North Korean Economy Watch

Joong ang Daily
Moon So-young
12/28/2006

…[edited]…President Roh Moo-hyun’s Uri Party and the Grand National Party agreed to cut the budgets for inter-Korean cooperation projects…

The North-South cooperation fund, one of the latter budget items, was perhaps the hottest of the hot issues. The Assembly agreed to allocate 500 billion won for that fund, down 150 billion won from the government’s proposal.

The Grand Nationals had demanded that spending be cut by at least 300 billion won, citing North Korea’s nuclear test in October. The Uri Party refused to cut more than 100 billion won. Mainly because of that fight, the budget approval had been delayed from its mandated deadline of Dec 2. Last year, Seoul allocated 650 billion won for the North-South fund, the same amount as the 2007 request.

Joong Ang Daily
Jung Ha-won
12/27/2007

In early 2007 South Korea is expected to begin its first graphite shipments from a new mine in North Korea that has been co-developed by the two countries since 2003.

The mine development project in Jeongchon, which cost $10.2 million, was completed in April, but electricity shortages and diplomatic tension over North Korea’s nuclear test delayed testing operations for months.

According to Korea Resources Corp., South Korea’s state-run mineral developer that took part in the project, the new mine, located near the western part of the border with South Korea, recently began test operations, and graphite shipments will begin early next year.

“North Korea authorities recently guaranteed a stable supply of electricity,” said an official with Korea Resources.

The mine is expected to produce about 3,000 tons of graphite a year, and Korea Resources Corp. plans to bring about 1,830 tons of graphite, or 20 percent of annual production, to South Korea each year for next the 15 years. The firm is also involved in an iron ore mine development project in the North’s Deokhyun, North Pyeongan province.

North Korea is known to have more than 200 varieties of minerals worth about 2.2 quadrillion won ($2.4 trillion) still unexplored in its mountainous areas. Chinese companies have wasted no time exploring those resources, with the North Korean government thirsty for cash and outside investment. China’s state-run steelmaker, Tonghua Iron and Steel Group, last year was granted rights to develop the Musan iron ore deposit in North Korea, the largest open-air iron mine in Asia, for the next 50 years. North Korea also granted exploration rights for more than 10 mines to China’s Wookwang Group and other Chinese developers.

South Korea has been sluggish by comparison, due to political issues and a lack of infrastructure, such as roads and electricity. There remain untapped resources in the reclusive North.

“There is a wealth of magnesite buried in the Dancheon area,” said the Korea Resources Corp. official. “We will carefully review the plan to explore the area.”

Korea Herald
12/27/2006

North Korea, desperate for foreign currency under U.S.-imposed sanctions, has started to sell its gold reserves on international markets, a Japanese newspaper said Tuesday.

The United States last year blacklisted a Pyongyang-linked bank in Macau, infuriating the communist regime which walked out of disarmament talks for 13 months during which it tested an atom bomb.

Since the US crackdown on the bank, North Korea has earned 28 million dollars in foreign cash by exporting gold to Thailand, which had not imported gold from Pyongyang for the previous five years, the Yomiuri Shimbun said.

North Korea exported 500 kilograms of bullion to Thailand in April and another 800 kilograms a month later, the conservative Japanese daily said without identifying its sources.

North Korea’s central bank, Choson Central Bank was also re-listed on May 12 for trading on the London Bullion Market, said the newspaper, quoting a spokesman for the London market.

The North Korean central bank, which can issue currency, joined the London gold market in 1976 but was de-listed in June 2004 due to inactive trading, the newspaper said.

The Yomiuri, citing South Korean data, said North Korea was estimated to have between 1,000 and 2,000 tons of gold reserves.

The United States blacklisted Macau’s Banco Delta Asia in September 2005, saying it suspected that 24 million dollars in North Korean accounts were linked to counterfeiting or money-laundering.

The accounts have been frozen and other Asian banks have taken similar moves.

The financial sanctions were a main topic during six-nation talks, aimed at persuading North Korea to end its nuclear program, which ended in deadlock last week in Beijing.

N. Korea uses chartered flight to transport pro-Pyongyang Koreans in Japan
Yonhap
12/26/2006

North Korea has sent chartered flights to Dalian, China, to ferry pro-Pyongyang Korean residents living in Japan, local civil aviation authorities said Tuesday.

Chinese authorities said North Korea’s Air Koryo flew into the port city on Nov. 22 and twice more on Dec. 1 and Dec. 10.

Air Koryo does not maintain regular flights to the city on the Liaodong Peninsula.

Airline officials said the flights were arranged to transport students from a school run by the General Association of Korean Residents (Chongryon), who wanted to visit the communist country.

It said there are no plans to continue the chartered flights.

The use of chartered flights comes after Tokyo banned the Mangyongbong-92 ferry from docking in Japanese ports in July. The ship had been the only regular passenger link between the two countries. The Japanese government initiated the ban after Pyongyang launched ballistic missiles into the East Sea.

Air Koryo operates regular weekly flights to Beijing on Tuesday, Thursday and Saturday, and flights to Shenyang in Liaoning Province on Wednesday and Saturday.

Yonhap
12/24/2006

Chinese firms have bought a controlling stake in one of the largest copper mines in North Korea, industry sources said Sunday.

Sources familiar with business cooperation between North Korea and China said Hebei-based Luanhe Industrial Group and another privately owned company signed a deal that gives the firms control over Hyesan Youth Cooper Mine in Yanggang Province.

Yonhap
12/21/2006

The South Korean government may resume its humanitarian assistance to North Korea in the near future as part of efforts to mend soured ties with the communist nation, the country’s point man on North Korea said Thursday.

“The government has a principle to resume the North-South dialogue at the earliest date possible,” Unification Minister Lee Jae-joung told reporters.

(more…)

Joong Ang Daily
12/19/2006

Despite United Nations sanctions aimed at preventing the North Korean government from buying luxury goods for its ruling class, government sources here said a North Korean trading company is still busy providing Kim Jong-il loyalists with their perquisites.

Tian Ming Trading Company, in the center of this former Portuguese enclave now with the same China-affiliated status as Hong Kong, says its main business line is carpets, and little more. Three office workers said there were no North Koreans at the company and that it has never traded with North Korea. The company’s president was out of town on business, they said.

But a source with close ties to the trading economy here said that Park Su-dok, a 53-year-old North Korean, is in Macao and obtained a visa as an employee of the company.

Another source said, “Tian Ming is a joint venture by North Korean and Hong Kong investors, and its main business is buying luxury goods from Hong Kong for shipment to North Korea.” He added that Tian Ming’s president, a Hong Kong resident, is buying luxury watches, gold products and expensive liquor at North Korea’s request, using a Hong Kong branch office for the purpose.

Other Macao government officials said 18 North Korean firms were registered in Macao as of late November, and 115 North Koreans carry Macao visas as employees. Twenty have become Macao citizens, they added.

Since Washington threatened to impose sanctions on Banco Delta Asia here, allegedly for helping North Korea launder cash from its alleged dubious business lines, some of those companies have shut down. Ten are still in limited operation, however, these government sources said.

Separately, a South Korean banker in Hong Kong told the Joong-Ang Ilbo that a North Korean businessman had visited him in an attempt to sell gold bars through one of the South Korean bank branches in Hong Kong.

The banker reportedly spurned the overture, although the transaction would not have violated any South Korean laws or regulations on North-South dealings. He said he simply did not want to get involved in such a deal given the international attention being paid to commercial dealings with North Korea. The banker suggested that the offer may have been a sign of the foreign currency problems North Korea is facing because of the UN sanctions and U.S. pressure on financial dealings with North Korea.

Banco Delta Asia has said that between 2003 and 2005, it had sold 9.2 tons of gold bars that it had purchased from the North, where gold production is estimated to be about 25 tons per year, mostly for export.

Wall Street Journal
12/18/2006
Gordon Fairlcough, p.A1

Close-Out Sale: North Korea’s Elite Shop While They Can

A North Korean businesswoman with heavy makeup and a bouffant hairdo studied herself in a mirror as she modeled fur-lined leather coats at a small store in [Dandong, China] this frigid northeast border city.

During a three-day excursion late last month, the woman also tried on shoes and looked at large-screen television sets before buying furniture and fresh fruit and heading home to Pyongyang, North Korea’s capital city.

The United Nations has called for a crackdown on luxury-goods shipments to North Korea as a way of pressuring the country to drop its atomic-weapons programs, which came under new fire after an October nuclear test.

If anything, the uncertainty about the flow of fancy goods appears to have whetted the appetites of some privileged North Koreans — whose impoverished country cultivates a Spartan socialist image.

In Dandong, North Koreans, many wearing lapel pins with a picture of North Korea’s founding dictator, Kim Il Sung, stroll through hotels and department stores. Signs are often written in Korean, with storekeepers advertising computers, karaoke machines and the erectile-dysfunction drugs Viagra and Cialis.

A few North Koreans have bought new cars at a Toyota dealership near the Dandong customs checkpoint, according to a salesman. One man paid about $50,000 in cash for a luxury sedan.

Gold is also gaining a following. Wang Xiaoju, a saleswoman at the jewelry counter at Xin Yi Bai Department Store, says North Korean women come in nearly every day, mostly to buy gold chains and other gold jewelry.

Women from the North also are frequent visitors to a riverfront spa, favoring milk baths and massages, according to staff there. A saleswoman at the Xin Yi Bai L’Oreal counter says North Koreans are regular customers. Among the big sellers: body sculpting cream for women who want to look thinner.

In the first 10 months of this year, Chinese exports of fur coats and fake furs to North Korea soared more than sevenfold from the year-earlier period, according to Chinese Customs figures. Exports of televisions and other consumer electronics were up 77%, while perfumes and cosmetics were up 10%.

Some North Koreans are even buying real estate in Dandong. One high-rise building, where three bedroom apartments go for nearly $100,000 each, has sweeping views of a decrepit North Korean village with crumbling cinder-block houses across the border. A North Korean buyer recently purchased one of the units with cash, according to the building’s sales agent.

“Life is quite comfortable” for senior party members, military officers and traders, who have prospered despite widespread shortages of food, fuel and medicine in North Korea, says Pak Yong Ho, a former high-ranking North Korean official who defected to South Korea two years ago.

North Korea’s Communist Party has long had overseas agents in Macau, Switzerland and elsewhere dedicated to maintaining supplies of luxuries for top military and government personnel, according to former North Korean officials. Their jobs, in the wake of the U.N. sanctions, could get much harder.

The U.N. so far has let individual countries decide which high-end products to block. Washington has barred U.S. companies from selling everything from iPods to Harley-Davidson motorcycles. But that move was largely symbolic, as there is very little direct trade between the U.S. and North Korea.

Japan, which has for decades been a source of luxuries for the North Korean ruling class, has banned exports of 24 fancy products from caviar and gems to watches and art.

But the key to whether the sanctions will work is in the hands of China, North Korea’s largest trading partner.

A steel-girder bridge here spans the Yalu River, connecting Dandong to the city of Sinuiju in North Korea. That has helped Dandong, whose name means “Red East,” become a popular shopping destination for North Koreans with money. It is unclear how much that will change because of the sanctions.

So far, China hasn’t disclosed what specific kinds of high-end exports — TVs or luxury automobiles, for instance — it will block. A Chinese foreign-ministry spokeswoman, Jiang Yu, has said the list “should not be allowed to impact normal trade transactions” between the socialist neighbors.

North Korean leader Kim Jong Il, whose own taste for expensive French cognac and other imported luxuries is well known, uses money and goods liberally in an effort to buy the loyalty of the elite, according to U.S. and South Korean officials. Some of these officials say that depriving the ruling class of its creature comforts could alienate them from Mr. Kim, long known as “Dear Leader.”

But many North Korea watchers and North Korean defectors doubt that the elite would revolt against Mr. Kim’s government, because their fates are so closely tied to his now. “Under this regime, the privileged have had a very good life,” says Kim Dok Hong, the second-highest North Korean official to defect. “If the regime collapses, the people they’ve mistreated will be looking for revenge.”

At the peak of the famine that killed more than a million North Koreans in the mid-1990s, Mr. Pak, the former government official, says his parents weren’t short of food. Their home had three refrigerators regularly replenished with imported provisions by the Communist Party. Mr. Pak uses a pseudonym to protect family members still in the North from government retribution.

“The elites have had more freedom to do their own business” since economic overhauls in 2002, says Yang Chang Seok, a senior official at South Korea’s Unification Ministry, which oversees relations with the North. “People have earned a lot of money from trading.”

These days in Pyongyang, members of the ruling class are ferried around in imported cars and live in well-appointed — and well-guarded — apartment complexes. Their children race around city parks on in-line skates and play American computer games.

Says Mr. Pak: “If you can afford to pay, there’s nothing you can’t get.”

Wall Street Journal Opinion Journal
Melanie Kirkpatrick
12/18/2006

This being The Wall Street Journal, we went straight to the bottom line. How much, we asked our visitor at a recent editorial board meeting, does it cost to free one North Korean refugee hiding in China?

The Rev. Phillip Buck pauses a moment before replying, apparently making the yuan-to-dollar conversions on the abacus in his mind. “If I do it myself,” he says, “the cost is $800 per person. If I hire a broker to do it, it’s $1,500.”

Pastor Buck is a rescuer. It’s a job title that applies to a courageous few–mostly Americans and South Koreans and predominantly Christians–who operate the underground railroad that ferries North Korean refugees out of China to South Korea, and now, thanks to 2004 legislation, to the U.S. Mr. Buck, an American from Seattle, says he has rescued more than 100 refugees and helped support another 1,000 who are still on the run. For this “crime”–China’s policy is to hunt down and repatriate North Koreans–he spent 15 months in a Chinese prison. He was released in August.

The plight of the tens of thousands of North Korean refugees in China is a humanitarian crisis that has received scant world attention. It won’t be on the agenda of the six-party talks, which are scheduled to restart today in Beijing. But the experience of Pastor Buck and other rescuers is worth noting as negotiators sit down with Kim Jong Il’s emissaries. North Korea won’t change, they believe, so long as Kim remains in power. Follow that logic, and regime change is the proper goal.

The refugees, Pastor Buck argues, are the key to regime change in North Korea and, by inference, the key to halting the North’s nuclear and missile programs. Help one man or woman escape, he says, and that person will get word to his family back home about the freedom that awaits them on the outside. Others will follow, and the regime will implode. This is what happened in 1989, when Hungary refused to turn back East Germans fleeing to the West, thereby hastening the collapse of the Berlin Wall.

Pastor Buck was born in North Korea in 1941 and fled with his brothers to the South during the Korean War. He emigrated to the U.S. in the ’80s, becoming a citizen in 1992. When famine hit North Korea in the late ’90s, and millions died, he raised relief funds in Korean churches in the U.S. “I helped send 150 tons of flour and rice to the North,” he says, “and 70 tons of fertilizer . . . This was a time when government rations had stopped and people were living off grass.”

But on visits to the North, he soon realized that the government was stealing the food intended for starving citizens. “I changed my mind” about the efficacy of aid, he says, and in 1998 he joined the effort to help people escape. “If you see someone who is drowning in the river, wouldn’t you reach out and help that person?” he asks. “That’s what was in my heart.”

Pastor Buck is nothing if not determined. In 2002, while in a Southeast Asian country with a group of refugees he had guided there, his apartment in Yanji city, in northeast China, was raided. Nineteen refugees were captured and a copy of his passport was confiscated. With his identity now compromised, Mr. Buck returned to the U.S. and underwent legal proceedings to change his name. John Yoon, the name he was born with, was dead; Phillip Buck was born.

The new Pastor Buck returned to China, where, on May 25, 2005, he was arrested and eventually convicted of the crime of helping illegal immigrants. Thanks to the intervention of the U.S. government, he was deported before he could be sentenced.

Another American, Steve Kim, was not so lucky. Mr. Kim, a furniture importer from Huntington, N.Y., has been in prison in China since September 2003, sentenced to five years for smuggling aliens. Mr. Kim, who, like Mr. Buck, is of Korean ancestry and is a Christian, became aware of the plight of the refugees during business trips to China. He funded two safe houses and paid for refugees’ passage on the underground railroad. Beijing refuses to grant him parole, saying foreigners are not eligible. His wife and three children will pass their fourth Christmas without him.

Mr. Buck, meanwhile, will celebrate Christmas at home in Seattle, along with four refugees, now settled in South Korea, whom he has invited to spend the holiday with him and his family. These refugees–two men and two women–have harrowing personal tales of starvation, death and repression in the North and desperate lives on the run in China.

One young man, who asks that his name not be used for fear of retribution on family members still at home, spent time in the North Korean gulag, after being captured in China and repatriated. He was tortured, he says–rolling up his trousers at a recent press conference in Washington, D.C. to display the scars on his legs.

One morning at roll call, he recounts, one of his cellmates, a man who had been badly beaten during the night, was too sick to get out of bed. The guards ordered the prisoners to carry the injured man into the woods and bury him. “I keep thinking, maybe he would still be alive if we hadn’t buried him,” the escapee says. The name of the dead man was Kim Young Jin. The name of the prison is Chong Jin. Says the man who escaped: “I am very glad to be here, and tell the people in America how life in North Korea really is.”

Pastor Buck spent last Christmas in jail. “My cellmates were criminals,” he says, “12 in all, murderers and rapists.” His diary entry for Dec. 24, 2005, notes that he distributed the chocolates his children had sent him as Christmas gifts to his cellmates. And this year? “I am so excited that I can celebrate this Christmas with lots of joy,” his diary entry for last Thursday reads.

His final words are for the refugees. “I pray, let the Christmas spirit be with those North Korean refugees still in China. Let them be safe too.”

Joong Ang Daily
12/15/2006

North Korean women down Japan for gold

North Korea retained the Asian Games women’s soccer title early yesterday with a 4-2 penalty kick shootout win over Japan.

The defending champions, Asia’s highest-ranked team, enjoyed the better chances throughout the match and held their nerve at the end with goalkeeper Jon Myong-hui saving two Japan kicks.

North Korea scored all of its penalty kick chances as Ri Kum-suk, Ri Un-gyong, Ho Sun-hui and Jong Pok-sim all found the net.

Despite the victory North Korean coach Kim Kwang-min said his club should have gotten it done in regulation.

“Although we are similar physically we are better players,” said Kim. “I told them to be aggressive from the start and we should have won in 90 minutes. I am not overly satisfied with the performance.”

The first half of the game saw both teams cancel each other out, but North Korea almost broke through in the first half.

It took a flying save from Japan ese goalkeeper Miho Fukumoto to deny North Korea’s top scorer, Ri Kum-suk, from finding the net with a sharp, downward header.

At the one-hour mark, Song Jong-sun turned smartly and unleashed a fierce left-footed shot which just sailed past Fukumoto’s left hand.

Kim Kyong-haw then teed up Ho Sun Hui, who shot straight at Fukumoto.

Eriko Arakawa then set up Japan’s best chance of the game in the 72nd minute when she turned inside two defenders, drew the goalkeeper out and released the ball into the path of Shinobu Ohno, who was unable to steer the ball home.

Ri Kum-suk then squandered a late chance to settle the tie in normal time, heading just inches wide at the far post.

Fukumoto twice rescued Japan in extra-time, once even having to keep out a misdirected header from teammate Kozue Ando.

Ohno then gave the North Koreans a major scare when she had the ball in the back of the net with a volley finish five minutes from the end of the first period of extra time.

But it was controversially ruled out for offsides and the match went to the penalty shootout.

Daily NK
Yang Jung A
12/13/2006

On the 12th, the Mainichi Newspaper reported that N. Korea sent a group of middle-aged men cheerleading squad to the Asian Game held in Doha, Qatar. In 2002 N. Korea sent a group of young women cheerleading squad to Busan Asian Game.

When N. Korea won the soccer game 2 to 1 over Japan held in the past 7, hundreds of the N. Korean cheerleading squad were so excited that after the game they entered into the stadium and tossed their players shoulder-high.

The cheerleading squad was construction workers who were out in Doha to make foreign currency funds. The newspaper also reported that while N. Korea has screwed most of salaries of its workers recently dispatched in Czech and Poland, it has seemed to actively export their workers to the Middle-East areas.

In the South-North soccer game held in the past 9, around one thousand of the North Korean people cheered up their players, who finally lost the game and shouted ‘take heart of grace’ following the instruction of a cheerleader.

Mr. Gong, South Korean businessman doing equipment business in Doha said that, “Two teams of North Korean workers were dispatched into one workplace. One team is consisted of two hundreds workers” and “their contract duration is 2 or 3 years and they are diligent”.

You could see the North Korean people who have stiff looks go shopping in a big supermarket in weekends.

A Pyongyang man cheering up his team in the South-North soccer game said that, “the workplaces are divided into a few areas so that I do not know how many people are in here. I am really happy to be here to meet people working at other workplaces”.

In the meanwhile, other men responded that, “I make Kimchi by myself. I have no problem for my living”. After the first half of the game, many people bought a few bottles of juice and snacks in a stand. The newspaper added, however, nobody granted an interview to reporters about their salaries.