materials are exempt from this restriction.
    (c) This section does not authorize any debit to a blocked account.

[60 FR 8935, Feb. 16, 1995]

Daily NK
Kim Song A
5/9/2007

Photos of Kim Jong Il’s half-brother, Kim Pyong Il and the North Korean ambassador in Poland were recently made public.

Kim Pyong Il’s daughter, Eung Song and son, In Kang who have until now lived a sheltered and private life are also exposed in the photos. They are Kim Jong Il’s niece and nephew.

The photos were first released in March on Poland’s City of Narew homepage. The photos show Kim Pyong Il, his children and city officials making visitations to industrial sites, exhibitions, museums and participating recreational activities. In reference to the photos, it seems that these events took place on February 10.

Throughout the past, North Korea has maintained economic and cultural exchanges through the Korean Friendship Association with various countries in the East-European bloc. The events that took place on this day were organized by the association with North Koreans residing in Poland also participating in the occasion.

The homepage showed photos of Kim Il Pyong Il visiting NARMET Pty Ltd, his son, In Kang playing a game of table tennis and daughter Eun Song playing the piano.

Through the photos of Kim Pyong Il, you can see an exact resemblance of his father, though a “younger Kim Il Sung.” His two children are known to have completed a Masters degree in Poland and look healthy and well in appearance.

Kim Jong Il has one younger sister Kim Kyung Hee (married to Jang Sung Taek) as well as half-brothers (to different mothers) Kim Pyong Il, Kim Young Il (deceased 2000) and half-sister Kim Kyung Jin (51, married to Kim Kwang Sup, Ambassador to Austria). After being appointed as the successor in 1974, Kim Jong Il sent his brothers and sisters to work at alternative foreign departments so that they could not interfere with his power.

According to elite North Korean officials, there was a time where Kim Il Sung had considered appointing his succession to his three sons, “Jong Il, the Party, Pyong Il, the military and the government to Young Il.” However, after winning a power conflict with his uncle Kim Young Joo, Kim Jong Il ousted his uncle to Jagang province and sent his other siblings including Pyong Il to other departments where they could not come near of his power.

Kim Pyong Il was born on August 10 1954 and graduated from Kim Il Sung University with a major in economics. Following, he was appointed a high rank position and after passing the Kim Il Sung National War College, began working as a battalion commander at the guards headquarters. Once it was confirmed that Kim Jong Il would succeed his father, Kim Pyong Il left Pyongyang in 1979 to work at the North Korean Embassy in Yugoslavia. Around the same time, Kim Kyung Jin left with her husband for Czechoslovakia and Kim Young Il to East Germany.

In 1988, Kim Pyong Il was appointed Ambassador for Hungary but as soon as South Korea and Hungary developed amiable relations in December that year, he was re-appointed as the Ambassador to Bulgaria. Then in 1998, he became the official Ambassador to Poland where he has continued his services until now.

Kim Pyong Il’s wife is Kim Soon Geum. It is the first time that photos of their daughter Eun Song and son, In Kang, have been exposed to the public. When Kim Jong Il and his first wife Kim Young Sook had their first daughter, Kim Il Sung named the child “Sul Song.” When Kim Kyung Hee had her first daughter, she was named “Geum Song.” Similarly, it seems that Kim Il Sung named Kim Pyong Il’s first daughter, “Eun Song.” Kim Kyung Hee’s first daughter Jang Geum Song was known to have committed suicide last year in France as her parents opposed a marital proposal.

Of North Korea’s central committee under the Workers’ Party, the office 10 is known for regulating, controlling and being responsible for Kim Jong Il’s half-siblings.

Kim Pyong Il: North Korea’s Man in Poland
Daily NK
Nicolas Levi
5/17/2009

In February 2005, when I met Kim Pyong Il in Poland for the first time, he told me that he favored ameliorating the human consequences of the division of Korea.

Afterwards he started to talk to the other people present there in a room at the North Korean embassy; one of them later told me that Kim Pyong Il is usually very discrete, and is rarely present at receptions in other embassies in Warsaw. He generally only goes to the Chinese and Russian embassies, and sometimes to the Romanian and Algerian ones as well. North Korea was a model for both communist Romania under Ceaucescu and Algeria, that’s why the North Korean ambassador has special ties with those countries. In addition, Shaif Badr Abdullah Qaid, the last Yemeni ambassador in Warsaw studied in Pyongyang in the 70’s and became Kim’s good friend; their conversations dealt with life in North Korea, but never about the private life of half brother of Kim Jong Il.

In February 2006, I had occasion to talk with Kim Pyong Il again during a reception on Kim Jong Il’s birthday. During this meeting I saw a confident Kim Pyong Il, happy in Poland. However our conversation remained very diplomatic; Kim agreed that Korea should be reunified peacefully.

I never talked with Kim In Kang (26), Kim Pyong Il’s son, but I did have the chance to meet his daughter Kim Eung Song (28) some 10 times, both with her friends and face to face. She was a very open person. She was not only a nice girl; she also had impressive languages-skills (she is fluent in English, Polish, French and presumably Russian). She had a great social life in Poland with many friends. However, her father ordered her to return to Pyongyang in 2007, where she was supposed to marry the son of a North Korean General. She refused for a time, but finally went back to the North Korean capital.

Kim Sun Gum (56), the wife of Kim Pyong Il is a very discreet person, and rarely talks to others. Theirs was an arranged marriage. The wedding was personally organized by Kim Il Sung. It is said that she has a political background; her family apparently comes from the special services.

The last time I met Kim Pyong Il, in February 2009, I told him that I was preparing a doctoral thesis about his extended family (Kim Il Sung has two official wives: Kim Jong Suk, the mother of Kim Jong Il and Kim Sung Ae who is Kim Pyong Il’s mother). He reacted violently, telling me it was too dangerous.

That was my last contact with Kim Pyong Il; we haven’t met again since.

Kim Jong Il has a younger sister called Kim Kyung Hee (married to Jang Sung Taek) as well as half-brothers Kim Pyong Il (55) and Kim Yong Il (deceased in 2000), and half-sister Kim Kyung Jin (51), who is married to Kim Kwang Sop, Ambassador to Austria. After being appointed successor to his father in 1974, Kim Jong Il sent his half-brothers and sisters to work in overseas missions so that they could not interfere with his power. Kim Pyong Il started out in Yugoslavia, before moving to Hungary in 1988. However, he was swiftly relocated to Bulgaria as part of a protest over the opening of diplomatic relations between Hungary and South Korea. He then went on to work in Finland, but since January 1998 has resided in Warsaw.

Nicolas Levi is a Polish free publisher whose interests are mainly connected with the Korean Peninsula.

KCNA
5/7/2007
The 10th Pyongyang Spring International Trade Fair will be held at the Three-Revolution Exhibition from May 14 to 17. 

Participating in it will be companies from the DPRK, China, Russia, Syria, the Netherlands, Germany, Bangladesh, Switzerland, Singapore, Australia, Italy, Indonesia, Pakistan, Poland and Taipei of China. 

Machine tools, electric and electronic equipment, vehicles, medicaments, daily necessities, foodstuffs and so forth are to be on display in the fair.

Yonhap
5/5/2007

European companies operating in North Korea have been running a business coalition to better coordinate trade ties with the reclusive nation, a businessman said Saturday.

“Our purpose is to build bridges between Europe and North Korea,” Felix Abt, chairman of the European Business Association (EBA), said in an interview with Washington-based radio station Radio Free Asia. The association was founded in April 2005.

The businessman, who is also president of the joint venture PyongSu Pharma Co., said European firms need to do more business with Pyongyang, whose business ties are heavily dependent on Northeast Asia.

The association comprises 11 companies, mostly European or joint ventures between European and North Korean state-run firms. DHL, the logistics arm of Germany’s Deutsche Post AG, is also a member.

North Korea’s trade with the European Union accounted for less than 10 percent of its total volume in 2004, while trade with China surged by 35.4 percent, according to the EBA’s Web site.

Korea Times
Kim Yon-se
5/3/2007

President Roh Moo-hyun has expressed his willingness for economic cooperation with Russia, including linking the Trans-Korean Railway (TKR) and the Trans-Siberian Railway (TSR), by sending a letter to Russian President Vladimir Putin, a Chong Wa Dae official said.

But cooperation with North Korea would be required for the railway connection between Seoul and Moscow, government officials said.

Though experts from South Korea, North Korea and Russia have held a series of meetings to discuss the railway project over the past several years, it has lingered on due to a series of politically negatives surrounding the Korean Peninsula.

According to government officials, North Korea has won Russian pledges of economic aid by agreeing on the project, which will generate huge profits for Russia.

During the Kim Dae-jung administration, many hoped the railway project would provide a momentum for the reunification of the two Koreas.  Since 2001 when North Korean leader Kim Jong-il and Russian President Vladimir Putin agreed on the reconnection of the TKR and TSR, the project to restore the Gyeongui line which links Seoul to Pyongyang and Shinuiju in the North, was expected to recommence.

Reconnection of the Gyeongui railway was agreed upon during the inter-Korean summit talks in June 2000.

But the North withdrew its workforce and equipment from the area in 2001, while the South has completed more than 70 percent of the Southern part of the line.

When the TKR and TSR are connected, transportation costs will be cut and the time taken to ship cargo to Europe will be reduced to 20 days from 45 days, bringing a significant change to the logistics system in Northeast Asia.

In addition, the connection of the railways is expected to increase both countries’ revenues, as North Korea and Russia are likely to collect $100 million and $400 million in tolls, respectively.

“The letter to Putin did not contain anything new on the railway project, though the issue was included in suggestions for economic cooperation,” said Cheong Wa Dae spokesman Cheon Ho-seon.

He added that there has been no reply from Putin to Roh.

In the letter delivered by former Prime Minister Han Myeong-sook, Roh also proposed to hold a summit with Putin. Han traveled to Moscow on April 25 to attend the state funeral of former Russian President Boris Yeltsin.

Yonhap
5/23/2007
Koreas fail to agree on details for swapping of raw materials, resources

South and North Korea on Wednesday failed to settle remaining differences over how to boost cooperation in light industry and natural resource development, the Unification Ministry said.

“The two sides just agreed to continue to discuss details regarding the issue,” the ministry said in a statement. The ministry did not provide details about when they will meet again.

Working-level officials could not agree on the list and price of raw materials the South is to provide the North in exchange for the right to develop natural resources in the communist country.

The North called for more than the South has earmarked for the shipment on the last day of the two-day talks held in the North Korean border city of Kaesong, according to South Korean officials.

Last month, South Korea agreed that it will provide raw materials to the North in June to help revive its threadbare light industry in return for the North’s natural resources. The two Koreas reached a similar swapping agreement in 2005, but it has not been implemented due mainly to the North Korean nuclear dispute.

In the agreement, the rice shipment, which will consist of 150,000 tons of domestic rice and 250,000 tons of imported rice, will be sent to the North late this month in the form of a loan to be paid back over the next 30 years with a 10-year grace period. Seoul hopes to link it with Pyongyang’s promise to take initial steps toward nuclear disarmament.

Last Tuesday, the South Korean government endorsed the spending of funds needed to provide rice and raw materials for light industry to North Korea. The South’s planned shipment of 400,000 tons of rice is worth US$170 million, while the provision of raw materials for light industry is worth $80 million.

In 2005, South Korea agreed to offer raw materials to the North to help it produce clothing, footwear and soap starting in 2006. In return, the North was to provide the South with minerals, such as zinc and magnesite, after mines were developed with South Korean investments guaranteed by Pyongyang.

But the economic accord was not implemented, as North Korea abruptly cancelled the scheduled test runs of inter-Korean railways in May last year, apparently under pressure from its powerful military.

Last Thursday, two trains crossed the Military Demarcation Line for the first time since the end of the 1950-53 Korean War. But critics said the test run of two railways, one in the east and the other in the west, is not likely to lead to the formal opening of the railways or to rail services for a joint industrial complex in Kaesong or for tours of the North’s Mount Geumgang.

As part of efforts to accelerate the formal opening of the inter-Korean rail service, the South plans to sound out the possibility of providing raw materials via reconnected railways during the working-level dialogue or the upcoming ministerial talks.

Koreas hold talks on swapping of raw materials for light industry
Yonhap
5/22/2007

South and North Korea on Tuesday held talks to work out details for boosting cooperation in light industry and natural resource development, the Unification Ministry said.

The aim of the working-level dialogue, being held in the North Korean border city of Kaesong for two days until Wednesday, is to focus on procedures for the South’s shipment of raw materials to the North in exchange for the right to develop North Korea’s natural resources.

During the talks, South and North Korea are scheduled to exchange agreement documents, which will then take effect immediately since the two sides successfully conducted test runs of cross-border railways, a precondition for the implementation of the accord, government officials said.

The South also plans to sound out the possibility of providing the materials via reconnected railways in a prelude to the formal opening of the inter-Korean rail service, according to sources.

“We are studying various ways of speeding up the formal opening of the Gyeongui (Seoul-Sinuiju) and Donghae (East Coast) tracks. The use of the tracks for the promised shipment of light industry raw materials could be an option,” a government source said, asking to remain anonymous because of the sensitivity of the issue.

On Thursday, trains crossed the Military Demarcation Line for the first time since the end of the 1950-53 Korean War. But critics said the test run of two railways, one in the east and the other in the west, is not likely to lead to the formal opening of the railways or to rail services for a joint industrial complex in Kaesong and tours of the North’s Mount Geumgang.

Earlier this month, South Korea said it will ship the first batch of light industry materials to the North via ship on the Incheon-Nampo route, but the mode of transportation for the rest has yet to be decided.

Last month, South Korea agreed that it will provide raw materials to the North in June to help revive its threadbare light industry in return for its natural resources. The two Koreas reached a similar swapping agreement in 2005, but it has not been implemented due mainly to the North Korean nuclear dispute.

In the agreement, the rice shipment, which will consist of 150,000 tons of domestic rice and 250,000 tons of imported rice, will be sent to the North late this month in the form of a loan to be paid back over the next 30 years with a 10-year grace period. Seoul hopes to link it with Pyongyang’s promise to take initial steps toward nuclear disarmament.

Last Tuesday, the South Korean government endorsed the spending of funds needed to provide rice and raw materials for light industry to North Korea. The South’s planned shipment of 400,000 tons of rice is worth US$170 million, while the provision of raw materials for light industry is worth $80 million. The approval will be promulgated on Tuesday.

In 2005, South Korea agreed to offer raw materials to the North to help it produce clothing, footwear and soap starting in 2006. In return, the North was to provide the South with minerals, such as zinc and magnesite, after mines were developed with South Korean investments guaranteed by Pyongyang.

But the economic accord was not implemented, as North Korea abruptly cancelled the scheduled test runs of the railways in May last year, apparently under pressure from its powerful military.

Wall Street Journal Editorial
5/3/2007
Page A16

It’s been two and a half weeks since the 60-day deadline passed on April 14 for North Korea to comply with the first part of the nuclear accord reached in February. That includes shutting down the Yongbyong nuclear reactor, letting in U.N. inspectors and providing a list of all nuclear programs. But so far no word from Pyongyang, and nothing from Beijing or Washington either. President Bush and Secretary of State Condoleezza Rice both recently claimed their “patience” is not “endless,” contrary to all available evidence.

Meanwhile, another North Korean deadline has been allowed to lapse. On January 19, United Nations Secretary-General Ban Ki Moon ordered an “external inquiry” into all U.N. programs in North Korea, including the United Nations Development Fund, Unicef, the World Food Program and the U.N. Population Fund. Mr. Ban’s announcement followed our report on irregularities in UNDP programs in North Korea and U.S. concerns that tens of millions of dollars in hard currency were funneled to dictator Kim Jong Il.

Mr. Ban imposed a 90-day deadline for the audit, but it appears to be lost somewhere in the U.N. bureaucracy. The auditors spent two weeks in March at UNDP headquarters in New York interviewing staff and looking at the books, but they have yet to set foot in North Korea, much less file a report. Oh — and the “independent” and “external” audit Mr. Ban ordered is being conducted by the U.N.’s own Board of Auditors, consisting of a team from South Africa, France and the Philippines.

We had a challenge gathering even these details. The Board of Auditors refuses to talk to the press. The UNDP understandably feels it lacks standing to comment on an investigation of itself. And Mr. Ban’s press office can’t seem to get the facts straight, first telling us the auditors were in Korea and then informing us they weren’t. You’d think someone at the U.N. would show more interest in explaining one of the boss’s priorities to the public.

It will be interesting to see how Kim Jong Il responds if the auditors get around to asking for visas. The dictator recently told the last two UNDP officials left in Pyongyang to get out. The UNDP suspended operations there in March, after our reports and after the Kim government refused to let aid officials visit the projects they fund.

Mr. Ban is staying mum on the missed U.N. deadline. But on the evidence so far, Kim can be forgiven if he concludes that the world isn’t serious about enforcing any of its deadlines concerning North Korea.

American Enterprise Institute Book forum
4/17/2007

A couple of weeks ago, I had the opportunity to attend a book forum at the American Enterprise Institute on Nicholas Eberstadt’s new book, The North Korean Economy: Between Crisis and Catastrophe.  It was very informative to hear three different perspectives on the direction of North Korea’s economic reform.

Panelists included:

Nicholas Eberstadt, AEI
Andrei Lankov, Kookmin University
Deok-Ryong Yoon, Korea Institute for International Economic Policy

In summary, Mr. Eberstadt and Mr. Lankov are pessimistic about the North Korean leadership’s desire to enact reforms–knowing that information leakages will undermine their political authority.  As Mr. Lankov pointed out, the North Korean nomenklatura are all children and grandchildren of the founders of the country who are highly vested in the current system.  They have no way out politically, and as such, cannot reform.

They argue that the economic reforms enacted in 2002 were primarily efforts to reassert control over the de facto institutions that had emerged in the collapse of the state-run Public Distribition System, not primarily intended to revive the economy.  Lankov does admit, however, that North Korea is more open and market-oriented than it has ever been, and  Mr. Yoon was by far the most optomistic on the prospects of North Korean reform.

Personally, I think it makes sense to think about North Korean politics as one would in any other country–as composed of political factions that each seek their own goals.  Although the range of policy options is limited by current political realities, there are North Koreans who are interested in reform and opening up–even if only to earn more money.  In this light, even if the new market institutions recognized in the 2002 reforms were acknowledged only grudgingly, they were still acknowledged, and their legal-social-economic positions in society are now de jure, not just de facto.  The North Korean leadership might be opposed to wholesale reform, but that is economically and strategically different than a controlled opening up on an ad hoc basis–which is what I believe we are currently seeing. Anyway, dont take my word for it, check out the full commentary posted below the fold:

(more…)

Daily NK
Kim Yong Hun
4/30/2007

North Korean high authority has issued domestic instructions to “remove all Japanese products from Pyongyang and every other city within 3 years.” A source in North Korea reported that the prohibition includes the trade and circulation of Japanese cars, bicycles, electronic goods, and groceries. The Kim Jong Il regime seeks to punish Japan for the attitude it displayed in the recent six party talks and for its decision to continue sanctions against North Korea for an additional 6 months.

As a result, reliance on Chinese and South Korean products such as refrigerated vans and trucks is increasing according to a custom house officer in the Chinese border city Dandung. There, “10 Yuan stores” offer South Korean goods whose main consumers are North Korean traders, according to the source. Hot items include plates, lunch boxes, shoes and clothes, and a South Korean electronic rice-cooker, the “Cuckoo.” The cooker is one of the most popular devices among North Korea’s elite who have spurred the import boom.