North Korean Economy Watch

from the Joong Ang Daily:

South Korean workers loading fertilizer sacks yesterday at a dock in Ulsan. The ship and another ship from Yeosu, South Jeolla province, will head today to Haeju Port and Nampo Port to transport the last 20,000 tons of 200,000 tons of fertilizers South Korea promised to send to North Korea. Despite North Korea’s missile tests, the South Korean government decided to send the last fertilizers as a humanitrian aid.

This is weird.  (Hat tip to Lost Nomad)

China sends the DPRK food aid via train.  The DPRK keeps the train and sends the crew back across the border  sans-train.

[F]ood and fuel supplies sent to North Korea have been halted, not to force North Korea to stop missile tests or participate in peace talks, but to return the Chinese trains the aid was carried in on. In the last few weeks, the North Koreans have just kept the trains, sending the Chinese crews back across the border. North Korea just ignores Chinese demands that the trains be returned, and insists that the trains are part of the aid program. It’s no secret that North Korean railroad stock is falling apart, after decades of poor maintenance and not much new equipment. Stealing Chinese trains is a typical North Korean solution to the problem. If the North Koreans appear to make no sense, that’s because they don’t. Put simply, when their unworkable economic policies don’t work, the North Koreans just conjure up new, and equally unworkable, plans. The Chinese have tried to talk the North Koreans out of these pointless fantasies, and for their trouble they have their trains stolen. How do you negotiate under these conditions? No one knows. The South Koreans believe that if they just keep the North Korean leaders from doing anything too destructive (especially to South Korea), eventually the tragicomic house of cards up north will just collapse. Not much of a plan, but so far, no one’s come up with anything better.

Kumgang resort goes international
 
Emerson Pacific Group, a Korean company that is now building a golf and spa resort at North Korea’s Mount Kumgang, said yesterday that it had reached an agreement with a British resort operator to co-manage those facilities.

A spokeswoman for Emerson Pacific said that her company would be responsible for development planning for the resort and fund it entirely; the British company, General Hotel Marketing, would oversee the resort’s construction and interior design, operating systems, staff training and global marketing. General Hotel Management operates 16 resorts around the world, including at Langkawi and Bali in Asia.

The agreement gives an international polish to the formerly inter-Korean project to develop tourism at Mount Kumgang, widely acclaimed from antiquity as the Korean Peninsula’s most scenic area.

Ralf W. Ohletz, the executive vice president of General Hotel Management, told the press yesterday that he was convinced that the resort “has the potential to become a global-scale tourist attraction.” He added that the locale ― North Korea ― made the project both challenging and attractive.

Emerson said it would spend about 80 billion won ($85 million) on the resort, which is scheduled to open next year. It is already selling memberships in the golf course there for 17 million won each.

Hyundai Asan, which is the overall operator of the tourism project at Mount Kumgang, said yesterday that the beach there will be open for swimming and picnicking beginning Saturday.

The tour operator also said the Oegeumgang Hotel, on the mountains’ eastern slope, has been remodeled and will be open on July 11. The 11-story building, with 179 rooms, was formerly a retreat for senior North Korean officials. 

In the old days, the DPRK nurtured its independence by alternating its allegiance between China and Russia, playing the big boys off each other.  Today, China clearly holds more influence in the DPRK in terms of trade and direct political influence.  In fact, China and the DPRK are involved in several hydro-power projects on the Yalu river.  Perhaps energy subsidies are a way for Russia to regain a foothold in the DPRK and protect its direct link to Pyongyang and potential land links to Seoul. 

On an economic note, this kind of behavior is typically called “dumping” in the west and it is not allowed under WTO rules.  But both parties are clearly better off if the deal goes through.  This should tell us something about our Anti-dumping trade rules in the west as well. 

But this is all just silly speculation on my part.  Here is the article from the Joong Ang:

July 04, 2006
KHABAROVSK, Russia ― Russia has been in discussions with North Korea to supply it with surplus electricity, Russian officials at a state-owned electric power company recently told the JoongAng Ilbo. In return, North Korea would provide Russia with natural resources.

“We have been discussing exporting surplus electricity from the far eastern district of the country to North Korea,” Victor Minakov, president of Vostokenergo, the far eastern branch of the United Energy System of Russia, said in an interview last week in Khabarovsk.

“The fastest and most efficient way to resolve North Korea’s electricity problem is to supply electricity from Russia,” Mr. Minakov said.

According to Mr. Minakov, negotiations have been delayed because Russia initially asked North Korea to pay cash for the electricity, and then asked it to cover the expenses for building power transmission lines, neither of which the North could afford.

However, the negotiations resumed after Pyongyang offered to pay for the electricity with natural mineral resources. “Representatives from the Russian energy company will visit Pyongyang at the end of this month for further discussions on detailed matters,” Mr. Minakov said.

The far eastern area of Russia, reportedly has around 300,000 kilowatts of surplus electricity, and the government plans to further improve productivity there by building more power plants. Russia and North Korea has been negotiating on the supply of electricity since 2001.

Russia plans to build a 370-kilometer (229-mile) power transmission line between Vladivostok, Russia, and Chongjin, North Korea, to supply 300,000 to 500,000 kilowatts of electricity. Building power transmission lines and converters would take three years, and cost at least $200 million.

“It costs much less to supply electricity from Russia to North Korea than from South Korea to the North or through the programs of the Korean Peninsula Energy Development Organization,” Pavel Korovko, vice president of Vostokenergo, said on June 27 at a seminar in Khabarovsk.

The Korean Peninsula Energy Development Organization was dissolved recently after failing to build light water reactors in North Korea under the terms of a 1994 agreement between North Korea and the United States.

UNESCO has listed a series of Koguryo burial sites on the world heritage list.

Here is a link to the list approved in 2004 (with coordinates for Google Earth):
http://whc.unesco.org/en/list/1091/multiple=1&unique_number=1269

Here is a list of accepted and “wait-listed” projects:
http://whc.unesco.org/en/statesparties/kp

Here is a nice video of the sites on the UNESCO web page:
mms://stream.unesco.org/culture/nhk/north_korea.wmv

Here is a story in the BBC about North Korea’s additions to the World Heritage List.

Here is another great resource about the history of the move in the Korea Foundation Newsletter.

Apparently the job of overseeing these tombs is in the hands of the Management Bureau for Cultural Property Conservation (MBCPC) in the Korean Cultural Preservation Agency (KCPA)

From the Korea Times:

Wild Rocambole Band _ Tallae Umakdan in Korean _ an all-female band of six North Korean defectors will release their first album here this August. Most studied at music schools in North Korea, or performed with state-run troupes.

Included on the album is “Hong Kong Lady,’’ one of the most beloved trot songs in South Korea along with several songs they learned in North Korea.

Leader Han Ok-jung, 28, who escaped the North in June 1998 is good at singing and Chinese while dancer Heo Su-hyang, 22, who fled in 2001, is well-versed in apparatus gymnastics and singing.

Kang Yoo-eun from Pyongyang, and Lim Yoo-kyung from North Hamkyong Province, both 19, sing and play the accordion.

To protect their families who remain in the North, two of the members, who are now South Korean citizens, use false names.

From the Korea Times:

Seoul to Promote Knowledge Sharing With N. Korea
By Kim Sung-jin
Staff Reporter

The government Thursday said it will continue to promote various projects to exchange economic knowledge with the reclusive North Korea.

Vice Finance and Economy Minister Bahk Byong-won said Thursday that private economic cooperation between the South and the North has become brisker than ever with the Kaesong Industrial Complex and North Korean tourism projects getting into full swing, but inter-government cooperation is still very limited.

“What we need more than anything else to further advance the cooperative inter-Korean economic relations is an extension of knowledge-sharing programs with the North,” Bahk said. He made the remarks at a conference on knowledge sharing for the economic development of North Korea at the Westin Chosun Hotel in downtown Seoul.

Participants in the conference included the Asia Foundation’s country representative in Korea Edward Reed, head of political section of the Delegation of the European Commission to Korea Maria Castillo Fernandez, former Swiss Agency for Development and Cooperation’s (SDC) North Korean office resident director Rudolf Strasser and Korea Institute for International Economic Policy (KIEP) president Lee Kyung-tae.

As Bahk noted, government-level economic exchange programs between the South and the North are still very limited although Seoul and Pyongyang agreed on revising a plan to dispatch economic inspectors across the demilitarized zone (DMZ) at the Inter-Korean Economic Cooperation talks held on Cheju Island between June 3 and 6.

“The Korean government will make consistent efforts to widen knowledge sharing with the North as well as with the international community,” Bahk said.

“We also hope that academia, non-government organizations and international organizations will play a leading role in extending inter-Korean knowledge sharing programs,” he added.

Annual inter-Korean economic transactions, including the transaction of merchandise and services such as tourism, have made a significant improvement over the past five years regardless of the political tension on the Korean Peninsula. They expanded to $1 billion in 2005 from some $200 million prior to the inter-Korean Summit held in 2000.

Meanwhile, the Korea International Trade Association (KITA) said Thursday that inter-Korean economic transaction, or trade, expanded 30 percent in the first five months of this year, thanks to vibrant industrial activity in Kaesong just across the inter-Korean border.

Between January and May, inter-Korean economic transactions amounted to $428.63 million, up 34.4 percent from the same period last year.

In the cited period, North Korea-bound South Korean goods jumped 35.4 percent to $264.97 million, and imports from the North increased 32.9 percent to $163.66 million.

Inter-Korean economic transactions are forecast to expand sharply next year as the number of South Korean manufacturers moving into the Kaesong industrial complex will reach 300 with the completion of the first phase of the industrial park construction project, up from current 15.

Seoul plans to help Kaesong house as many as 2,000 South Korean firms by 2012 when the complex is fully developed.

From Yonhap:

South Korea will intensify efforts in technical assistance and training for North Korea in order to help the communist state’s economy grow further, a government official said Thursday.

“We should help the North to enhance its understanding of economic principles and their operation mechanism, which will guarantee us more substantial and enduring results from economic assistance to North Korea,” Vice Finance Minister Bahk Byong-won said in a speech at a forum titled “Knowledge Sharing for Economic Development of North Korea.”

“Material assistance without economic knowledge and managerial capacity cannot contribute to sustainable economic growth,” he said.

Bahk said excessive transaction costs caused by the lack of adequate knowledge about economic principles, practices and international economy on the North Korean side have posed bigger threats to economic development than anything else.

“Some have suggested that inter-Korean cooperation has proceeded at a slow pace, but despite a rapidly changing environment, inter-Korean economic cooperation has shown remarkable strides,” he said.

Inter-Korean trade volume, which stood at US$2 million-$3 million before the 2000 inter-Korean summit, reached $1 billion last year, making South Korea the second-largest trading partner of North Korea, the official said.

Also, personnel exchanges and movement between South and North Korea have never been more frequent than recently, he said.

Bahk said economic cooperation between the Koreas, which has been regarded as one-sided, has also shifted to the one that is reciprocal and serves mutual interests, he said.

“South Korea, international organizations and nongovernmental organizations should seek to create synergies by exerting concerted efforts through sharing information among ourselves with regard to the knowledge-sharing experience with North Korea,” Bahk said.

The South Korean government will not spare any effort to vitalize knowledge sharing with North Korea for its economic development in close partnership with the international community, he said.

From Industry Week:

June 29, 2006 — China and North Korea have signed an agreement to build a hydroelectric dam on the Yalu river which borders the two nations, state media reported June 28.  The deal was signed on Tuesday in Pyongyang between China’s Changchuan Hydroelectric Power Co. Ltd. of Jilin province and North Korea’s electric power and coal industry ministry.

China will fund the 350 million yuan (US$43.75 million) Wenyue Hydroelectric Project, while the infrastructure will be built in North Korea. The dam will have a capacity of 40,000 kilowatts although the electricity will be used in North Korea where power supplies are far more scarce.

Construction on the dam is expected to begin in September and will be completed in three years. The Chinese side will provide equipment for the dam.

Under the agreement the North Korean side will repay the investment on the dam to the Chinese side from proceeds from electricity sales.

from the Joong Ang:

Chinese specialists on Korean affairs have revealed greater concerns about the political stability in North Korea than at any other time since the height of the North Korean food crisis in 1996-97.

Chinese concerns do not necessarily mean that the political leadership in Pyongyang is near a collapse, but they reveal that China’s crisis is primarily about North Korea’s economic and political stability, not its nuclear weapons.

Chinese analysts are preoccupied with a fundamental dilemma in pursuing stability in North Korea: unless North Korea pursues reform and opens up, it cannot survive, but reform and openness could lead to political instability in North Korea, to the detriment of China’s own interests.

China’s primary objective is to prevent instability while simultaneously encouraging North Korea’s economic reform ― not to denuclearize North Korea as the United States desires or to promote South Korea’s unification aims. The exchange of summits in recent months between Hu Jintao and Kim Jong-il has strengthened China’s political influence in North Korea. Chinese investments in North Korea’s energy and other sectors and the widespread availability of Chinese products in North Korean markets have raised anxieties in Seoul that China is making North Korea into China’s “fourth northeastern province.”

China’s economic rise has given it new tools for promoting the stability of weak states on its periphery. Chinese government-led investments and cheap products are providing China with the decisive political influence to stabilize weak or failing state structures in neighboring countries such as Pakistan, Laos and Myanmar, as well as North Korea.

Chinese specialists recall their own experience with opening and reform, and fret that North Korea cannot claim a “peaceful environment” in which to pursue reform as long as there is nuclear confrontation with the United States. The Chinese want the United States to lessen tension and promote an environment conducive to North Korean economic reform.

North Korean leaders focus on the security threat from the United States, but the greatest enemy of the North Korean system is the penetration of external goods and information and the development of self-interest and individual choice as real options for the North Korean people. These bottom-up changes are eroding North Korea’s corporatist, leader-centered ideological controls and transforming the relationship between the individual and the state.

The rapid emergence of legal and illicit cross-border market interactions that have mushroomed outside state-level political controls in China or North Korea are the real threat to the North’s political stability. The seeds of North Korea’s demise, ironically, are likely to be “made in China,” not the United States.

Certainly, China prefers a Korean Peninsula that is friendly to China, or alternatively the maintenance of North Korea as a strategic buffer. Chinese analysts remain suspicious of American intentions. They believe a U.S.-North Korea confrontation is in America’s interest and that President Bush’s hopes for a peaceful, unified, free and democratic Korean Peninsula must be resisted.

Chinese analysts know that change in North Korea is inevitable, but they claim that there is no alternative to Kim Jong-il’s leadership, in which they have made a significant political investment. Despite North Korean efforts to restore political controls, disaffection with the top leadership that was almost unknown a decade ago is gradually spreading with the flood of external cultural influences that has invaded Pyongyang. This development is most worrisome to Chinese analysts concerned about North Korea’s stability.

It is no accident that Chinese military forces moved closer to the border with North Korea in recent years.

Military analysts admit that Chinese contingency plans are in place to intervene for “environmental control” to secure nuclear weapons and fissile materials in the event of regime instability, but the primary objective would be to protect China from the spillover effects of chaos in North Korea. Likewise, the United States surely has its own plans to secure North Korean “loose nukes” in the event of political instability, regardless of possible political or legal obstacles to such an intervention.

Given the low level of U.S.-Chinese military-to-military relations and high level of strategic distrust over the future of North Korea, there is no effective mechanism for official dialogue between the United States and China to mitigate the possibility of accidental conflict in the event that more than one state tries to secure “loose nukes” during political instability in North Korea.

The 2001 crisis involving an American intelligence aircraft brought down on Hainan Island revealed the risks that derive from poor channels of communication.

Regardless of whether or not North Korea’s regime is likely to fail or become unstable, there is a need to address such contingencies and clarify proper courses of action.

Advance discussions among the three countries might minimize the prospect of a conflict between special operations forces from the United States, China, and/or South Korea in any race to secure North Korea’s “loose nukes” during a period of regime crisis in the North. 

From the Korea Times:

South Korea’s Red Cross will provide $400,000 (a little over 388,000,000 won) to its North Korean counterpart along with 10 buses and 6 cars to facilitate more on-screen reunion meetings of family members separated by the inter-Korean border.

The provision is in line with an agreement both sides signed earlier this month through an exchange of letters via the Panmunjom truce village.

According to the agreement, the South will provide the North with cash and vehicles for promoting family reunions and will also give the North necessary materials for building on-screen family reunion centers in the North at the earliest possible date.

The North, for its part, will concretely inform the South of its use of the money, vehicles and materials, the agreement says.

South Korean Red Cross officials will also be allowed to inspect on-screen family reunion center construction sites.

The two Koreas started operating on-screen family reunions through video link on Liberation Day, Aug. 15 last year. Four on-screen sessions have so far been held, while 14 face-to-face reunions have been held since August 2000, including the ongoing session at Mt. Kumgang in the North.

“Most of the separated family members have become aged and, considering this trend, we need to resolve the issue as early as possible,’’ a South Korean Red Cross official said. “To expand the on-screen family reunion sessions, we concluded that the North needs to be equipped with more facilities for on-screen reunions.’’