North Korean Economy Watch

Yonhap
8/30/2006
Sam Kim

Thousands of used but clean shirts, pants and other clothes are stacked in big heaps in warehouses outside Seoul to be sent to poverty-stricken North Korea.  But they can’t be sent as they are, because North Korean officials want to get them their way: all without English writing on them and their size no bigger than “large.”

“In addition, we have color restrictions,” Ahn Jeong-hui, director of the Korean Council for Reconciliation and Cooperation, the donor of the clothes and other relief goods. “Strong colors could easily repulse North Koreans.”

Whenever impoverished North Korea suffers from flood and other natural or man-made disasters, sympathetic South Korean civic organizations usually respond to their appeal for emergency aid with warm hearts.

The shipment-in-waiting is for thousands, perhaps tens of thousands of North Koreans who were made homeless in massive floods in mid-July.

There were no official North Korean announcement on the extent of the flood damage but its media said “hundreds” of people were killed or missing. One South Korean relief group said “thousands” were killed.

The South Korean civilian aid is in addition to more than US$200 million worth of relief goods scheduled to be sent by the Seoul government, which include 100,000 tons each of rice and cement, 50,000 tons of reinforced steel bars and a number of trucks and other construction equipment.

With its economy in shambles, impoverished North Korea turned to international handouts in 1995 to help feed its 23 million people. U.N. relief workers said the largest floods in the country are expected to result in 100,000 tons of crop damage this year.

After years of dealing with North Korea, South Korean donors have learned that helping the communist country is not just about sending large quantities of supplies. It requires certain “customization,”

“The maximum size of clothes we send to North Korea is ‘large,'” said Hyun Il-hyun, secretary at Join Together Society, another South Korean relief agency, “We know anything bigger, like ‘extra large’ or ‘extra extra large,’ won’t fit North Koreans.”

“What will fit elementary school kids in South Korea will usually fit North Korean middle-schoolers,” she said. “Most North Korean adults will fit well into what South Korean teenagers wear.”

Chronic food shortages and malnutrition have stunted many North Koreans, making some look like dwarfs. Television footage broadcast in South Korea showed gaunt North Koreans scouring winter fields for grains left by reapers.

Nearly 8,700 North Koreans have defected to South Korea since the Korean War ended in 1953, including 1,139 in 2002, 1,281 in 2003, 1,894 in 2004, 1,383 in 2005 and 1,054 in the first seven months of this year. Many complained of hunger in their communist homeland.

A 2004 survey of 2,300 North Korean defectors showed that average North Korean men and women are 5.9 centimeter and 4.1 centimeters shorter than their South Korean counterparts, respectively. An average 14-year-old boy from North Korea is up to 15.8 centimeters shorter than the same-aged South Korean.

English-embellished clothes are not welcome, either, in North Korea, relief workers said.

“We pick out any clothing that has English writing on it,” Hyun of Join Together Society said. “North Korean authorities apparently don’t want their people to think the clothes are coming from their sworn enemy, the U.S. We also restrict clothes that have the names of South Korean organizations.”

North Korea has asked them to increase shipments of rice and flour instead of instant noodles, according to South Korean relief workers.

“We will comply with the North Korean request and no longer send instant noodles,” said Ahn of the Korean Council for Reconciliation and Cooperation. “I think the North’s request has do to with the South Korean marks and logos on the packings.”

According to South Korean government officials, North Korea tightly controls the flow of information among its people. All radio sets are pre-set to monitor only state broadcasts.

From Yonhap:
8/30/2006

North Korean exports to Japan dropped by nearly 50 percent last month from June amid Tokyo’s economic sanctions against the communist state for its test-firing of missiles early last month, a report by Japan’s Finance Ministry released on Wednesday showed.

The total amount of North Korea’s exports to Japan last month dropped to some 440 million yen (US$3.75 million), a 44.2 percent decrease from that of June, the report said. The amount is also down 42.2 percent from that of the same period in 2005.

The report failed to provide specific reasons for the drop, but observers believed it was mainly due to the country’s economic sanctions against the impoverished North, which followed Pyongyang’s test-firing of seven ballistic missiles on July 5.

The observers also said trade between the two is likely to further shrink amid Tokyo’s strong reaction to North Korea’s missile tests and the communist state’s alleged preparations to test a nuclear bomb.

The United Nations Security Council unanimously adopted a resolution on July 15, condemning the North Korean missile tests and prohibiting any missile-related dealings with the North. But Tokyo has been taking additional steps to cut off any cash inflow to North Korea from its country.

The country has banned a major North Korean ferry, Mankyongbong-ho, from its ports at least for the next six months, cutting off the largest and almost the only direct means of transportation between the two for North Koreans and some 200,000 pro-Pyongyang Korean residents in Japan.

From the Joong Ang Daily:

Four South Korean Red Cross officials are expected to visit North Korea’s Nampo port this week to supervise the delivery of the first government aid package to help the North recover from recent flooding, an official at the Unification Ministry said yesterday.

The Red Cross officials will depart from the port of Incheon at 11 a.m. Wednesday aboard the 3,000-ton ship Trade Fortune, which sails regularly between the Koreas, according to the official.

The shipment includes 300 tons of rice, 20,000 blankets and 10,000 first aid kits, according to the official.

Seoul suspended shipments of its regular humanitarian assistance to the North shortly after Pyongyang launched seven ballistic missiles in early July, including a long-range Taepodong-2, which is believed capable of reaching the U.S. west coast.

The South Korean government says it will not make additional commitments of any economic assistance to the communist state until the North returns to stalled international negotiations with the South, Japan, China, Russia and the United States over its nuclear program.

The government, however, pledged to give 241 billion won ($251 million) worth of aid through the country’s Red Cross as one-time humanitarian assistance to the North after heavy rains there last month reportedly left hundreds of people killed or missing and thousands of others injured.

Pyongyang rejected an initial aid offer from the South Korean Red Cross last month, but its inter-Korean pro-unification organization later asked Seoul’s civic organizations and other “related offices” for rice and construction equipment, while expressing gratitude for the civic groups’ efforts to help the country recover from devastating torrential rains and flooding.

The Unification Ministry has also agreed to provide funds matching amounts raised by each civic organization, expected to total some 10 billion won.

The government’s aid through the Red Cross will include 100,000 tons of rice, 100,000 tons of iron rods, 80,000 blankets and over 200 construction vehicles.

From Yonhap:
Byun Duk-kun
8/29/2006

Four South Korean Red Cross officials are to visit North Korea’s Nampo port this week to supervise the delivery of the first government aid package to help the North recover from recent flooding, an official at the Unification Ministry said Tuesday.

The Red Cross officials are to depart from a port in the country’s western city of Incheon at 11 a.m. Wednesday aboard the 3,000-ton ship Trade Fortune, which sails regularly between the Koreas, according to the official.

“The trip is to supervise the first shipment of the Red Cross’ flood aid to North Korea,” the official said.

The shipment includes 300 tons of rice, 20,000 blankets and 10,000 first aid kits, according to the official.

Seoul suspended shipments of its regular humanitarian assistance to the North shortly after Pyongyang launched seven ballistic missiles, including a long-range Taepodong-2, which is believed capable of reaching the U.S. west coast.

The South Korean government says it will not make additional commitments of any economic assistance to the communist state until the North returns to stalled international negotiations with the South, Japan, China, Russia and the United States over its nuclear ambitions.

The government, however, pledged to give 241 billion won (US$251 million) worth of aid through the country’s Red Cross in one-time humanitarian assistance to the North after heavy rains there last month reportedly left hundreds people killed or missing and thousands of others injured.

Pyongyang rejected an initial aid offer from the South Korean Red Cross last month, but its inter-Korean pro-unification organization later requested Seoul’s civic organizations and other “related offices” for rice and construction equipment, while expressing gratitude for the civilian efforts to help the country recover from the flooding.

The Unification Ministry has also agreed to provide funds matching those raised by each civilian organization, expected to total some 10 billion won.

The government’s aid through the Red Cross is to include 100,000 tons of rice, 100,000 tons of iron rods, 80,000 blankets and over 200 construction vehicles.

South Korea provided hundreds of thousands of tons of rice and fertilizer to the impoverished North annually since heavy rains and a nationwide famine in the mid-1990s left over 2 million North Koreans dead and millions of others displaced.

North Korea requested the South to give half a million tons of rice for the year before it launched the seven missiles into the East Sea on July 5.

Government officials say the country will not consider accepting the North’s request until the North agrees to return to the international nuclear negotiations, which have stalled since November due to Pyongyang’s boycott, as well as resumes its self-imposed moratorium on missile tests.

The Koreas remain divided along a heavily-fortified border since the end of the 1950-53 Korean War, which ended with a cease-fire.

From the Choson Ilbo
8/28/2006

A Californian man indicted on charges of smuggling counterfeit dollars into the U.S. testified at his trial that the high-quality counterfeit US$100 bills or “supernotes” were manufactured in North Korea, the National Intelligence Service said Monday. The NIS reported to the National Assembly’s Intelligence Committee that the man admitted conspiracy to smuggle the supernotes and admitted where the phony bills were made.

The man is a Chinese-American named Chao Tung Wu, the NIS said. There have been reports in the U.S. media quoting anonymous government officials as saying the supernotes were made in North Korea, but this is the first time the claim was confirmed in legal testimony by a chief suspect.

A joint taskforce of the FBI, the CIA, the Justice Department and the Treasury conducted secret investigations and rounded up 59 suspects around the U.S. on charges of smuggling counterfeit dollars and cigarettes in August last year. The taskforce worked under the code name “Smoking Dragon” and “Royal Charm” between 1999 and 2005. It alleges suspects attempted to smuggle millions worth of forged dollars and some $40 million worth of counterfeit cigarettes.

The case drew much publicity not only because of its sheer scale but also because of North Korea’s suspected involvement. The Treasury Department led the investigation that ended up designating Macao’s Banco Delta Asia as Pyongyang‘s “primary money laundering concern” on Sept. 15 last year, a month after the suspects were arrested.

“We should note that talk of political solutions between the U.S. and North Korea over the counterfeit dollars disappeared in South Korea and China since the end of last year,” a diplomatic source in Seoul said. Some until then claimed the U.S. was pressuring the North without clear evidence, but they lost their ground as Washington acquired evidence to support North Korea’s involvement.

The trial is likely to take one or two years, a diplomatic source said. If it ends with a guilty verdict for the main suspect for smuggling made-in-North Korea supernotes, it would get Pyongyang into serious trouble on the global stage. The North denies the charges and says the resulting sanctions amount to “theft.” The communist country in a statement last Saturday said the U.S. has produced no clear evidence so far. But the suspect’s guilty plea undermines the credibility of that claim.

From Yonhap:
Byun Duk-kun

The increase in the first-half trade between North Korea and China fell to the smallest volume in five years, South Korea’s Unification Ministry said Monday.

Ministry officials said the slowdown did not appear to be linked to North Korea’s recent provocations, such as the test-firing of seven ballistic missiles in early July.

The amount of North Korea-China trade only increased 4.7 percent on-year to US$780 million in the January-June period, Kim Nam-sik, head of the ministry’s information and analysis bureau, told reporters.

This marked the smallest, as well as the first slowdown of, increase in trade between the close allies since 2002 when trade volume increased by 6.2 percent for the same period from a year before.

The year-on-year growth in the first-half Sino-North Korea trade reached 16.2 percent in 2003, 37 percent in 2004 and 43 percent last year, according to Kim.

The report comes amid reported signs that Beijing may have begun taking measures to reduce or limit its economic cooperation with Pyongyang as a way of expressing its dismay or anger at the North for its test-firing of seven ballistic missiles on July 5.

The ministry official, however, cautioned against interpreting the slowdown as signs of a possible disruption in relations between the communist allies, saying the reason for the slowdown appears to be economic rather than political.

“Many experts believe it (the slowdown) is more due to economic than political reasons,” Kim said.

The amount of North Korea’s exports to China for the first six months of the year decreased by more than 14 percent to some $200 million, also marking the first decline since 2000, according to a report by the information bureau.

Kim said this, too, was mainly because of economic reasons, such as the reduced price of North Korean exports to China “while the amount of exports remains the same” from that of last year.

Analysts here believe China may completely halt its economic and political relations with the North if Pyongyang decides to conduct a nuclear test.

The ministry official said there were no immediate signs of China taking such measures to punish North Korea.

From the Korea Times:

North Korea has recently changed its means of selling missiles to avoid interception, delivering them by air instead of by sea and in the form of components and equipment rather than complete products, a U.S.-based research organization said yesterday.
In its latest report, the Center for Nonproliferation Studies (CNS), headquartered in Monterey, California, said North Korea’s missile program appears to be under the command and control of its air force, not the army, an arrangement similar to Iran, which is believed to be buying missiles from the communist regime, according to the Yonhap News Agency in Seoul.

The report, called “CNS Resources on North Korea’s Ballistic Missile Program,” said that as Western opposition to the deliveries has increased, Pyongyang’s shipments have begun to be made by air rather than by sea, sometimes with the help of Moscow.

“Insome instances, this has been accomplished with private-sector Russian assistance, thereby calling into question the Russian government’s ability and/or willingness to control North Korea’s missile proliferation,” said the report.

The CNS Web site says the report was updated Aug. 11 this year.

North Korea also resorted to selling missile components and production equipment to clients, which include Iran, Pakistan and Syria, the report said.

“These changes will allow more rapid shipping deliveries, and interception of such shipments will become more difficult,” it said.

The CNS noted with interest that North Korea’s ballistic missiles appear to be under air force, not army, command and control.

It was Gen. Jo Myong-rok, then commander of the North Korean Air Force, who led a delegation to Iran in February 1994 to discuss testing of the Rodong missile in Iran, the report said.

“It should also be noted that Iranian ballistic missiles fall under the command and control of the air wing of the Iranian Revolutionary Guard Corps,” it said.

North Korea’s missile program came under renewed scrutiny after the secretive regime test-fired seven missiles last month, ranging from versions of its short-range Rodong to its long-rang Taepodong presumed to be able to strike the U.S. west coast.

The CNS said that while the test launches suggest advances in North Korea’s missile capabilities, there are still several technical hurdles before the long-range versions can be fielded.

“The developmental leaps to successful multiple stage systems using large rocket motors cannot be achieved without external technological assistance,” it said.

“Some of this assistance is probably being provided by Russian specialists, both in North Korea and Russia,” said the report, due mainly to Moscow’s inability to completely halt the leakage of information.

It added that while the shorter-range Rodong missiles are operational, since it has exported some to Iran, Pakistan and other nations, “it may not have enough missiles to field a full brigade.”

Yonhap
8/27/2006

Trade between South and North Korea in the first seven months of this year topped US$600 millio this year due to increasing trade of agricultural products and corporate products, a local trade promotion agency said Sunday.

The inter-Korean trade reached $668 million in the January-July period, up 14.7 percent from a year earlier, according to the Korea International Trade Association (KITA).

Corporate-related trade, including the trading related to inter-Korean industrial complex in Kaesong, increased 31.9 percent to $489 million worth, while non-corporate trade such as government and private aids fell 15.3 percent to $178.5 million.

South Korea sent $446.6 million worth of goods to the North, down 2.2 percent, from the same period last year while the value of products coming to South Korea reached $263.2 million, up 56.8 percent, the association said.

From ABC News:
Burt Herman

China has reduced shipments of crude oil to North Korea, apparently in response to Pyongyang’s missile tests, a news report said Saturday.

China, the communist North’s closest ally and key provider of oil, also has agreed with South Korea to cooperate to prevent a possible North Korean nuclear test.

South Korea’s Chosun Ilbo newspaper said China has reduced “a significant amount” of its oil supplies to Pyongyang since the July 5 missile launches.

The report cited unnamed officials at an oil storage terminal near the Chinese border city of Dandong.

Officials could not be reached for comment Saturday.

There are growing concerns, bolstered by reports of suspicious activity, that Pyongyang may be planning to follow up its missile launches with a nuclear test. Pyongyang claims to have nuclear weapons but hasn’t performed any known test.

Song Min-soon, South Korea’s presidential security adviser, said Saturday that a North Korean nuclear test would be “a grave situation of a different level from missile launches and that South Korea and China have agreed to continue cooperation not to let that situation occur.”

Song, who returned from a two-day trip to Beijing on Friday, refused to elaborate how the two countries would cooperate.

South Korea, China, Japan, Russia and the United States have tried in six-party talks to convince the North to abandon its nuclear program.

South Korea’s seismic authorities said they detected a tremor in North Korea on Friday, but ruled out an underground nuclear test.

Talks on the North’s nuclear program have been stalled since November, when negotiators failed to make headway in implementing the North’s agreement to drop its nuclear program in exchange for aid and security guarantees.

Pyongyang has since refused to attend the six-party talks until Washington stops blacklisting a bank where the North’s regime held accounts, a restriction imposed over alleged counterfeiting and money laundering.

Daily NK
By Shin Joo Hyun
8/25/2006

“No changes to trade after the financial sanctions to North Korea” 

In response to North Korea’s illegal trade of currency, the U.S. passed the North Korea sanctions in which China agreed to participate. However, it has been confirmed that little changes have been made to North Korea-China trade.

On 28th July, I went to Dandong, China where North Korea-China trade is most active. It was here that I met a tradesman ‘K’ who said that there has been little change to the amount of goods going from Dandong to Shinuiju. He said that the restraints on trade outlined in the press after the missile launch, is in fact different to reality.

In order to see the amount of trade between North Korea and China for myself, I headed for Hualian warehouse. The size of this warehouse and parking lot is as big as a school playground and numerous cargo trucks were on stand-by to be loaded and shipped.

Goods that pass the route from Dandong to Shinuiju are all contained at this warehouse and then are shipped over the boarder in large cargo containers. It appears that it is a goods warehouse to promote North Korea exports. On the 25th at 3PM, I snuck into the warehouse by a small truck.

On entering the premises ‘K’ who accompanied me to the warehouse did not have to undergo thorough inspection as he was a regular tradesman with North Korea. This location is restricted for foreigners to enter, in particular South Koreans who are unquestionably prohibited from entering the grounds. Undoubtedly photography and collection of data is also prohibited.

While riding the truck we circled the warehouse once and I was able to witness goods busily loaded onto containers. The busiest part of the day is around 1-2PM. At present the height of the day has passed and rather containers sent to Shinuiju customs are visible.

The warehouse seems quiet, maybe because the busiest part of the day has passed. I can see everyday warehouse workers taking orders from drivers and loading goods onto trucks such as sugar, flour and confectionary. On one side are boxes of fans and beer going to North Korea. As always, the majority of goods transported to North Korea is food and clothes.

Amongst the goods, Chinese noodles and clothes with floral prints are most popular. Until recently, the most popular and expensive item was the VCD however it has now become a prohibited import. According to ‘K’ a large warning is written at the entrance of North Korea’s customs house saying ‘Import of VCD’s prohibited.’

‘K’ said “Lately, capitalist ideologies are entering North Korea, hence authorities are trying to destroy republicanism by prohibiting the import of VCD’s. This means we are to watch ‘Bocheonbo Band’ videos made in North Korea, however it’s easier said than done. We are lucky that they have not yet confiscated what we already have.”

To a passing North Korean trade director, ‘K’ asks whether or not a lot of goods were loaded onto containers today. The director replied “There are so many goods that the warehouse is overflowing” and added a snarl remark that “The workers (Chinese staff) are inefficient with their hands” and returned to his truck.

The director had an imposing built body rare for North Koreans. ‘K’ said that although the people of North Korea may be living a hard life, the North Korean people trading here live a relative abundant life. With the image of an imposing director in my mind, I left the warehouse.