North Korean Economy Watch

You can learn about which specific Kaesong sites have been named at the UNESCO web page.

Back in 2004, several Koguryo tombs were named to the list.

According to Yonhap (via Global Post):

Trade between South and North Korea came to virtually zero in May after inter-Korean tensions led to the shutdown of the Kaesong Industrial Complex seen as the last symbol of bilateral economic cooperation, the government said Monday.

The volume of inter-Korean trade reached only US$320,000 last month, which accounts for just over 1 percent of the $23.4 million recorded in April, according to the Unification Ministry, which handles inter-Korean affairs.

The majority of the May trade represents electricity costs the South spent to maintain the plant facilities in the factory park in the North Korean border city of Kaesong, according to the ministry. The South exported about $260,000 worth of electricity while importing $60,000 worth of periodicals from the North last month, the ministry said.

Inter-Korean exchange came to an abrupt halt in mid-April as the North withdrew North Korean workers employed by South Korean firms in the Kaesong industrial zone in protest against South Korea’s joint military drills with the U.S. in March.

The joint factory park made up almost all of the inter-Korean trade as chilly relations cut off other exchanges.

The number of cross-border trips permitted during May came to only seven, the ministry said, adding that they were the last batch of the seven South Korean workers who returned to the South after the closing of the Kaesong complex.

As inter-Korean relations remain frosty, the hiatus in inter-Korean trade is expected to continue, analysts said.

Read the full story here:
Inter-Korean trade comes to almost naught in May
Yonhap (via Global Post)
2013-6-24

Pictured above (Google Earth): The Victory (Sungri) Refinery in Rason, North Korea.

UPDATE 2 (2016-3-25): NK News reports that HBOil refutes the claim in the Joong Ang Daily:

“HBOil JSC … hereby refutes the South Korean publication known as ‘KOREA JOONGANG DAILY’, for irresponsible reporting and dissemination of erroneous news on 23 March 2016; asserting that HBOil JSC has withdrawn from its joint venture in the Democratic People’s Republic of Korea,” the statement read.

HBOil also confirmed, “that it remains fully committed to its joint venture with Korea Oil Exploration Corporation (“KOEC”) of the DPRK, and continues its tenacious efforts to progress the joint venture’s ambition for exploration and development of hydrocarbon resources onshore North Korea.”

HBOil entered into a joint venture with North Korea in 2013 and has attempted to make inroads into North Korea’s undeveloped oil and gas sector.

The company has since invested in projects that could give it access to upstream oil and gas production and downstream refinery capacity in the coming years. However there has not been much reported movement on their North Korean project, and the outlook will not have been improved by a 70 percent drop in oil prices since last year.

While the statement affirmed HBOil’s belief that North Korea represents an “exceptional business opportunity” it also stated that the company are reviewing the implications of the recently adopted UN Security Council resolution against the country.

UPDATE 1 (2016-3-23): The Joong Ang Daily reports that HBoil is pulling out of North Korea:

A Mongolian oil company recently decided to withdraw from North Korea, a South Korean government source said, amid growing pressure from the international community after North Korea recently conducted nuclear tests and long-range missile launches.

HBOil JSC, an oil trading and refinery company based in Ulaanbaatar, Mongolia, acquired 20 percent of the North Korean entity Sungri refinery in June 2013, valued at roughly $10 million. In May 2014, the company opened a joint venture in Pyongyang.

The ex-communist country established bilateral ties with the North in 1948, but after this recent decision, the already impoverished North Korea will be further isolated from the international community.

“Mongolia is sending a message to North Korea: don’t fall down the wrong path,” said Nam Sung-wook, professor at Korea University’s Department of North Korean Studies.

North Korea formerly attracted foreign investment to resume operations of the Sungri refinery, which stopped running in 2009, in order to push for economic development. The deal with Mongolia, begun almost three years ago, was taken as evidence that North Korea wass seeking further investment partners-in addition to China.

However, the North Korean government continually delayed the inland oil development project, failing to provide reasonable explanations. Mongolia may therefore have concluded that there was no practical benefit to continuing the project.

Bilateral ties between the two countries recently turned bitter when Mongolian president Tsakhiagiin Elbegdorj said Mongolia could not endure the North’s tyranny forever, a remark made during his speech at Kim Il-sung University in Pyongyang at the end of October 2013.

“No tyranny lasts forever. It is the desire of the people to live free, that is the eternal power,” the president said in his speech. After his remarks, North Korean leader Kim Jong-un expressed disappointment and refused to hold meetings with the Mongolian president.

ORIGINAL POST (2013-6-13): Clarification:   “HBOil has 20% of a state-dominated joint venture called Korean Oil Exploration Corp. International, and a formal commitment with Sungri has yet to be made. Another option is to invest in a refinery on the west coast of the DPRK.”

According to Bloomberg:

HBOil JSC, an oil trading and refining company based in Ulaanbaatar, Mongolia, said it acquired 20 percent of the state-run entity operating North Korea’s Sungri refinery, according to an e-mailed statement yesterday. It intends to supply crude to Sungri, which won’t be fully operational for up to a year, and export the refined products to Mongolia.

“Mongolia has had diplomatic relations with North Korea for many years,” Ulziisaikhan Khudree, HBOil’s chief executive officer, said in a June 12 interview in Ulaanbaatar. “There are certain risks, but other countries do business with North Korea so I am quite optimistic the project will be successful.”

The investment comes as ex-communist Mongolia seeks to power its mining-led boom while offering sanctions-hit North Korea a bridge to economic reforms. Since Swiss-educated Kim Jong Un took over the leadership of the totalitarian regime in December 2011, Mongolia has pledged to help its Soviet-era ally implement an economic transition similar to its own of the 1990s.

…

Under the transaction, worth as much as $10 million, the Mongolian Stock Exchange-listed HBOil would swap shares for full ownership of Ninox Hydrocarbons (L) Berhad, a private Malaysian company that owns 20 percent of KOEC International Inc., and issue convertible notes to fund investment at Sungri.

The rest of KOEC International is held by North Korea’s national oil company, Korea Oil Exploration Corp., which also has oil production and exploration rights in North Korea.

“This is a chance to take an equity holding in a foreign entity, and will allow us to import petroleum products, which could be lower than the current price,” said HBOil’s Khudree.

HBOil jumped by the daily limit of 15 percent to close at 253 tugrik (18 cents) on the Mongolian stock exchange today.

The deal will be the first purchase by a Mongolian-listed company of a foreign asset, according to Joseph Naemi, chief executive officer of the Ninox parent, Ninox Energy Ltd. The company is in compliance with international sanctions levied against North Korea, he said.

“If the sanctions change, and if they target the oil and gas industry, that would put us out of business, and we will have to comply,” Naemi said. “That is a risk one takes.”

Naemi said he had briefed his North Korean partners on the transaction and that “they are supportive.” No one was available to speak about the deal at North Korea’s embassy in Ulaanbaatar, which is in the middle of a renovation.

North Korea has three onshore oil basins with “proven working petroleum systems” and the country is conducting exploration for new fields, BDSec brokerage, Mongolia’s largest and the underwriter of the bonds HBOil plans to offer, said in a note to investors yesterday.

The Sungri refinery, located in the Special Economic Zone of Rason City in North Korea’s northeast, has a refining capacity of 2 million tons a year and is connected to the Russian railways system, HBOil said in its release.

Read the full story here:
Mongolia Taps North Korea Oil Potential to Ease Russian Grip
Bloomberg
Michael Kohn and Yuriy Humber
2013-6-18

The English language PDF is here.

Translation courtesy of Lee Kyungmin, currently working at Hanns-Seidel-Foundation Korea.

According to Agence France-Presse:

The UN food body on Saturday said it had approved $200 million of food aid for North Korea, targeting the country’s most vulnerable people who remain dependent on external assistance.

The World Food Programme (WFP) executive board has this week approved a new two-year operation for North Korea starting on July 1, WFP spokesman Marcus Prior said.

“It will target about 2.4 million people – almost all children, and pregnant and nursing women – with about 207,000 [206,800] metric tons of food assistance at a cost of US$200 million,” he said in an email to AFP.

The WFP will continue to focus on the nutritional needs of young children and their mothers through food which will be manufactured in the North using ingredients imported by the food body, he said.

“WFP remains very concerned about the long-term intellectual and physical development of young children in particular who are malnourished due to a diet lacking in key proteins, fats and micronutrients,” added Prior.

In March, UN resident coordinator in North Korea Desiree Jongsma said timely imports from the WFP had contributed to avoiding a crisis this year but two thirds of the nation’s 24 million population were still chronically food insecure.

Nearly 28 percent of children under five in the North suffer from chronic malnutrition and four percent are acutely malnourished, according to a UN national nutrition survey last year.

Overall production for the main 2012 harvest and early season crops this year was expected to reach 5.8 million tonnes, up 10 percent on 2011-2012, UN agencies said in November.

But the poverty-stricken country is still struggling to eradicate malnutrition and provide its people with vital protein, the UN’s Food and Agriculture Organization and WFP said.

North Korea suffered regular chronic food shortages under the Kim dynasty, with the situation exacerbated by floods, droughts and mismanagement. During a famine in the mid to late-1990s, hundreds of thousands died.

International food aid, especially that from South Korea and the United States, has been drastically cut over the past several years amid tensions over the communist state’s nuclear and missile programmes.

The US last provided food aid to North Korea from late 2008 to March 2009. Some 170,000 tonnes out of an expected 500,000 tonnes was delivered, until Pyongyang expelled US workers monitoring the distribution.

Here is the official announcement.

Quarterly bulletin for WFP’s operation Nutrition Support to Women and Children in DPR Korea (Q1, 2013)

DPRK National Nutrition Survey (October 2012)

Read the full story here:
UN food body approves $200 mn food aid to N. Korea
Agence France-Presse
2013-6-8

According to the Chicago Tribune:

Hall Healy, chairman of the Wisconsin-based International Crane Foundation, has been engaged for years in the effort to protect the migratory cranes in North Korea and restore their habitats. Since 2008, the group has been raising money and coordinating efforts to help a farming community on the Anbyon Plain, roughly 60 miles north of the DMZ.

Through helping the Anbyon farmers, Healy said they are also helping the cranes. When there’s more food for the farmers, there’s also more rice left over in the fields for the cranes, Healy said. The birds also benefit from a pond that was recently built and stocked with fish.

“You have to work with the people,” Healy said. “And if the people have needs, and they always do, you have to help them first.”

Founded in 1973, the International Crane Foundation works in countries around the world to protect the 15 species of cranes in existence.

The North Korea project — which focuses on the red-crowned and white-naped cranes — has special meaning for Healy, who’s been closely involved since its inception. He’s traveled to the DMZ more than a dozen times, and to the Anbyon Plain twice — most recently in November 2011. He plans to return in the fall.

Anbyon was targeted as a priority area, out of concern that a large wetlands area south of the DMZ, near Seoul, could be developed soon, Healy said. If that development occurs, Anbyon would give cranes a reliable haven.

Over the past five years, the foundation has raised about $200,000, including in-kind services, for machinery, fertilizer, training and building supplies, Healy said. Partnering with other groups — including the State Academy of Sciences in Pyongyang, North Korea, the Anbyon farming cooperative, BirdLife International and the Germany-based Hanns Seidel Foundation — it has turned that relatively small amount of money into significant results, Healy said.

So far, it’s worked out well for the farmers. The primary crop in Anbyon is rice, Healy said, but the farmers are also now planting fruit trees and raising livestock. Organic fertilizer, new machinery and sustainable farming techniques have improved the crop yield and the health of the soil, he said.

On the crane side, it’s still a work in progress. Last winter, cranes circled but did not land in Anbyon. But they landed the two years previous, Healy said, and better results are expected this year.

Wildlife conservation that directly benefits people is becoming a more popular approach, said Jeff Walk, an ornithologist and director of science for the Nature Conservancy in Illinois. And cranes are an excellent focus, he said, because people are naturally drawn to them.

“It’s a good thing. You need that hook with people,” Walk said. “We call them ‘an umbrella species.’ You work to protect them and a whole other community benefits, too.”

Compared with working in other countries, Healy said communication with the North Korean farmers has been limited and indirect. Through the United Nations mission in New York, the International Crane Foundation communicates with the State Academy of Sciences in Pyongyang, instead of directly with the farming cooperative.

Healy worked previously as president of the DMZ Forum, a New York-based group focused on ecological preservation in the DMZ.

Seung-ho Lee, current president of the DMZ Forum, said conservation work in North Korea is inherently “a trust-building process” with people who have been largely cut off from the Western world. The Anbyon project is effective because it yields results without ideology or politics, he said.

“It’s a very useful approach,” Lee said. “To give them a sense of volunteerism and work, but to also give them a real product.”

Previous post on the International Crane Foundation here.

Read the full story here:
Saving the cranes: Hope flies in North Korea
Chicago Tribune
Gregory Trotter
2013-6-7

Thursday, June 27, 2013
Where The University Club of Washington, DC
1135 16th Street NW
8:30 AM-1:30 PM

To see the full agenda, click here

Register here (by c.o.b. on June 21)

We are pleased to invite you to participate in an off-the-record symposium, hosted by the National Committee on North Korea and the Export Control and Sanctions Committee of the American Bar Association, on legal compliance issues for U.S. non-governmental organizations, universities, and businesses operating in North Korea or with North Korean citizens.

This half-day symposium will feature panels on U.S. export control and sanctions laws and regulations pertaining to transactions with North Korea; the implications of the Foreign Corrupt Practices Act for organizations operating in North Korea; and North Korea’s legal system.

Adam Szubin, the Director of the Office of Foreign Assets Control of the U.S. Department of Treasury, will give the keynote address. Speakers will include James Min on North Korean laws; Susan Kramer and Parvin Huda of the U.S. Department of Commerce; George Kleinfeld from Clifford Chance on OFAC regulations; John H. Wood of Hughes, Hubbard and Reed on the FCPA; and Yuri A. Koshkin, Trident Group and Chris Ferguson, The Risk Advisory Group, will discuss due diligence.

This off-the-record symposium will cover many practical legal aspects of North Korean law, US export control and sanctions as well as anti-bribery laws as they pertain to operating in North Korea or with North Koreans. However, it is informational in nature and is not intended to provide you with specific legal advice, which should be sought independently.

According to the Wall Street Journal:

On a vast construction site outside this northeastern Chinese city, engineers are working around the clock on a project that could transform the economic—and geopolitical—dynamics of the region: a 223-mile, high-speed rail link to the North Korean border.

The $6.3 billion project is one of three planned high-speed railways designed to bring North Korea closer into China’s economic orbit, even as Beijing supports sanctions aimed at Pyongyang. China is also sinking millions of dollars into new highways and bridges in the area, and the first cross-border power cable.

China’s vision for closer economic integration with North Korea runs counter to a U.S. strategy aimed at piling pressure on Pyongyang to abandon its nuclear-weapons program and refrain from further threats.

(more…)

According to Yonhap:

The growth of North Korea’s exports and overall trade volume slowed down significantly last year, apparently due to international sanctions condemning its nuclear test and other provocations, Seoul’s trade promotion agency said Wednesday.

According to the Korea Trade-Investment Promotion Agency, better known as KOTRA, North Korea’s overall trade reached US$6.81 billion in 2012, growing 7.1 percent from a year earlier and reaching a record high since 1990 when such data began to be compiled.

The growth, however, marked a sharp slowdown from a 51.3 percent on-year hike in 2011.

“Such a significant slowdown of growth last year appears to have been caused by the fact that North Korea has only a limited number of export products and that sanctions by the international community continued,” KOTRA said in a press release.

The North’s overall exports gained 3.3 percent on-year to $2.88 billion with imports surging 10.2 percent to $3.93 billion.

Still, the North’s trade relations with its communist ally China strengthened with the countries’ bilateral trade reaching $6.01 billion, accounting for 88.3 percent of the North’s overall trade in 2012.

Trade with China has also slowed. According to Yonhap:

North Korea’s imports from China for this year registered its first drop in three years due apparently to China’s tightened grip on transactions with its ally under United Nations sanctions, Beijing’s customs data showed Wednesday.

The North brought in US$1.01 billion worth of Chinese goods during the January-April period, down 8.68 percent from a year earlier, according to China’s online customs data analyzed by Yonhap News Agency.

It was the first annual drop for the four-month period since 2010 when Customs-info, the online customs data provider, started to provide related information.

The North’s imports from China stood at $525.8 million for the same four-month period in 2010. It had posted two successive annual increases to reach $1.1 billion in 2012 before registering a fall this year, according to the data.

The on-year reduction this year can be attributable to China’s increased efforts to strictly apply punitive U. N. sanctions adopted to punish the North for its long-range rocket launch, believed to have been a test of its ballistic missile technology, and its third nuclear test, which occurred on Feb. 12.

Taking a step back from its previous stance to keep neutral about its ally, China joined punitive international moves by tightening its customs and immigration inspections toward the North.

The data, however, showed that the North’s exports to China grew 6 percent on-year to $842.8 million during the January-April period.

Read the full stories here:
Growth of N. Korean trade slows in 2012
Yonhap
2013-5-29

N. Korea’s imports from China drop amid tensions
Yonhap
2013-5-29

UPDATE 2 (2013-5-24): South Korea has again requested that the DPRK repay past food loans. According to Yonhap:

South Korea again called on North Korea Friday to repay millions of dollars in loans provided in the form of food since 2000, the Unification Ministry said.

The impoverished North missed the June 7, 2012 deadline to repay South Korea US$5.83 million in the first installment of the $724 million food loan extended to the North in rice and corn. The latest call is the South’s fifth demand made on the North to repay its debt.

Seoul’s state-run Export-Import Bank (Eximbank) sent a message on Thursday to Pyongyang’s Foreign Trade Bank, calling for the repayment, Unification Ministry spokesman Kim Hyung-suk said in a briefing.

The South Korean bank also sent another message the same day, notifying the North of its forthcoming June 7th deadline to repay the second installment of $5.78 million, the spokesman said.

“North Korea should faithfully abide by what they previously agreed to with the South,” Kim said, calling for the repayment of food loans.

Amid a conciliatory mode under the liberal-minded late President Kim Dae-jung, Seoul started to provide food loans to the famine-ridden country, providing a total of 2.4 million tons of rice and 200,000 tons of corn from 2000-2007.

Under the deal, the North is required to pay back a total of $875.32 million by 2037.

Read the full story here:
S. Korea again asks North to repay food loans
Yonhap
2013-5-24

UPDATE 1 (2012-7-15):  South Korea claims the DPRK missed a deadline for explaining how it intended to repay South Korean “loans”. According to Yonhap:

North Korea missed the deadline Sunday for notifying South Korea of how it will repay millions of dollars in loans provided in the form of food in 2000, resulting in Seoul having the right to declare Pyongyang has defaulted on its debt, an official said.

South Korea sent the North a message on June 15 that the communist nation was supposed to have paid back US$5.83 million in the first installment of a 2000 food loan worth $88.36 million by June 7. The North was required to respond to the message in 30 days.

That deadline passed on Sunday with the North remaining silent, giving South Korea the right to declare the North has defaulted on the debt, according to a government official in Seoul.

But South Korea is unlikely to go ahead with the declaration any time soon as it would have little effect on the North. The communist nation remains largely outside of the international financial system and the prospect of national default is unlikely to force it to repay its debt.

Officials said they are considering sending Pyongyang a message again calling for debt repayment.

Widespread views are that it won’t be easy for the North, which is still struggling with food shortages, to pay back its debt, but officials said the country could repay the debt in kind as it did before. In 2007 and 2008, the North repaid some debt with $2.4 million worth of zinc ores.

After the two Koreas held their first-ever summit in 2000, South Korea provided the North with a total of US$720 million in loans of rice and corn until 2007. Including interest accrued on the loans, the North is required to repay some US$875 million by 2037.

Such aid has been cut off after the South’s President Lee Myung-bak took office with a pledge to link any assistance to the North to progress in international efforts to end Pyongyang’s nuclear weapons programs.

The Daily NK also covered the story.

ORIGINAL POST (2012-6-8): According to Yonhap:

North Korea has not shown any signs of repaying the loans South Korea extended in food grains since 2000 although the initial day of the scheduled repayment passed as of Thursday. The South Korean government provided North Korea grain loans worth US$725 million for seven years until 2007, including 2.4 million tons of rice and 200,000 tons of corn. The total principal and interest North Korea should repay for the next 20 years is estimated at $875.32 million.

North Korea was scheduled to pay South Korea $5.83 million by Thursday for the loans extended to it in 2000. Korea Eximbank, which is in charge of trade finance with the North, notified its counterpart the Chosun Trade Bank of North Korea of the repayment obligation Monday but North Korea had not responded of Friday.

The former South Korean governments led by President Kim Dae-jung and Roh Moo-hyun provided an estimated 1 trillion won (US$850 million) to North Korea from 2000 to 2007 under the sunshine policy. South Korea provided an additional 1.37 trillion won to North Korea to finance the construction of a light water reactor in order to suspend North Korea’s nuclear development. All the loans to the North were taxpayer’s money.

…

North Korea should show sincerity in the repayment of these loans for the sake of its future. If it fails to do so, the North will encounter substantial difficulties in accessing further loans from the international community. North Korea also has failed to repay loans it borrowed from the old Soviet Union. Russia reportedly had to reduce 90 percent of the Norths loans, worth $11 billion.

If North Korea has difficulties repaying its debts to South Korea in cash, it should sincerely discuss alternative measures to repay the loans with the South Korean government.

The South Korean government should positively consider measures to get the money back in kind, such as in mineral resources. North Korea should understand that if it fails to show the minimum sincerity on the repayment of its debts, it will experience much more difficulty in attracting economic assistance from the outside world.

The Choson Ilbo reports this additional information:

In 2007 and 2008, South Korea also gave the North $80 million worth of raw materials to produce textiles, shoes and soap. At the time, North Korea repaid 3 percent of the loan with $2.4 million worth of zinc ingots. Repayments of the remaining $77.6 million become due after a five-year grace period, so North Korea must start repaying $8.6 million a year every year for 10 years starting in 2014.

Seoul also loaned Pyongyang W585.2 billion (US$1=W1,172) from the Inter-Korean Cooperation Fund so it could re-connect railways and roads with the South that were severed in the 1950-53 Korean War. And it provided W149.4 billion worth of equipment to the North. The North must repay that loan in 20 years with a 10-year grace period at an annual interest of 1 percent.

It also seems unlikely that South Korea will be able to recoup W1.37 trillion plus around W900 billion in interest it provided North Korea through an abortive project by the Korean Energy Development Organization to build a light-water reactor.

The loans amount to a total of around W3.5 trillion, which the South will probably have to write off.

The Daily NK also reported on this story.

Read the full story here:
North Korea should show sincerity in repaying South Korea loans
Yonhap
2012-6-8

N.Korea Misses 1st Loan Repayment Deadline
Choson Ilbo
2012-6-8