North Korean Economy Watch

According to Yonhap:

The number of North Korean visitors to China increased drastically since then-North Korean leader Kim Jong-il’s tour of the North’s biggest communist ally early last year, Chinese government data shows.

The data on the entry of foreigners obtained Sunday by Yonhap News Agency showed that 152,000 North Koreans entered China in 2011, a sharp rise from 116,000 the previous year. Out of the total, 114,000 were businessmen and laborers.

The comparable figures were 116,000 in 2010, 103,000 in 2009, 101,000 in 2008, 113,000 in 2007 and 110,000 in 2006.

The sharp rise is attributed to the visit to China by late North Korean leader Kim Jong-il in May last year, apparently to enhance bilateral economic cooperation.

The Beijing government said at the time that Kim was invited “so he could have the chance to grasp the developments in China and make the most of them for the development of North Korea.”

The number of North Korean visitors to China will likely increase further this year as China has received 88,000 North Koreans for the first six months this year alone.

Read the full story here:
N. Korean visitors to China rise drastically since last year: data
Yonhap
2012-7-29

According to the Donga Ilbo:

South Korea held two rounds of secret talks with North Korea at an inter-Korean industrial complex in Kaesong at Pyongyang`s request late last year on joint development of rare earth metals in the North. Called the “vitamins of high-tech industries,” rare earth metals are minerals necessary for making smartphones, notebook computers and hybrid vehicles.

The North’s proposal to hold the meetings was made after the South stopped almost all inter-Korean economic cooperation in May 2010, soon after a South Korean naval vessel was sunk by a North Korean torpedo. Whether this will lead to the resumption of inter-Korean economic cooperation remains to be seen.

The Korea Resources Corp., a South Korean state-run resources developer, said Sunday that it held working-level talks with officials of the North’s National Economic Cooperation Federation at the Kaesong Industrial Complex in September and December last year.

In the second contact, the federation handed over four rare earth samples to the South Korean side. An analysis showed that the samples were a type of rare earth metals used to manufacture LCD panels and optical lenses.

A South Korean official who participated in the talks said, “The North strongly proposed that the two Koreas jointly develop coal mines as well as rare earth metals.”

The resources corporation tried to brief North Korea on the results of the sample analysis. No further talks have been held since, however, due to changes in Pyongyang’s political situation following the death of leader Kim Jong Il on Dec. 17 last year.

Still, the corporation said it maintains a “hotline” with its North Korean counterpart and plans to develop resources in the North. CEO Kim Shin-jong briefed South Korean President Lee Myung-bak on the results of the sample analysis in February. He said, “The president encouraged us to carry on after we reported that North Korean rare earth metals are economically promising.”

The South Korean resources development industry estimates that North Korea has 42 types of minerals, including rare earth metals at nearly 700 mines under development. Their value is estimated at nearly 6,984 trillion won (6,133 billion U.S. dollars). In particular, the industry says that while China has made rare earth metals a strategic resource, the North has up to 20 million tons of rare earth deposits. China’s rare deposits are estimated at 55 million tons, accounting for about half of the world’s total.

A South Korean official involved in economic projects in the North said, “We cannot rule out the possibility that inter-Korean economic cooperation projects will be resumed, as (the North`s No. 2 man) Jang Sung Taek and (military bigwig) Choe Ryong Hae, who are known as pragmatists, have rapidly emerged as powerful men,” adding, “Resource development is what the North needs the most and the South can approach this without political burden.”

The Wall Street Journal’s Korea Real Time adds additional details:

North Korea makes occasional claims to have large deposits of rare earths, a potential source of hard currency for the impoverished nation. There are no reliable data on North Korea’s rare earth deposits.

China controls about 95% of the world’s rare-earth production. Rare-earth minerals are used in products ranging from consumer electronics to batteries to defense systems.

Kores invested 6.25 billion won ($5.5 million) in 2003 to jointly develop a graphite mine in North Korea. The project has capacity to produce as much as 3,000 tons of graphite annually and the deal allows Kores to take half of the annual produce for 20 years, according to the official. So far, Kores has collected 850 tons of graphite.

Economic ties between North and South Korea remain almost completely suspended following two attacks on South Korea in 2010 by the North that killed 50 people.

Additional information below:
1. The graphite mine mentioned above is called the Janchon Graphite Mine.  You can learn more about it here.

2. More on rare earths in the DPRK can be found here.

Read the full stories here:
Koreas held 2 secret talks on rare earth metals last year
Donga Ilbo
2012-7-23

South, North Korea Discussed Rare Earth Mining
Wall Street Journal’s Korea Real Time
2012-7-24

They should be studying Xiaogang Village! But instead they are studying Huaxi Village. Why? According to the Joong Ang Ilbo:

For the past six months, seven working-level North Korean officials have been staying at the Longxi International Hotel, located in a 72-story skyscraper in Huaxi Village, in China’s Jiangsu Province, a local government official told the JoongAng Ilbo in a telephone interview.

They’re allegedly trying to learn the secrets of Huaxi Village, known as China’s richest village but one that is still dedicated to socialism.

…

Huaxi Village is one of the richest places in China and a symbol of a model mixing socialism and capitalism. All the residents are shareholders of the local conglomerate and earn dividends at the end of every year according to its profitability.

“Roughly 20 North Koreans recently toured Huaxi Village,” a local resident told the JoongAng Ilbo. “The seven working-level North Korean officials have been staying in the village for six months learning how to manage a modern-style hotel.” Intriguingly, all seven are women.

The 328-meter (1,076-foot)-high Longxi International Hotel was completed last October and cost 3 billion yuan ($471 million). The five-star hotel has 800 rooms, including suites that go for 99,999 yuan per night.

“Officials from North Korea’s Foreign Ministry and the North Korean Embassy in Beijing also visited the village,” the resident said. “I’m not quite sure whether the women workers are from the ruling Workers’ Party, but they are mostly in their 20s.

“They have a great interest in learning about the dramatic growth of the village,” he continued. “They reportedly receive some kind of wages [from North Korea].”

Starting in 1978, the village’s residents actively participated in the reforms led by Deng Xiaoping. Wu Ren Bao, 84-year-old local secretary of the village, said in an interview with the JoongAng Ilbo in October 2011, “We accepted whatever was needed to make people rich and develop the village.”

Read the full story here:
Title
Joong Ang Ilbo
Chang Se-jeong, Jeong Yong-soo
2012-7-20

Institute for Far Eastern Studies (IFES)
2012-7-12

After Kim Jong Un’s succession following the death of his father, Kim Jong Il, added attention is drawn to the economic cooperation between China and North Korea.

The DPRK-China economic cooperation has totaled 990 million USD from January to April this year, a rise of 16.5 percent against the previous year. Other economic cooperation projects are also underway as appropriate system and regulations are currently being established along with recruitment and training of employees.

According to Yonhap News Agency on July 4, Chinese commerce ministry invited about 20 North Korean economic government officials and scholars to Tianjin for training in special economic zones from late May. The main purpose of the training was identified; to promote and revitalize the special economic zones in North Korea, including Hwanggumpyong and Wihwa Islands and Rajin-Sonbong.

The invited North Korean trainees are top officials from economic, administrative, finance, and customs sectors to receive two-month training in Tianjin from Chinese experts with years of experience and knowledge in the area of operations, management, and investment promotion of economic zones. The entire training cost is supported by the Chinese government with full support of education and accommodations.

The details of the program consisted of a month of training in theoretical background and a month of practical training in economic zones of Shanghai Pudong and Shenzhen.

Hwanggumpyong and Wihwa Islands began as China and North Korea partnered up to develop it as the next Kaesong Industrial Complex. Last June, China’s Commerce Minister Chen Deming and the DPRK’s vice-chairman of National Defence Commission Jang Song Thaek met and hosted the groundbreaking ceremony for the development of the area. However, the development in Hwanggumpyong area is making a slow progress.

On June 25, Kyodo News Service of Japan reported that China and North Korea both expressed to delay the joint development project of Hwanggumpyong for the lack of economic value after North Korea conducted its satellite launch. However, on the following day, Chinese foreign ministry made a statement that Hwanggumpyong joint development project was on track and criticized Kyodo for the inaccurate account of the situation.

China has obtained port usage right of Rajin Port in 2008, which connects Tumen River with Hunchun of Jilin Province in China. The construction for the 53 km-long road that connects Rajin with Hunchun is expected to be completed by the end of this year and sea route to this area will officially take off. China invested in the entire cost of construction as it hopes to develop it into an international distribution base, as a part of the Chang-Ji-Tu Development Project in Northeast China.

Nearly 70 percent of China-DPRK trade is located in Dandong and Sinuiju area. Many experts agree that it will be a matter of time before the development of Hwanggumpyong economic zone become full-fledged. Despite the apparent delay in development, North Korea has already established a Law on Hwanggumpyong and Wihwa Islands Economic Zone and joint management committee were formed consisting of Chinese and North Korean officials. Rapid progress in this zone can be expected after the New Yalu River Bridge is completed in 2014.

As economic trade and cooperation between North and South Korea ebbed, North Korea is likely to increase its efforts with China, combining the land and manpower of North Korea with China’s resources and technologies to develop other SEZs similar to Kaesong. However, a large-scale dispatch of North Korean employees to China will be difficult challenge to overcome.

UPDATE 6 (2012-9-24): The Associated Press reports that WIPO didn’t violate sanctions. According to the article:

The U.N. patent agency says it has been cleared of breaking sanctions against North Korea by sending computers to the regime in Pyongyang.

The Geneva-based World Intellectual Property Organization said Monday that a U.N. panel found it had not violated any of three U.N. Security Council resolutions by providing technical assistance to North Korea.

In July, the Foreign Affairs Committee in the U.S. House of Representatives launched an investigation into whether WIPO had violated U.N. sanctions by sending computers and other technology to Iran and North Korea.

WIPO has insisted it did nothing wrong in providing ‘‘standard IT equipment’’ to the patent and trademark offices in those two countries. The Iran review is still pending.

UPDATE 5 (2012-7-24): A preliminary assessment by the State Department has concluded that WIPO did not violate U.N. sanctions when it sent materials to the DPRK. According to a State Department briefing on July 24:

QUESTION: Two small things. One on WIPO, if that’s how it’s pronounced. WIPO. So following suggestions that WIPO allowed the transfer of banned technology to Iran and North Korea, has the United States been able to mount its own investigation of this?

MS. NULAND: Well, first and foremost, to repeat what we said here last week, we share the concerns raised here in Washington, in the media, regarding these equipment and software transfers by WIPO. We’ve been concerned since we first learned that they had transferred equipment to both North Korea and Iran. We’ve been in contact with WIPO and urged them to institute substantive safeguards.

Our own preliminary assessment, but we are still seeking more information from WIPO, is that there doesn’t appear to have been a violation of UN sanctions. However, this has now been referred to the sanctions committee for them to make their own determination, so we will await the views of the respective UN sanctions committees. We are also seeking more information from WIPO so that we can conclude our own work on whether there was any violation of U.S. law, but we don’t yet have everything that we need in order to make that assessment.

QUESTION: I understand that you don’t yet have everything you need to make a final assessment. But based on what you have, are you able to make a preliminary assessment as to whether or not any U.S. laws were broken?

MS. NULAND: I don’t have a preliminary assessment for you. We’re still seeking some more detail from WIPO.

QUESTION: And then one last thing. I believe there was supposed to have been a hearing in the House today on this that got canceled, I think because the WIPO officials were not going to be available to testify. Are you – given that you don’t yet have all the information that you want, are you satisfied that you are getting enough cooperation from them?

MS. NULAND: Well, we are continuing to work with them, and that is a conversation that is ongoing. I think we are – we have seen a number of positive steps from WIPO with regard to their procedures going forward that are important. For example, they have agreed to a commission that will have an external and independent auditing ability with regard to their projects to try to prevent this kind of thing from happening in the future. As I said, they’re going to seek a retroactive opinion from the sanctions committee, which wasn’t evident at the beginning of this. And they’re also going to ensure that any future projects are reviewed by their legal counsel. But we are still working with them on some of this U.S. stuff that we need.

QUESTION: But you don’t feel like they’re stonewalling you on this?

MS. NULAND: We do not. No.

Here is what the Chicago Tribune had to say about the canceled House committee hearing:

On Tuesday, the ranking Republican and Democrats on the U.S. House Foreign Affairs Committee accused Gurry of preventing two senior WIPO staff members from testifying before a planned committee hearing, forcing its cancellation.

The staff members asked to testify were James Pooley and Miranda Brown, a source familiar with the matter said.

“Director-General Gurry is obstructing this committee’s investigation of WIPO’s transfer of U.S.-origin technology to rogue regimes under international sanctions — a transfer that occurred on his watch,” Republican chairwoman Ileana Ros-Lehtinen and ranking Democrat Howard Berman said in a statement.

A WIPO spokeswoman was not immediately available to comment on the statement. Gurry told Reuters late last week that he would allow “a properly competent person” to testify.

…

Lawmakers have suggested that the United States freeze contributions to WIPO until they are satisfied it is cooperating, although this would likely have a limited impact on the U.N. agency, which relies on member state contributions for only 10 percent of its budget.

UPDATE 4 (2012-7-19): WIPO has issued this statement on their web page:

Information and Clarifications Concerning WIPO’s Technical Assistance Programs
Geneva, July 19, 2012
PR/2012/717

Following some recent media attention and requests for information from certain member states relating to WIPO’s technical assistance programs, WIPO Director General Francis Gurry provided the following information and clarifications concerning the actions that have been undertaken, or are being undertaken, by the Organization in relation to the provision of technical assistance to countries that are the subject of United Nations (UN) sanctions.

The Director General reiterated that the Secretariat is treating concerns relating to the Organization’s technical assistance programs to countries that are the subject of UN sanctions with the utmost seriousness.

The actions undertaken include:

1. Following the expression of initial concerns over the provision of standard IT equipment to patent and trademark offices for the processing of intellectual property (IP) applications, new internal procedures were established and made operational on May 1, 2012. Under these procedures, all managers must refer any activity proposed in a country subject to UN sanctions to WIPO’s Legal Counsel for guidance and clearance. The Legal Counsel will, wherever necessary, consult the appropriate UN Sanctions Committee. Additionally, any work plan for a country subject to UN sanctions will be submitted at the commencement of each calendar year for guidance by the appropriate Sanctions Committee.

2. The provision of standard IT equipment to the IP offices of the Democratic People’s Republic of Korea (DPRK) and the Islamic Republic of Iran that occurred in the preceding years, within the context of the Organization’s business modernization program for IP Offices in developing countries, is being referred to the relevant UN Sanctions Committees for their information and guidance.

3. The initial steps are being undertaken for a full external and independent review of the technical assistance provided to countries subject to UN sanctions.

4. A new internal instruction has been issued ending any provision of IT hardware in any of WIPO’s technical assistance programs.

The Director General reiterates his commitment to transparency and re-affirms the readiness of the Secretariat to continue to provide any information requested by any of the member states of the Organization.

While the legal advice received with respect to the technical assistance provided to DPRK and Iran was that the technical assistance was not in breach of UN Sanctions, it is hoped that the measures outlined above will provide assurance that the Organization is treating this matter with the seriousness that it warrants.

For further information, please contact the Media Relations Section at WIPO:

Tel: (+41 22) – 338 81 61
Fax: (+41 22) – 338 81 40
E-mail

(more…)

According to Yonhap:

The total number of South and North Koreans visiting each other’s country fell nearly seven percent in the first five months of 2012 from a year earlier, the Seoul government said Tuesday, as tensions persist over the North’s deadly attacks on the South in recent years.

A total of 47,432 South Koreans visited North Korea in the January-May period, while no North Koreans visited the South, according to data from the Unification Ministry, which handles inter-Korean affairs. The figure is down 6.9 percent from the same period last year, when the number of inter-Korean visits reached 50,925, including 13 North Koreans who visited the South.

Read the full story here:
Inter-Korean visits drop 7 pct this year
Yonhap
2012-7-10

UPDATE: Read here about increasing numbers of North Korean workers legally taking up work in China.

ORIGINAL POST (2012-6-29): Robert Collins recently published a report with HRNK on the DPRK’s songbun system. Previous posts on Songbun here.

Though some argue that the “Arduous March”, grassroots marketization, and the rise of official corruption has diminished the importance of songbun within the North Korean system, this article in the Daily NK  (which never uses the word ‘songbun”) makes the case that it is still important in one highly visible sector: overseas workers.

According to the Daily NK:

A North Hamkyung Province source told Daily NK on the 27th, “The process of choosing expatriate workers is very sensitive, even though the only target is Pyongyang-based factory and enterprise workers.”

According to the source, backgrounds are checked thoroughly, and single people may not take part. Married workers also need to obtain permission from the National Security Agency affiliated to the enterprise with which they are registered.

Prior to sending the workers abroad, the People’s Safety Ministry also checks each individual’s origins, the whereabouts of his or her direct family and if anyone in that family has spent time in a detention facility and why. They also check the marital status and criminal records of more distant relatives.

Despite the hard nature of the work that waits in China and the difficulty of obtaining a position, the number of applicants is huge, the source went on. And with single people ineligible as a measure to decrease the risk of defection, the source even commented that “single workers are rushing to get married,” adding also, “Pyongyang has caught marriage fever.”

“Competition is fierce because they would prefer to go away to a place where factories are running and they can get paid,” he pointed out. “Cadres and NSA agents in charge of the process are doing well out of the bribes. Some people are even borrowing money to bribe the authorities, saying that they will pay them back when they return from China”.

Commenting on the situation, Kim Seung Cheol, a defector who heads North Korea Reform Radio, said it is no surprise. He explained, “This is the only way working people can make any real money. It is similar to the American dream.”

Read the full story here:
Workers Face Fierce Fight for China Role
Daily NK
Choi Song-min
2012-6-29

Institute for Far Eastern Studies (IFES)
2012-6-28

A high ranking North Korean official visiting Taiwan gave a statement that, “North Korea is using most of its resources for national defense and military.”

This was revealed in a report released by KOTRA Taiwan Trade Mission. In this report, Kim Jong Gi, the chairman of the Committee for the Promotion of International Tradeof DPRK visited the Taiwan-(North) Korea Business Association to attend a meeting discussing North Korean business trade.

Kim criticized South Korea, Japan and other neighboring countries for harboring antagonistic attitudes toward communist North Korea, and especially the United States for enforcing “violent sanctions” against North Korea.

He also admitted the country was suffering from economic hardships and food shortages since 1995 with four years of continuous natural disasters. In 2011, the total food needed is around 6.5 million tons but the actual production output was only 5.1 million tons, leaving the country 1.4 million tons short.

Kim also explained that North Korea experienced similar economic growth as South Korea and Taiwan in the 1970s and 1980s but as socialist countries began to collapse one after another in the early 1990s, North Korea’s economic trade agreements with other nations became null and hence hindered its economy and trade.

At that time, North Korea was signing purchase agreements on magnesium oxide (about 800,000 ton) with Eastern European countries every year and barter trade with other socialist nations. But with the fall of socialist countries, North Korea quickly lost its long-term trading partners and it failed to take appropriate and necessary actions. Thus, it fell into the vicious cycle of unsold commodities with insufficient funds, leading to inevitable economic downturn.

Kim was the highest official from the DPRK to visit Taiwan. The purpose for his visit was to 1) attract investment from Taiwan for Hwanggumpyong Island and Rajin-Sonbong Special Economic Zone, and 2) express gratitude toward the Tzu Chi Foundation, a Buddhist charity for continuous assistance to North Korea. The Tzu Chi Foundation is reported to have sent aid to North Korea nine times.

According to IHS Janes:

In marked disregard of UN sanctions (Resolutions 1718 from 2006 and 1874 from 2009 both prohibit North Korea from conducting security-related exports), North Korean technicians and engineers stationed in Syria are working with specialists from Syria’s Scientific Studies and Research Centre (SSRC) to develop an arsenal of advanced SSMs. Co-operation between Pyongyang and Damascus also constitutes a Syrian violation of the same two resolutions, which, among other sanctions, include “an arms embargo, which also encompasses a ban on technical training or services”.

Nevertheless, IHS Jane’s has learned that engineers from North Korea’s Tangun Trading Corporation are working with engineers from the SSRC’s Project 99 in a compound located in Jabal Taqsis, near the city of Hama, to advance the Scud D development programme.

Read the full story here:

North Korea aiding Syria to upgrade Scud D capability
IHS Janes
Robin Hughes
2012-6-27

Ambassador John Everard has just released a new book on the DPRK, Only Beautiful, Please: A British Diplomat in North Korea.

Click image to order at Amazon.com!

Listen to a presentation on the book at Brookings here.

Below is the summary:

All too often, coverage of Democratic People’s Republic of Korea (DPRK) focuses on its nuclear ambitions, military culture, and the outsized personae of its leaders. From 2006 to 2008, former British ambassador to North Korea John Everard lived in Pyongyang from several months before the DPRK’s first nuclear test almost until Kim Jong Il’s stroke in 2008. During his travels around the DPRK, Everard had the rare opportunity to speak to ordinary North Koreans.

On June 25, the Center for Northeast Asian Policy Studies (CNAPS) at Brookings and the Walter H. Shorenstein Asia-Pacific Research Center (Shorenstein APARC) at Stanford University hosted John Everard for a discussion of his book, Only Beautiful, Please (Shorenstein APARC, June 2012) and his observations of daily life in North Korea. Panelists included David Straub, associate director of the Korean Studies Program at Stanford University and Brookings Senior Fellow Jonathan Pollack. Senior Fellow Richard Bush, director of the Center for Northeast Asian Policy Studies at Brookings, moderated the discussion.

The ambassador earlier published a paper with the Korea Economic Institute on North Korean markets.  Learn more about that here.

Ambassador Everard also gave a speech at the Korea Society in New York.

Hat tip to Marmot’s Hole.