North Korean Economy Watch

Herald Tribune
Choe Sang-Hun
10/10/2005

Here in the North Korean capital, where ubiquitous slogans posted on deserted boulevards and carved into mammoth towers give the city the look of an off-season theme park dedicated to a bygone ideology, one message is conspicuously absent these days.
 
There is no mural showing muscular North Korean soldiers stabbing American troops with bayonets, as there once was. No longer is there a billboard depicting a North Korean missile slamming into Capitol Hill in Washington. And there are no shrill slogans exhorting North Koreans to prepare for “a final battle with American imperialist aggressors,” as they did in the past.
 
“It is true that we have removed anti-American slogans,” said Hong Sung Chul, one of the North Korean officials who recently escorted a group of South Koreans on a tour of the North. “We hope the Americans reciprocate our good will.”
 
Hong said the removal of anti-American slogans was part of North Korea’s effort to cultivate a favorable atmosphere amid six-party talks aimed at ending North Korea’s nuclear weapons program. A new round of negotiations is scheduled for November.
 
But it is still a toss-up as to whether the banished imagery was part of an official campaign to recast the most enduring feature of North Korean psyche, the fear and loathing of Americans, or just a publicity effort for visitors.
 
Either way, the revamping of propaganda in North Korea’s showpiece capital was as much a sign of change here as the busloads of foreign tourists rushing through the once-forbidden city. These modest indicators offer a glimpse into a country that is gradually regaining confidence after years of famine and after tentatively increasing its contacts with the outside world.
 
Pyongyang is not a mirror of the rest of the country. The government stocks the city with politically reliable citizens and keeps its living standard much higher than elsewhere. But in the sales pitches and bargaining of store clerks and the relaxed manner of Communist minders escorting visitors, eager to polish their government’s image, a new measure of optimism was palpable among the country’s elite.
 
The government minders, part tour guides and part public relations officers for the regime, talked about the importance of rebuilding the North Korean economy and attracting foreign investment with the same rehearsed spontaneity that North Koreans once recited anti-American diatribes.
 
As North Korea prepared to celebrate Monday the 60th anniversary of the ruling Workers’ Party, throngs of students and citizens have been mobilized daily to rehearse for a massive outdoor rally. Streets were festooned with red-and-yellow party flags emblazoned with the images of a hammer, sickle and calligrapher’s brush.
 
For almost two months, the authorities have also brought thousands of people into Pyongyang in North Korea’s version of a pilgrimage to Mecca. Here, the faithful were treated with an “Arirang” extravaganza, the closest thing to an Olympic opening ceremony in North Korea, but one with a decidedly totalitarian flavor.
 
In an unusual gesture of openness, the North Koreans this year opened the show to outsiders, accepting hundreds of them daily, mostly from South Korea, in a scheme driven not simply by a desire to educate outsiders on North Korean socialism, but also by commercialism.
 
For these outsiders, the trip was an occasion to witness the country’s cautious and clumsy steps into the outside world even as the North is still burdened with the ideas of an outmoded era. Unwittingly or not, North Korea, by opening itself to well-fed South Koreans wielding digital cameras and bursting with U.S. dollars, was casting itself as one of the world’s weirdest tourist destinations.
 
In between visits to Communist monuments, tourists were ushered into souvenir shops where smiling beauties sold everything from mushrooms to “adder liquor,” a leaky bottle of fiery alcohol with a dead snake in it. The women extolled the concoction’s purported effectiveness as an aphrodisiac and only accepted euros and U.S. dollars.
 
The South Korean tourists spent profusely, buying goods whose main attraction was neither quality nor prices, but rather the flimsy packaging and outdated design: perfect I-have-been-there mementos from the world’s last remaining “socialist paradise.”
 
North Korea demands that all visitors start their trip to Pyongyang by bowing before the 23-meter-tall, or 75-foot-high, brass statue of Kim Il Sung, the first ruler of North Korea.
 
On a recent trip, however, South Korean tourists stood upright before the statue, some with hands in pockets, some clicking digital cameras, as an official solemnly bid them to bow. If North Korean minders were enraged, they did not show it.
 
But questioning revealed the minders’ unique take on their country’s problems with the outside world.
 
“People in South Korea and the rest of the world don’t understand us,” complained Hong. “We know some countries ridicule us for our economic difficulties. We want to rebuild our economy fast. How good will it be if we can use the money spent for our nuclear weapons to buy rice for our people. But we can’t.
 
“We saw what the Americans did to Iraq,” Hong continued. “What option would a small country like us have but to build nuclear weapons when a big bully is determined to strangle us and gang up on us?”
 
Park Man Gil, a North Korean official, stressed his country’s desire for greater contact with its neighbor. “We want more economic cooperation with South Korea,” he said.
 
The North’s desire to make connection to the outside world was confirmed – vigorously, in fact – by a South Korean executive.
 
“You always hear two voices here. On one hand, they lash out at the United States; on the other hand, they are conciliatory,” said Park Sang Kwon, president of Pyeonghwa Motors of South Korea, which runs an auto-assembly factory in North Korea. “As a person who has dealt with the North Koreans more often than any other from the outside, I can say with certainty that the North Koreans really want to be accepted by, and live with, the Americans.”

Korea Times
Andrei Lankov
10/4/2005

During the 50-odd years that followed the armistice of 1953, both Korean states have been locked in an intense rivalry. It was a local cold war, a minor version of the global Cold War, but much more emotional since it was a war between the same people. During some periods, this cold war became very hot. Indeed, those decades were an era of daring raids, complicated intrigue, botched and successful assassinations and, of course, of covert naval warfare.

The major role in this quiet warfare was played by North Korean infiltration craft, used to land agents on the South Korean coast. There are three major types of vessels used by the North Korean navy for this purpose. Throughout the history of quiet naval warfare, two ships of each type were lost due to enemy action.

The most unusual and imaginative contraptions are the semi-submersible boats. These can be described as a poor navy’s submarines. They are small boats, with a displacement of some 5-10 tons and a top surface speed of 40-50 knots. They have ballast tanks, and when these tanks are filled with water, the craft submerges almost completely with only the small conning-tower visible above the water. In this semi-submerged state, the craft is much slower, but it is also almost invisible both to both human eyes and radar. Perhaps it is not as good as a real midget submarine, but it is much cheaper and easier to maintain, and it can carry up to six people.

The first battle with such a craft took place in December 1983, when one was discovered not far away from Pusan, and after a chase was sunk by the South Korean navy.

Another semi-submersible was lost in action in 1998. The South Korean signal intelligence discovered the semi-submersible near Yosu in the early hours of the morning of Dec. 18. The South Korean Navy mobilized a number of planes and ships, which approached the boat, demanding that the crew surrender. But North Korean special forces are famous for their unwillingness to give themselves up alive, so they opened fire using small arms. There was no possible doubt about the outcome: the boat was hit by artillery shells and it sank, to be salvaged the following year.

A semi-submersible infiltration boat cannot operate at a great distance from its base, and in most cases it is carried close to the target destination aboard a specially designed mother ship. Such ships are disguised as fishing boats, but they have powerful engines and a built-in dock for a semi-submersible or a more conventional speedboat. The dock is equipped with outward-opening double doors on the stern, allowing the boat to be safely hidden inside the hull.

There have been two cases in which such a ship has been discovered and sunk by hostile forces. The first incident of this kind happened in August 1983, when a South Korean patrol boat discovered just such a ship operating near Ullung-do Island. The ship was sunk after a short shootout.

Another incident took place in December 2001, and this time, the ship was found by the Japanese navy near the Japanese coast. This was not the first discovery of this kind, but on previous occasions, the North Koreans ships managed to flee using their superior speed. This time, however, the ship could not move fast enough _ perhaps the disintegration of economy has influenced the navy as well. As to be expected, the ship’s crew refused to surrender and opened fire, injuring two Japanese sailors. They returned fire and in less than four minutes the ship sank with its entire crew.

The North Korean Navy also possesses a number of submarines, including the Yugo class vessels. These are specially designed midget submarines whose major task is infiltration. The Yugo boats are small, with a displacement of merely 70 tons when submerged.

Such a submarine was caught in a fishing net near Sokcho on the east coast on June 24, 1998. Its propeller and periscope had been fouled. The vessel was captured by the South Korean navy but sank while being towed. The submarine was soon salvaged but all crew and commandos (nine of them – more than usual for a submarine of this type) were found dead after committing group suicide.

Larger Sango class submarines are also sometimes used for infiltration. It was this submarine that was involved in the most high-profile case of military confrontation between the two Koreas in the 1990s. In mid-September 1996, a North Korean Sango submarine was on a routine infiltration mission: a group of commandos were to conduct surveillance of the military installations on the east coast. However, in the early hours of Sept. 18, the submarine ran ashore and was discovered by a taxi driver. The crew and commandos attempted to breakthrough to the DMZ. A long spy hunt ensued, with heavy losses of life on both sides (among the victims there were farmers whom the commandos killed as dangerous witnesses) as well as with the usual group suicide of the North Korean soldiers.

Indeed, one of the most remarkable features of this quiet war is the unwillingness of the North Korean soldiers to surrender. Few sailors and commandos have ever been taken alive. Does this reflect the exceptional valor of the North Korean warriors? To some extent it may, but also there are other reasons behind such behavior. But that is another story…

The Guardian
Jonathan Watts
10/3/2005

Of all the bars in all the world, there is probably none as exclusive, surreal or intriguing as the Random Access Club in Pyongyang. There are also few institutions that are quite so necessary to the mental well-being of the customers.

Open for business only on Friday nights, the RAC is a watering hole for North Korea’s tiny expatriate community; the 300 foreign residents allowed to live among the 22 million population of the planet’s most reclusive nation.

At first sight, the club inside the compound of the United Nations World Food Programme could not look more mundane nor the clientele appear less exotic. Apart from the decor – mostly copies of Chinese contemporary artworks – the simple bar, concrete walls and well-worn pool table might as easily belong to a church hall in Croydon as an expat hang-out in Pyongyang. The few dozen customers seem so earnest and engaging that they too could be mistaken for a suburban congregation rather than the disaster and war hardened aid workers and diplomats they really are.

What is bizarre is the context. The RAC is an oasis of modern globalised normality inside a land where time has not only stood still but gone backwards. North Korea exerts more control over its citizens than the Soviet Union in the dark days of Stalinism. It takes the ideology of 1984 to levels that George Orwell could not have dreamed of. It is rusting proof that the engine of industrial development has a reverse gear. And it is a dark and uncomfortable warning of what could happen to the world if we ever run out of oil.
To find a place like the RAC in the midst of this is like seeing a tiny postcard of Brighton beach stuck on Picasso’s Guernica, or having the latest Peter Greenaway film interrupted by a few seconds of Neighbours.

The bar’s short history is the story of the gradual opening of North Korea since the government reluctantly requested outside help to feed a population racked by famine, droughts and floods.

When it started in 1995, the WFP had just two representatives running a small aid project from rooms in the Koryo hotel. By 1997, North Korea had become the biggest humanitarian operation on the planet, with international organisations providing food and medicine to more than a quarter of the population.

In the meantime, the resident aid community – which included other UN agencies and about a dozen NGOs – had swollen to more than a hundred and been moved to the diplomatic district. The RAC emerged in response to the growing need among this group for a communal gathering point and a place to let off steam about the frustrations of working in such a difficult political and humanitarian environment.

Foreigners in Pyongyang arguably face more restrictions than their counterparts in any other country. They cannot make private visits to the homes of North Koreans, they cannot travel outside of Pyongyang without permission and they are not supposed to exchange their dollars and euros for local currency.

The work can be harrowing. Although the worst of the food crisis passed more than five years ago, some areas still suffer from poor nutrition and a lack of basic medicines. In remote outposts, WFP monitors can be extremely isolated. In Hyesan – a four-day drive from Pyongyang – the organisation’s representative lives alone for eight weeks in a basic hotel where the temperature in the lobby can fall as low as minus 17 degrees in the winter. There are no other foreigners, their local guides leave them at the weekends, and they are not allowed to socialise privately with Koreans.

In Pyongyang, the situation is not nearly as bad. Many visitors are surprised at the beauty of this showcase city. Compared to most capitals, it is clean, quiet and safe. There is sufficient food, some fine duck and noodle restaurants and even a little capitalist entertainment in the form of the casino, karaoke bar and golf course at the Yanggakdo hotel.

In addition, years of pure ideology – the utter subjection of the individual to the collective will of the state embodied by the leader Kim Jong-il – have produced some impressive (or scary, depending on your point of view) cultural marvels, such as the circus and the performances by young dancers and musicians at the children’s palace.

Those looking on the positive side of life in North Korea also point out the friendliness, innocence and high levels of education of many of the people they meet, as well as the cleanliness of the air in a country starved of energy and short on traffic. Because of this, and the frequent blackouts, Pyongyang is probably the best capital in the world for stargazing.

But the political problems undermine most of these benefits. Most foreigners accept their phones are bugged. Some suspect that much of what they see during inspections is staged. Even among the old-hands who have been in the country for years, many say they have never made a Korean friend.

This is largely because North Korea is gripped by a siege mentality – and not without justification. The country has been in a state of hot and cold war with the US since 1950. Outsiders are seen as potential spies or sources of ideological impurity.

There is good reason for the government to fear charity. Every smile or hand-out from a foreign aid worker undermines the state’s xenophobic propaganda and philosophy of “juche” self-sufficiency.

The WFP’s mission in North Korea is the only one where aid monitors do not have unrestricted access to the entire country. But the UN organisation has gradually widened its focus, pushing back the boundaries where it operates, expanding its presence to 42 foreign and 70 domestic staff, and meeting regularly with thousands of local officials who might otherwise never come into contact with a foreigner. Its monitoring ambitions remain the same as when the RAC was named: random access to all parts of the country.

This is the aspect of aid work that North Korea fears the most. Although the food and drugs are humanitarian, their side-effect is political. As most of the customers in the RAC will testify, one of the biggest changes since the aid operation began is in attitudes. Ten years ago, most North Koreans would turn their backs on a foreigner. Now they are almost as likely to smile.

That, more than anything, may be why the RAC could soon be losing most of its customers. The government has ordered all humanitarian work to end by the end of the year. Negotiations are still under way regarding what that will mean, but one resident’s estimate is that as many as 80 of the 120 aid officials in Pyongyang will have to pack their bags and leave by December 31.

The mood in the RAC has never been more gloomy. Out will go most of the young blood. Those who remain are likely to be diplomats, a sharply reduced corps of aid workers, five English teachers and a handful of businessmen.

“It’ll be like going back to 1994,” commented one regular at the bar.

“The jokes these days are black ones about all the second-hand fridges and cars that will flood into Pyongyang’s markets at the end of the year,” said another.

It is still possible that as one door closes others will open. North Korea welcomes economic development in the form of investors and technical support for infrastructure projects. The government wants to boost the tourist industry. A new railway is about to open across the demilitarized zone that will increase the flow of visitors from South Korea. The growing influence of Beijing is bringing in more people and goods from China. Progress in six-nation nuclear talks could also mean more atomic energy agency inspectors and diplomats from Japan and the US.

But ready or not, North Korea wants its independence back. It wants its future foreign guests to be visiting town on short-term visas, not moving in for years on end and setting up their own social club. For North Koreans and expats, there will be plenty of other bars, but at the RAC, it is time to drink up. The government may soon be calling last orders.

Los Angeles Times
Barbara Demick
10/3/2005

North Korea Reinstates Controls on Grain Sales Rice and other foods will be distributed by the government and banned at markets.

Rolling back some of its economic reforms, North Korea is banning the sale of rice and other grains at private markets and strengthening its old communist-style public distribution system under which all citizens are supposed to get rations, aid groups and North Korea experts say.

The changes were supposed to be implemented Oct. 10, a holiday in North Korea marking the 60th anniversary of the ruling Workers’ Party. But reports from the World Food Program office in Pyongyang, the capital, indicate that merchants have been told already that they can no longer sell grain.

The United Nations agency said in a statement on its website that “as of Oct. 1, reports are that cereal sales in the markets will cease and public distribution centers will take over countrywide distribution.”

North Korea experts say the moves do not necessarily indicate an abrupt U-turn in the impoverished country’s economic policies, so much as concern that change was taking place too quickly.

“I think it is a transitional necessity. You can’t move too fast into free—market economics without softening the blow for people who have grown up in a planned economy,” Richard Ragan, who heads the World Food Program office in Pyongyang, said in a recent telephone interview. “This is not that different from what you saw happening in China in the 1990s.”

Lee Young Hwa, a Japan—based human rights worker who has close contacts with traders at the Chinese—North Korean border, believes the new restrictions on markets are designed to boost the power of the Workers’ Party and curb the role of the military in the economy.

“The military people control the food sold at the market. Nobody else has the trucks or the access to gasoline to move food around the country. The leadership fears that their economic reforms aren’t working because everything is controlled by the military, and they want to take back control,” Lee said.

For years, there have been accusations that the military was pilfering humanitarian shipments of rice and other aid, keeping the best for its own and selling the rest at markets. Secretly taped video footage obtained last year by human rights workers shows apparently unopened sacks of rice given by the U.S. and other donors being sold illegally at a market in the northern city of Chongjin.

On the open market, a pound of rice costs 15 to 25 cents — an impossible sum for many North Koreans, whose average salary of $1 per month keeps them on the verge of starvation.

Under the new rules, rice, as well as other staples such as corn, is to be sold at public distribution centers at subsidized prices and in rationed quantities. Markets, which have been gradually legalized since 2002, will still be permitted to sell vegetables, produce, clothing and other goods.

Cho Myong Chol, a former North Korean economist who lives in Seoul, said he believed North Korea would continue with market reforms but at a slower pace. “Since the economic reforms in 2002, the gap between the haves and the have—nots has become so extreme that there is an imbalance that is causing social unrest and dissatisfaction. I think they needed to do something about food to keep control.”

It remains to be seen whether the changes will help ordinary North Koreans. The government recently informed U.N. aid officials that it was cutting back their operations and no longer needed large donations of rice and other foodstuffs. Experts believe North Korea is concerned about the U.N. ‘s monitoring requirements and prefers direct aid from countries such as South Korea and China, which place fewer restrictions on donations.

Until the 1990s, the public distribution system introduced by North Korean founder Kim Ii Sung was the hallmark of a nation that claimed to provide its people with everything from rice to shoes. But the system collapsed in the early l990s, exacerbating a famine that killed an estimated 2 million people — about 10% of the population. The public distribution system still operates, but at reduced capacity.

Although North Koreans today buy much of what they need at markets, the government doesn’t like to admit it and insists that the cradle—to—grave system of social welfare remains.

“We are still a communist country. Nothing has changed. I get everything I need through the public distribution system,” said Yoon So Jung, 25, a guide interviewed last week at Mt. Kumgang, one of the few areas of the country open for tourism.

But pressed about her pink windbreaker, Yoon admitted hesitantly, “Well that, I bought at the market.”

BBC
9/23/2005

North Korea has formally told the UN it no longer needs food aid, despite reports of malnutrition in the country.

Deputy Foreign Minister Choe Su-hon said the country now had enough food, due to a good harvest, and accused the US of using aid as a political weapon.

Top UN relief co-ordinator Jan Egeland said an “abrupt” end to food aid would harm North Korea’s most vulnerable.

Pyongyang’s move comes as the world community continues to urge it to give up its nuclear ambitions.

Analysts say North Korea might be worried that accepting more food aid now could be perceived as a sign of weakness.

The North may also have lost patience with efforts by foreign agencies to monitor deliveries of food, according to the BBC’s Seoul correspondent, Charles Scanlon.

In recent years, the UN and other international agencies have been feeding up to six million of the poorest and most vulnerable North Koreans.

But these organisations have long struggled for access to one of the world’s most closed societies.

Even at the height of a famine in the mid-1990s, which may have killed two million people, they were tightly restricted and refused entry to large parts of the country.

Now the authorities are cracking down altogether, our correspondent says.

After meeting UN Secretary General Kofi Annan in New York on Thursday, Choe Su-hon told reporters: “We requested him to end humanitarian assistance by the end of this year.”

He said that the North wanted all foreign NGOs out by the end of the year, and added that the UN was to stop delivering food aid and to focus on long-term development instead.

Mr Egeland urged North Korea to reverse its decision, saying he was especially worried about the country’s children.

“Our concern is they (North Koreans) will not be able to have enough food. We are very concerned because we think this is too soon and too abrupt,” he said.

Gerald Bourke, a spokesman for the WFP, said that UN staff were currently discussing with the North Korean government what this meant in practice – adding that he was hopeful that current food-for-work and other community-based projects would class as longer-term development.

“We’re also talking to donors to see how much they still want to help us in this way,” he added.

Mr Bourke said that despite Mr Choe’s assertion of a better harvest in North Korea this year – and his pledge that the government was “prepared to provide the food to all our people” – there was still a considerable need for food aid.

“North Korea has a substantial and chronic food deficit,” Mr Bourke said, adding that malnutrition rates, especially for mothers and young children, were still very high.

Political issue?

Mr Choe also accused other countries, especially the US, of attempting to “politicize humanitarian assistance, linking it to the human rights issue”.

He said this constituted interference in the internal affairs of the country.

Washington rejected the suggestion it was mixing politics with relief work.

“All US decisions are based on… the need of the country involved, competing needs elsewhere and our ability to ensure that the aid gets to people who need it most,” a State Department statement said.

Another problem which analysts believe may have led to the North’s decision to ask foreign organisations to leave is the extensive surveying these groups are required to do, to ensure their money is being well-spent.

“Part of the problem is with our monitoring people moving around the country,” Mr Bourke conceded. “This is and has been a concern for them.”

In contrast, China and South Korea provide huge food shipments to North Korea without overseeing where it ends up.

The South says it gives such aid as part of a strategy to promote political reconciliation.

But diplomats and aid workers say these generous shipments have undermined the multilateral effect.

According to our correspondent, there is concern that if monitoring stops, so too will surveys to check the food gets to those most in need.

From NK zone:

China and North Korea have signed a 50-year agreement that will give the Chinese border city of Hunchun exclusive rights over the North Korean port of Rajin, according to Chinese and South Korean reports.

The deal is seen as a boost to this underdeveloped region of China and to Hunchun in particular which is about 80 km inland on the Tumen river. It also envisages that Hunchun will establish a 5-10 sq km industrial zone in Rajin and for a highway to be built between the two cities.

A Chinese-language report posted last month describes how Hunchun, although it was given border trade rights with North Korea as long ago as 1986 and was made an “open city” in 1992, has seen little benefit from these privileges, despite national, provincial and local level investment totalling five billion yuan ($600 mln) as part of the Tumen River Development Zone. The report says this resulted in an economic bubble in the early 90s, with vast numbers of half-built factories, offices and roads and a border bridge that was never completed.

The aim has long been for Hunchun to have access to a nearby port in North Korea or Russia and to dredge the Tumen river, but the report says that while it has reached a navigation agreement with Russia it had failed to reach agreement with the DPRK. It also notes that dredging would have serious environmental implications (doesn’t enlarge on this but see below). It adds that plenty of landlocked countries are economically highly successful and that there are plenty of other cases “leasing ports to reach the sea”.

Thus even before the Rajin deal was signed there were hopes that Hunchun would in the next 10 years become the most advanced city in the Yanbian region after the capital, Yanji and eventually become the “Rotterdam of the north[east?!].”

Anyhow the agreement with Rajin has of course been greeted as a great victory and comes as the Tumen River Area Development Programme agreed to extend its 1995 Agreement on the establishment of a Consultative Commission for a further ten years and to expand its geographical reach to include the three Northeastern provinces and Inner Mongolia in China, the Rason Economic and Trade Zone of DPRK, eastern provinces of Mongolia, eastern port cities in South Korea and part of the Primorsky territory of Russia.
However, another Chinese report is sceptical about the deal which it says also involves construction of a 67-km highway and plans for the Rajin area to become a processing zone for Chinese goods which will then be reexported to southeast China.

It quotes a Jilin province commerce bureau official as saying as saying only time will tell whether it will achieve its aims, and also cites an unnamed professor from the Jilin Academy of Social Sciences as saying that North Korea’s ports, railways, roads, power and water networks and communications are extremely backward and badly maintained and development has also suffered from the “instability of [North Korean] government policy.”

The deal with North Korea follows failure to reach a similar agreement with a Russian port. The People’s Daily reported in 2003 that the Russian Ministry of Communications was opposed to a proposed 49-year deal with either the port of Zarubino or Posyet, both just over the Chinese border, because it viewed the Chinese as having territorial designs on the region, which China of course denies.

The Chinese article about the Rajin deal also gives some figures for Jilin’s border trade. It says this totalled $250 mln last year, consisting of $80.07 mln worth of exports to North Korea and $114.5 mln in imports (presumably the rest consists of trade with Russia, etc). Main exports consisted of machinery, grain and flour, textiles, steel, cars and coal. “Because the railways and other means of transport are poor and there are long delays, this was bad for our province’s exports of coal, grain and other bulk items,” the Jilin commerce bureau official said, adding that transport was the main factor impeding the province’s foreign trade.

A Chinese report posted last December says Hunchun officials had visited Pyongyang several times in the last year and had found North Korean officials eager to improve road and sea communications in order to create a “northeastern golden triangle.” It says leasing a nearby port across the border is the best option, and mentions a South Korean clothing company which saved much money and time by switching to Zarubino port in Russia (only 70 km from the border) from far away Dalian in China.

It adds that there are plans for an export-oriented abattoir at Hunchun with a capacity of 200,000 cattle and sheep per year. It also says Hunchun expected to handle $220 mln worth of foreign trade last year and in January-October 2004 it handled 172,300 tonnes of imports and exports, up 7.9% over 2003.  A North Korean trade official gave the Rajin zone his blessing in 1999, as did a professor of economics from Kim Il Sung University.

Development of the area would no doubt improve living standards, but it would also have serious environmental implications. the Tumen Development Programme notes that the Hunchun Border Economic Cooperation Zone was established in 1992 without an environmental impact assessment (EIA). “Since then, considerable investment has taken place and Hunchun’s population has multiplied many-fold, with serious implications for nearby wetlands and other ecosystems.” It adds that “in 1999, the Tumen Programme undertook a long-overdue EIA of the Zone to meet international (World Bank) standard and serve as a model for other development areas in the Tumen Region.”

Eastern Siberia and the Chinese border are is the last remaining stronghold of the Siberian (or Manchurian) tiger and it is also has crucial sites for a large number of bird species including about 50 species listed in the international red book of endangered species.

The Hunchun area is where most NK refugees cross into China, so economic development would presumably make North Koreans less likely to flee their miserably poor country, though improved communications may make it easier for them to do so…

The famous or infamous Emperor casino is also not far away. As NKZ readers will doubtless recall it was closed in January after a Chinese crackdown against gambling as its clientele was entirely Chinese. Little has been heard about it since though the management are apparently hoping to attract Europeans to replace the Chinese, not sure that habitués of London casinos are likely to be greatly tempted… Am also told that the Emperor isn’t totally closed but it does have extremely few customers.

Anyhow its two websites are still up, click here for the Chinese one and here for the Hong Kong one.

According to a Chinese report, Chinese gamblers are now flooding into Vladivostok following the closure of the Emperor (so much for the crackdown against gambling in border casinos…)

Korea Times
Andrei Lankov
9/13/2005

One can imagine how the friends and relatives of Min Yong-mi, a 35 year old housewife, were shocked to learn in June 1998 that the woman was detained as a South Korean special agent who had undergone special training and snuck herself into the North to destabilize the North Korean government.

What did earn the woman, an otherwise quite typical South Korean ajuma, a mother of two children, such a James Bond style reputation? Obviously, few comments she made on June 20, 1999, when talking to a guide while on tour in the Kumgang Mountains.

Actually, the description of what happened at 1:40 pm differ. All reports agree that the entire affair began when Mrs. Min asked a North Korean tour guide or “environmental inspector” how to read a rare Chinese character in one of the names of the Buddha that was carved on a rock. The “inspector” (in all probability, a plain clothes policemen) did not know the character as well. The conversation followed.

According to one version, Mrs. Min merely said that after unification the guide would be able to meet her in Seoul. However, it is more likely that the talk was far less innocent. Obviously, somehow Mrs. Min and her guide began to talk about defectors to the South (still a relatively small group in those days). Mrs. Min assured her North Korean interlocutor that the defectors were doing all right. The guide expressed his disbelief and said that all defectors are sentenced to hard labor. Mrs. Min assured him that this was not the case and said something like “If you come to the South, you will see for itself.” According to another version, she said something more moderate, to the effect that defectors were getting by quite well in the South.

Whatever the case, she was ordered to surrender her provisional ID and pay a fine of $100. Realizing that she was in trouble, Mrs. Min complied immediately, but it was too late. She was detained, accused of subversive propaganda, and spent about a week in detention, being interrogated by officers who arrived from Pyongyang.

The detention of Mrs. Min was the first crisis in the history of the Kumgang Project, then as now the largest joint operation of the two Koreas, a showcase of economic cooperation between the two governments.

The project was conceived in 1989, when Chung Ju-yung, the founder of the Hyundai Group, visited North Korea for the first time. One of the schemes briefly discussed in 1989 was an idea of a large tourist park in the North, to be patronised by South Korean tourists. The park was to be located in the Kumgang (“Diamond”) Mountains which for centuries have been regarded in Korean culture as an embodiment of scenic beauty. The mountains conveniently lay near the DMZ, the border between two Korean states.

It took, however, a decade and some major political changes to start the project moving. It was only in November 1998 that the Kumgang Mountain Tourist Project began to operate.

The idea was simple. The North Koreans created a type of ghetto for the South Korean visitors. A part of the Kumgang Mountains was fenced off, and the local population was moved away. The South Korean tourists took a cruise ship to the area. The ship moored in a local harbour, while the visitors went on mountain walks and sight-seeing trips.

This clever scheme solved the greatest problem Pyongyang saw in its interactions with the South – the problem of information flow. The North Korean commoners are supposed to believe that their South Korean brethren are suffering under the cruel yoke of the US imperialists. Understandably, their government does not want them to know that the per capita GNP in the South is 20 to 30 times higher than in the North. In the Kumgang Mountain Project the rich Southerners were kept out of sight of the average North Koreans, being accompanied only by a handful of carefully selected minders.

However, there always was a threat that South Koreans would do something improper. They were instructed before their trip not to talk politics at all. But how could those spoilt people from a decadent bourgeoisie society be trusted to behave themselves? A subject lesson in obedience was needed.

Some circumstances make us suspect that the entire affair was prepared in advance, and that the guide was deliberately provoking Mrs. Min. However, this is likely to remain uncertain until the collapse of the North Korean regime and the de-classification of their documents. It is still probable that Mrs. Min was simply unlucky. But it is clear that the North Korean side expected something like it to happen.

Mrs. Min’s ordeal lasted for a week. Pyongyang radio claimed her as a South Korean spy, the tours were suspended for a time, and frantic diplomatic activity ensued. Mrs. Min was released after six days of detention, to spend some time in hospital. But the North Korean authorities had attained their goal: they demonstrated that tourists are better to mind their tongues while enjoying the scenic beauties of the Kumgang area.

There were more detentions of South Korean tourists, none of which received comparable publicity. But the lesson had been given, and South Koreans learned to behave themselves.

The Mrs. Min incident contributed to the ongoing crisis of the Kumgang project. This crisis came to a climax in spring 2001 when the tours were almost discontinued. The Kumgang project was salvaged by a large-scale government intervention, but that is another story…

Choson Iblo
9/6/2005

North Korea’s gap between rich and poor has been growing since the Stalinist country started economic reforms in 2002. While some have managed to better themselves to form something of a nouveau riche class, more than 70 percent are now getting only about half the needed calorie intake from state-run food distribution centers, the Financial Times reported Friday.

The World Food Program’s North Korea director Richard Ragan told the paper the wealthy are concentrated in five cities, including Pyongyang. They are the group that can be seen going to work on their bicycles, which cost triple the average monthly salary in North Korea. The newly affluent work mostly in retail and service industries and include tailors, ice cream sellers and bike repairmen who make money in general markets, which have multiplied to some 300 since 2002. Some farmers selling surplus produce are also part of what passes for a wealthy class in North Korea.

Most of those working in industrial production subsist below the minimum level, and tens of thousands of industrial workers in towns like Hamhung or Kimchaek are losing their jobs. Among those able to work, 30 percent are unemployed, and 70 percent of the population receives 250-380 grams of food a day from state-run food distribution centers — no more than half the necessary daily intake of nutrients.

The FT said the country as a whole is experiencing 130 percent inflation but poverty is no longer shared equally.

Korea Times
Andrei Lankov
9/6/2005

For decades, money did not really matter in the North Korean economy and society. Levels of consumption were not determined by money expended, but rather by access to goods. Everything was distributed, and almost nothing was actually sold, at least from the 1970s when the Public Distribution system reached the height of its power.

Indeed, the history of the North Korean retail industries between 1948 and 1975 was one of a gradual demise of trade as it is generally known elsewhere. By the late 1940s most employees of state enterprises were being issued ration coupons. These coupons allowed them to buy goods at heavily subsidized prices. If they were not happy with them, they could go to the market.

In 1958 private trade in grain and cereals became illegal. For a while vegetables and meat were not rationed, but the number of items subject to distribution kept increasing, and by around 1975 the state shops had actually become nothing but outlets of the PDS. It was legal to buy and sell most goods on the market (grain and liquor remained an exception), however the North Korean economy was so structured that few goods could be produced outside the official economy. For this reason few goods could be channeled to the private markets. Thus, market prices were exorbitant, and people had to survive on what was supplied through the PDS.

However, the economic disaster and famine of 1996-2000 changed this situation. Markets began to spread across the country with amazing speed. In the years 1995-1997 nearly all plants and factories ceased to operate. In the worst period, in early 1997, the average utilization of major plants was reportedly a mere 46 percent of their capacity.

In most areas people still received ration coupons, but these coupons often could not be exchanged for food. Only in Pyongyang and some other politically important areas did food continue to be distributed through the late 1990s, but even here the norms were dramatically reduced: from the pre-crisis level of 500-700 grams a day (depending on one’s perceived value to the state) to merely 150-250 grams daily in the worst days of the famine. Even such small rations were not available to everybody. According to research by Meredith Woo-Cumings, as few as 6 percent of the entire population relied on the PDS in 1997.

Thus, many people, including myself, came to the conclusion that the PDS had died. This impression was reinforced in 2002 when the `economy improvement measures’ (never officially called `reforms’) were introduced. Then it was normally supposed by outside observers that consumption needs would be satisfied through markets.

But in 2004 and early 2005 new data emerged from the ever secretive North. It became clear that the Public Distribution System had not been dismantled. Indeed, it made a moderate comeback, largely due to foreign food aid which was largely channeled through the PDS.

Of course, the PDS does not even remotely reach its earlier ubiquitous levels. According to the FAO, the U.N. food and agriculture agency, in early 2005 the Public Distribution System was “the main source of cereals for the 70 percent of the population living in urban areas.’’ Farmers do not get food from the PDS. During the period November 2003 through October 2004, the average actual allocation through the PDS was about 305 grams, representing about half of a person’s daily needs. According to the World Food Program, in early 2005 rations were cut down to 250 grams per person per day — 40 percent of the internationally recommended minimum.

In October 2005 the North Korean government told its populace that the PDS would be re-started soon. So far, it seems that in Pyongyang the PDS indeed works at the 1990 level, but outside the capital the market remains the only place to find food.

In such a situation, the ability and willingness to engage in private business became a major guarantor of physical survival. A witty local observer described the situation in post-famine North Korea: “Those who could not trade are long dead, and we are only left with survivors hanging around now.’’

The major coping mechanisms are support from relatives in the countryside, wild food collection, and kitchen garden production. According to an FAO survey undertaken in late 2004, 57 percent of the PDS dependent population and “nearly all’’ farmers have kitchen gardens; about 60 to 80 percent of PDS dependents and 65 percent of coop-farmers gather wild foods; and 40 percent of surveyed households receive some support from relatives in the countryside (either as gifts or as part of barter deals).

It is important that farmers are allocated far larger rations, about 219 kilograms of cereals a year or 600 grams a day. They also have larger kitchen plots and can sometimes hide some additional food from hillside cultivation which is less strictly controlled by the state. According to the FAO estimates, kitchen gardens alone give the average farming household some 10 percent of its income.

As has been the case for decades, only a part of rations come as rice. Barley and maize, far less nutritious, comprise a large proportion of cereal consumption. The North Koreans’ approach to maize is clear from the fact that the rice/maize barter ratio is 1/2: for one kilogram of rice one expects to get two kilos of maize, and vice versa. In the period from September 2003 to September 2004 maize accounted for about half of all cereals distributed through the PDS.

But why is the PDS necessary, or why is it not possible to get rid of it altogether? The answer to this question is largely political and, as our readers guess, this will be another story.

Korea Times
Andrei Lankov
8/30/2005

For decades, Soviet newspapers regularly ran articles about the great friendship between Moscow and Pyongyang. Journalists extolled the achievements of the North Korean workers and the bravery of the North Korean soldiers. But these official musings did not mislead anybody. North Korea was deeply unpopular in the USSR in the 1960s and 1970s. Anti-communist dissenters saw it as an embodiment of everything bad about their enemy; the surviving Communist idealists saw the Kim Monarchy as an embarrassment to their cause; and the hawkish admirers of the strong state perceived Pyongyang as an untrustworthy and unappreciative ally.

In the late 1980s, when the Communist countries began to crumble, everybody in the USSR expected Pyongyang to collapse in the near future. Moscow foreign policy in the first post-Soviet years was based on the assumption that Russia should unconditionally join the Western world, and thus North Korea was seen as a partner both doomed and embarrassing.

Kim Il-sung Sung died a peaceful death in 1994, and the violent collapse of his regime never happened but this non-event even produced some literature in Russia. Lev Vershinin, a historian and also a good fiction writer, authored Endgame, a novel that described the violent collapse of an imaginary Communist dictatorship. The country of the novel had features that reminded readers of Romania, Cuba and North Korea. Even the geographic names were deliberately mixed _ against all laws of linguistic history, so the capital of this imaginary country had a Korean-sounding name of Taedongang, and the place of the Stalinists’ last stand was called Munchon.

Around the same time, Igor Irteniev, arguably the most popular Russian satirical poet of the 1990s, mockingly wrote of an event that everyone expected to take place soon: “I cannot sleep without a sedative in the darkness of the night, when I imagine what happens to Kim Il-sung in the blood-stained hands of the executioners.’’

But the mood began to change sometime after 1996. North Korea was still the butt of jokes, but new voices came to be heard in Russia as well. These voices presented a more positive approach to North Korea.

This reflected the general change of mood in Russia. An increasing part of its population began to see that the U.S.-led West not as a benevolent force but as a crafty rival, preying on Russia’s weakness. The pro-Western enthusiasm of the early 1990s was replaced by deep suspicions _ not only in the government offices but also in the popular psyche. Thus, the geopolitical opponents of the West, the assorted “pariah states,’’ began to attract some (rather undeserved) sympathy in Russia, and national egoism came to be seen as the only rational policy choice.

Official policy toward North Korea also began to change. By 1997-1998 it became clear that Pyongyang would not collapse any time soon, and the restoration of working relations with the North was a necessity, especially against the backdrop of Russia’s efforts to develop a more independent political line. Good relations with the Kim dynasty also could be useful as a negotiating chip in dealing with the Americans. In academic articles the critique of North Korea was hushed, and augmented with critique of Western insensibilities in dealing with this very peculiar society.

The concept of human rights does not play a major role in Russian politics. A period of idealistic enthusiasm in the early 1990s proved to be short, so few people take statements about human rights seriously. Neither the Russian government nor the Russian public shows much enthusiasm for crusades in the name of human rights in distant lands. It is well known that North Korea is notorious for its disregard of human rights, but Russians cannot care less. Their position is simple: first, it is North Korea’s internal affair after all; second, if North Koreans themselves live under such a regime, who are we to pass judgments on their behalf?

And there are, of course, people who are sincere admirers of the Kim regime, even if their numbers are very small (such people exist even in the West). For some Russian leftists, the regime is seen as a living example of Communist resilience, its alleged ability to survive if the leadership is “correct’’ and uncompromising. They did not question the right of the government to starve half a million or 1 million people in order to stay in power. They either deny the facts (half a million dead? Washington’s propaganda, of course!) or interpret them as voluntary sacrifices made by the patriotic Korean people. But actually, Korean domestic politics is not very important to them: it is the “anti-imperialist’’ stance of the North that really matters for the Russian Left, and make its prominent leaders even occasionally pay homage to the Great Leaders.

Of course, the general public is still skeptical of the North Korean regime and do not harbor many illusions about its true nature. But nobody in Russia wants to build policy on the basis of ideologies these days. You know, Russians have had enough of ideologies over the last century, so now they prefer interests, pure and simple…