North Korean Economy Watch

From the Korea Times:

A delegation from the South Korean Catholic Church left for Pyongyang early Wednesday to tour regions in the North it has provided with humanitarian assistance, the Archdiocese of Seoul said.

The 61-member delegation from the Seoul archdiocese, led by Monsignor Choi Chang-hwa, will take field trips in and around Pyongyang until Saturday, it said.

“This is the first time a Catholic delegation has traveled to North Korea on such a large scale, and with laymen included,” Ma Young-ju, an archdiocese’s public relations official said.

Pyongyang sent an Air Koryo plane to Incheon International Airport to pick up the delegation, Ma said.

The Seoul archdiocese has provided food and equipment worth 11 billion won ($11.6 million) since it started assisting in the midst of a deepening food shortage in the North in 1995.

It helps operate flour factories in Nampo and Shinchon on the North’s west coast and provides 1,200 tons of flour annually, according to the archdiocese.

According to the Manilla Times and ABS/CBN Interactive:

North Korea could suspend food rations for ordinary citizens in Pyongyang next month due to its worsening famine, a South Korean aid group warned Sunday.   The North Korean capital has had a better food supply than other areas despite a chronic food shortage since the 1990s.

“Pyongyang is no longer a safe zone in food supply,” Good Friends, a Seoul-based aid group for North Koreans, said in a newsletter.  “Food supply officials in Pyongyang say food rations lasted only 10 days in April and will be suspended for ordinary citizens beginning in May,” the group said. The aid group said big businesses and state organizations would remain unaffected.

United Nations food aid to North Korea ended late last year after Pyongyang said it no longer needed emergency shipments from the World Food Program (WFP) and other international humanitarian agencies. The North Korean government said it instead wants development assistance and a smaller operation with fewer international staff whose monitoring activities would be restricted.

WFP has proposed a downsized aid plan to feed 1.9 million people, largely women and children vulnerable to malnutrition and disease. It used to feed 6.5 million people.

North Korea’s grain production rose 5.3 percent to 4.54 million tons last year, still far short of its annual demand of six million tons, South Korea’s unification ministry report says.

According to the Daily NK:

North Korean sources have claimed that since April only some areas of Pyongyang have gotten food rations, and local areas were already cut off. North Korea recently relaunched rationing on the Workers’ Party Foundation Day (10/10/2005), yet from the beginning, the program did not meet its objectives, and furthermore, from this spring even Pyongyang is seeing a shortage of food.

Mr. Kim, who is a North Korean trader and now stays in Dandong, China said, “Officials working at the central agencies (the Party, Ministries, Court) in Pyongyang have gotten rations, but workers in general factories and small companies in local cities have to resolve their April and June food prooblmes themselves.”

Mr. Kim stated, “Despite a severe shortage of food, some wealthy, powerful people are persisting well. Yet other people who rely on the food rationing of factories mainly go to local areas to exchange goods for food.” It led to a situation where North Koreans have to withstand starvation by all means, before new potatoes come out.

At the same time, price of rice at the Jangmadang 9farmers markets) began rising.

Rice prices at the Shinuiju Jangmadang are:

1,000W ($0.33) to 1,200W($0.4) per 1kg
Yongcheon rice  is 1,200W 1kg
Chinese rice is 900W($0.3) to 930W($0.31) per 1kg

Corn is 300W($0.1) to 400W($0.133).

Shinuiju rice is a little more expensive than that of other cities, and its wheat flour is cheaper. It is because rice comes in from other cities, and Chinese wheat flour is distributed to each city via Shinuiju. 

Mr. Lee hinted that travel permits to China are issued “conditionally.” That is, after visitors to China come back to North Korea, they have to offer some food to the National Security Agency, and people with no relatives have a harder time getting passes.

Mr. Lee said, “As for me, it is better because I found my older brother. However, other people living in our village go out to rivers to dig for gold and to mountains to dig for edible plants.”

March and April, called the ‘Barley Period (Borigogae)’ are the months when food crunches are most severe. This is when the crops and edible plants (side dishes) harvested last year begin to run out. When edible plants run out, North Koreans prolong their lives by eating grass or wild plants. However, because of death by starvation in the mid 90’s, which resulted in massive foraging, even wild plants like bracken are not easily found now.  

According to the Associated Press, the Chongryun have once again begun shipping service between their homes in Japan and Wonsan, DPRK.

I remember seeing this very ship when I visited Wonsan in August 2004.  I did not get to walk aboard or anything, I just got a glance as my bus zoomed by….unfortunately too fast to take a picture.

Shipping from North Korea was severly curtailed by the Japanes Authorities in response to public outcry over the kidnapping issue.  Although Japan was coy enough to avoid an outright trade embargo, leaving the door open to future talks, they did place insurance and safety requirements on ships in their ports…requirements very few North Korean ships can meet.

From the article:

The Mangyongbong-92 was inspected by Japanese authorities as nearly 500 police guarded the area. Officials found six minor problems with the vessel, including ones related to fire prevention and communications, but issued no corrective orders, according to the Transport Ministry.

The ferry from Wonsan to Niigata has been a catalyst for Japanese protests. As the only regular passenger service between the two countries, its visits provide the isolated North with a crucial link to the outside world.

The vessel, which was to depart from Niigata on Wednesday, is scheduled to make 18 more visits through October, according to Transport Ministry official Hajime Nakamura.

In late March, police raided the Osaka office of a chamber of commerce for North Korea on suspicion that its top officials were involved in one kidnapping.

In March, Japan passed a law requiring all foreign ships over 100 tons entering Japan to be insured against oil spills, losses and other damage.

Few North Korean ships were believed able to meet the requirement, and officials acknowledged the measure was intended to increase pressure on the North.

Well, if you thought the Japanese were unpopular in South Korea, you should see the propoganda in the North. Still, there are strong ties between North Korea and Japanese of Korean descent. The Chongryun in North Korea send lots of hard currency, investment, and students through Wonsan. This support, however, seems to be on the decline. The Japanese government has restriced the number of North Korean ships that can dock in their ports (Under insurance requirements….a way of imposing an economic embargo without calling it so). Also, becuase of the unknown fate of the Japanese citizens in North Korea, the popularity of the pro-North Korean is at an all time low.

According to the Japanese press, here are some interesting statistics on foreign language learning in the DPRK:

At the elite Pyongyang University of Foreign Studies, the number of Japanese majors has fallen to a quarter of what it was a decade ago as the outlook for the two countries normalizing diplomatic ties becomes murkier, according to language professors at the institution.

“There were about 200 students of Japanese in the mid-1990s, after talks on normalizing diplomatic relations began,” a young professor at the foreign studies university said. “Now, there are only about 50 students for the entire four years.”

The most popular language for North Korean students now is English, with about 1,000 of the 2,000 students at Pyongyang University majoring in it. Chinese has become the second-most popular language, as trade ties between China and North Korea grow. Russian, the leading language to study in the days of the Soviet Union, when it had extensive political and economic ties with the North, comes in third place, and Japanese is the fourth-largest group.

“For business, English and Chinese are obviously the most important languages now. This is a phenomenon that reflects the change of the times,” said Noriyuki Suzuki, a senior analyst at Radiopress in Tokyo, a Foreign Ministry-backed foundation that monitors the North Korean media.

Economic Reform and SEZ as Survival Strategy of DPRK
PDF: Deok Ryong Yoon.pdf
Deok Ryong Yoon

Introduction to & implications of Gaesong Industrial Complex Project
PDF: kaesong.faqs.pdf
Ministry of Unification

Gaeseong Industrial complex: Past, Present and Future
PDF: Dong-geun Kim.pdf
Speech by Dong-geun Kim, Chairman of Gaeseong Industrial District Management Committee

Gaeseong Industrial Complex : Frequently Asked Questions (FAQs)
PDF: kaesong.faqs1.pdf
Ministry of Unification, ROK

From the Daily NK:

Computer Prices (Mar 14, 2006):
-17inch Pentium Ⅲ is US$110~120 retail ($90 wholesale price)
-A printer is US$65~70
-10 Floppy discs are 5,000W
-A keyboard is US$20
-A mouse is US$5

Snack prices (March 28, 2006)
-roast chicken is 6,500-8,000W
-roast duck is 9,000~12,000W
-750g of noodles are 2,400W
-box of Korean noodles is 6,750W
-1kg of potatoes is 400W
-1kg of Beans is 700W
-1kg of wheat flour is 750W (690W at wholesale price)
-400g of Milk is 5,000W
-1kg of Butter powder is 5,000W
-25g of Baking powder is 400W
-1kg of Chinese noodles of 2,000W
-1kg of dried cuttlefish is 8,800W.

Entertainment Costs (March 28, 2006)
-movie admission fee is 50W
-comic book is 1,500W, to borrow 100W
-Swimming pool is 70W
-bath admission fee is 2,500W
-5,000W ($1.67) /huor to use a Karaoke singing room
-1,000W ($0.33) /hour to use a computer in an internet café

Other Prices
–sanitary napkin is 500W, 600w, and 1,000w
-Skin lotions of three kinds are 42,000w
-Aloe cosmetics of three kinds are 42,000w
-A set of cosmetics (a skin cream and a skin lotion) is 10,000w (made in South Korea), 3,500w (made in China)
-Small gas cooking stove is 27,000w (made in South Korea / 25,000w in a wholesale price
-An electric bicycle is 150-200w.

North Korean inflation has increased following consecutively excessive issues of the 500W, 1,000W, and 5,000W notes.

Cities that can provide North Koreans with leisure facilities to enjoy are only Pyongyang, Shinuiju, Chongin, Hamhung, and Rasun. These cities possess big theaters, amusement parks, and swimming pools. Especially Shinuiju, which is close to China, has been introduced with foreign cultures and commodities very quickly. Shinuiju residents are also in the highest economic class of the North Koreans. Thus, Shinuiju has internet cafes, singing rooms, saunas, massage rooms, and comic bookstores.

The investigation was carried out by traders visiting Shinuiju in March and attaining the price levels concerned and then DailyNK gathered the information and cross-examined it.

Also, another trader emphasized that, “The official wage of North Korean workers is about 3,000 won. At the same time, the price for using a singing room per hour is 5,000 won. It shows how badly North Korea has been transformed,” adding that, “Shinuiju is the city where traders doing business with big money from North Korea and China gather. Such singing rooms, PC rooms, and saunas are just for them.”

Items marked by dollars in the price index below are usually paid in dollars, not North Korean won. A Chinese businessman who participated in the price investigation informed us that, “Currently in North Korea, the dollar is used frequently enough to be called ‘common currency’ and has more exchange value,” adding, “As trading costly articles, their paying in dollars makes them win credits.” He also said that, “That the dollar is exchanged into North Korea won is welcomed, yet to exchange the won into dollars is often impossible, even double the value.”

Now, in the early of April, the exchange rate of the dollar in North Korean black markets is roughly 3,000 won against the dollar.

From the Asia Times: 

The only currency used in the complex is the US dollar.

No foreign investors have yet signed up for the zone

Washington requires high-tech products destined for North Korea that include US intellectual property to undergo stringent export controls. This has irritated many in the South – particularly after the process delayed the transfer of telecommunications equipment. It also appears highly unlikely that Kaesong-built products will be included in a free-trade agreement between Seoul and Washington that is under negotiation.

Officials of the complex say they have assisted local villagers with heating briquettes and rice, but there is otherwise neither trade nor contact across the fence, indicating that the experience of capitalism is strictly insulated. This assumption is buttressed by relations inside the complex: despite talk of inter-Korean fraternity, social contact between Northern and Southern workers is non-existent.

While the railways between the two Koreas were reconnected in early 2004, theoretically linking Seoul and Sinuiju on North Korea’s Chinese border, it is uncertain when trains will start to run through Kaesong.

“There will be talks on opening the line in July, but it is not certain,” said a South Korean official at Dorasan Station, a giant steel-and-glass edifice on the southern side of the border. The lack of rail transport complicates his firm’s logistics costs, said Stafild’s Moon, whose head office is on the south coast of the peninsula, in Busan.
 

From the Daily NK:

The deputy director of Yanbian Korean Autonomous Prefecture in Jilin Province recently said he plans to “establish permanent trade relation with North Korea and pursue multinational tourism projects which connects China-North Korea-Russia through Tumen River Area Development Project”. He also said, “the government of Yanbian Korean Autonomous Prefecture will more actively pursue cooperation with North Korea during the 11th Five-Year Plan(2006~2010)”.

The Korean Autonomous Prefecture decided to establish 2 level highway between Rajin, North Korea and Yuanzheng maritime customs, Hunchun, China and to reconstruct the tailway between Rajin and Onsung in North Hamkyung Province.

Lee Yong Nam at Department of Trade in North Korea said, “economic trade between North Korea-China is improving with the attention of leaders in each country. Intimate economic cooperation will be maintained by all means possible”.

China gained exclusive right to use and develop Rajin port in North Korea, as compensation for establishment of high way in Wonjung-Rajin in North Hamkyung Province. China was excused from all the custom formalities of labor and equipments related to the establishment and development of highway and port, from which they saved 4 million Yuan per year.

Through the trading zone between North Korea-China in Tumen River area, China plans to export food, fertilizers, electronics, textile, plastic goods, cigarrete, mechanical devices. Yanbian Korean Autonomous Prefecture had 11 million 430 thousand dollars trade surplus from trade with North Korea in the first half of last year. A government official at the local government said, “trade surplus will increase drastically when the trading zone between North Korea- China is established” with excitement.

From Chosun Ilbo:

U.S. Treasury Department Under Secretary Stuart Levy said its ongoing financial sanctions against North Korea put “huge pressure” on the regime that could have a “snowballing … avalanche effect.  

Washington identified Macao-based Banco Delta Asia as Pyongyang’s “primary money-laundering concern” last September. since then the bank has folded.  According to Newsweek, “In today’s interconnected financial world, an official U.S. move to blacklist a foreign bank would be the kiss of death, since any financial institution doing business in dollars needs to hold accounts in correspondent U.S. banks in order to complete transactions.” Washington believes it has finally found a strategy that is putting real pressure on the regime — going after its sources of cash, all across the world.

Kim Jong il is reported to have told Chinese President Hu Jintao during a visit to China in January that his regime might collapse due to the U.S. crackdown on its financial transactions. [but this could be a bargaining chip to use aginast China…help us, or the US gets the peninsula].

“Numerous U.S. government agencies, including the FBI, Treasury, State Department and CIA, have been working for three years to curtail Pyongyang’s vast network of black-market activities” and “to cut off the financial conduits by which the proceeds are laundered.”

North Korea complains the sanctions imposed by the U.S. made its legitimate financial transactions impossible, and is boycotting six-party talks on its nuclear program as a result.

This story from the Daily NK has an update on whats happening at Raijin as well as a history of the area:

Read whole story here:

In December 1991, Rajin and Seunbong cities were declared “Free Trade Economic Regions”, Rajin Port was planned to be expanded according to a 3-stage development scheme. The first stage consisted of infrastructure construction such as railroads, roads, and ports.  In the ten years since, the budgetary outlays have been insufficient.

In 1996, the Committee for Promoting NK Foreign Economic Cooperation published a report, “Reality and Outlook for Rajin- Sunbong Free Trade Economic Regions.” According to the report, the Rajin Port should first build capacity for large-sized containers.  In stage two, its loading-handling capacity should be improved from 300 million tons to 1,700 million tons.  The third stage, beginning in 2010, the port should have the capacity to manage 100 million tons.