North Korean Economy Watch

According ot Yonhap:

South Korea is investigating about 10 companies accused of importing North Korean merchandise in violation of a ban that came into effect last year over the sinking of a warship, an official said Wednesday.

South Korea suspended all inter-Korean trade in May last year when a multinational investigation found North Korea responsible for the sinking of the Cheonan earlier that year.

…

Unification Ministry spokeswoman Lee Jong-joo said in a briefing in Seoul that the authorities are questioning the companies on suspicion of violating the ban by importing marine products, mushrooms and other items from North Korea via China.

The companies claimed that they had thought the products were from China. Lee said the government plans to step up its crackdown on imports from North Korea starting next month in an effort to reinforce the ban.

…

Read the full story here:
Companies under probe for importing N. Korean products: official
Yonhap
1/19/2010

According to the Korea Times:

The late North Korean leader Kim Il-sung proposed secret negotiations with Washington ahead of the assassination of then South Korean first lady Yuk Young-soo in 1974, according to a classified document dated June 6, 1974 from the U.S. Embassy in Senegal.

The revelation came after An Chi-yong, a former journalist based in the United States, posted the confidential dossier, classified as “secret,” on his website “Secrets of Korea,” Tuesday.

It reveals that the North’s founder, father of current leader Kim Jong-il, asked the late Senegalese President Leopold Senghor to deliver a secret message to the U.S. in 1974.

“President Senghor informed me on June 5 that during his recent visit to Pyongyang, Kim Il-sung charged him with a message for the United States government,” according to the dossier.

“Kim Il-sung said the DPRK (North Korea) would welcome secret negotiations with the USG (U.S. government) on the future of Korea.”

The suggestion was made two months before the assassination of the first lady on Aug. 15, 1974.

Yuk was shot by a Japan-born Korean believed to be a communist sympathizer and having acted upon orders from a pro-Pyongyang organization there.

The dossier also offers a glimpse of Kim Il-sung’s attitude toward Washington and Tokyo and his thoughts on the unification of the two Koreas.

“The North Korean leader told Senghor he felt the DPRK’s enemy in the Pacific is Japan, not us,” the document stated.

“What North Korea seeks is a confederation, not suppression of South Korea, and within that confederation, there would be a place for U.S. influence in the South.”

Another U.S. government document that cites a New York Times article by Richard Halloran reveals that Kim Il-sung may have sought a similar favor from the late Japanese Prime Minister Takeo Miki before the 1974 assassination.

“Halloran (NYT 8/10) says Kim Il-sung informed President Ford through Prime Minister Miki he wants to open direct talks with us to settle outstanding issues of Korea,” according to the dossier dated Aug. 11, 1975. “Wants us to send envoy to prepare agenda for talks with HAK (Henry A. Kissinger) on U.S. troop withdrawal, peace treaty to replace 1953 truce.”

The two Koreas remain technically at war as the 1950-53 Korean War ended in an armistice, not a peace treaty

It remains uncertain whether the communist North succeeded in holding bilateral talks with Washington.

A declassified U.S. document shows that Pyongyang continued its efforts to have dialogue with the U.S. even after the tragic assassination took place.

It says on Aug. 27 1974 an aide to then Romanian President Nicolae Ceausescu met with then U.S. President Ford at the White House to deliver a message from Kim Il-sung.

“The North Korean leadership wants to have confidential contact with the United States for discussions,” according to the declassified memorandum from President Gerald Ford’s files.

Yet, Ford’s response to the repeated proposal for talks was lukewarm.

“Certain things must precede such contacts. We don’t want to go in without a firm understanding,” the U.S. President was quoted as saying in the declassified documents.

Here is a link to the actual document.

Here is a link to “Secret[s] of Korea“.

Read the full story here:
NK proposed talks with US before 1974 assassination’
The Korea Times
Lee Tae-hoon
2011-1-11

According to Yonhap:

Despite persisting political woes, a new South Korean company has begun operating in North Korea’s border industrial complex that combines superior South Korean capital and know-how with the North’s cheap local labor, a government official said Thursday.

The company, known as DSE, completed building its factory in Kaesong in early May and is therefore exempt from the investment ban on North Korea that Seoul imposed later that month over the sinking of a South Korean warship, the Unification Ministry official said.

…

The ministry official, who spoke on customary condition of anonymity, said DSE began operating on Jan. 3 and is employing 160 North Korean workers, part of the 44,000 workforce in the Kaesong complex, to produce lighting apparatuses and other metallic products.

The number of South Korean companies operating in Kaesong now stands at 122, the official added.

…

South Korea has since sharply cut down on the number of its workers allowed to stay in Kaesong. The North, in an apparent act of desperation to revive its economy, has since called for lowering tension and holding cross-border dialogue. South Korean officials are demanding that the North first show “sincerity,” indicating Pyongyang must apologize for the series of provocations blamed on it.

Read the full story here:
New S. Korean company begins operating in N. Korean factory park
Yonhap
Sam Kim
1/6/2011

Image from KCTV via Yonhap

According to Yonhap:

North Korea has deployed new battle tanks and bolstered the size of its special forces by 20,000 over the past two years, deepening the threat of unconventional warfare against South Korea, the South’s new defense white paper said Thursday.

The biennial defense paper also defined the North Korean regime and its military as the “enemy” of South Korea, a description stronger than before but short of reviving the symbolic tag of “main enemy” for the communist neighbor.

The new white paper was released as the South’s military resolved to strike back hard against future provocations by the North, which last month bombarded the South’s front-line island of Yeonpyeong, killing two marines and two civilians.

“Threats from North Korea’s asymmetric warfare capabilities such as special forces, artillery pieces and weapons of mass destruction have been on a steady rise since 2008,” Deputy Minister Chang Kwang-il told reporters.

Military officials here have said the North is increasingly focused on unconventional or “asymmetric” weapons, such as improvised explosives or low-cost missiles because the regime knows its aging conventional weapons are no match for the technologically superior South Korean and U.S. forces

The white paper confirmed for the first time that North Korea deployed its new battle tank, called the “Pokpung-ho,” which in Korean means “Storm Tiger,” believed to have been developed in the 1990s based on the Soviet Union’s T-72 tanks.

The North’s new tank is presumed to be equipped with either a 125- or 115-millimeter main gun, similar to that of the T-50 battle tank of the Russian Army, defense ministry officials said.

The paper didn’t say how many of the new tanks North Korea has “deployed for operational use,” but said the number of North Korean tanks rose to some 4,100 units as of November this year, from 3,900 in 2008.

Also, the paper said the number of lightly equipped North Korean special forces, who are trained to quickly infiltrate South Korea, increased to 200,000 from 180,000.

Overall, the total number of North Korean soldiers remained unchanged at about 1.19 million, but the North has reorganized its military to add four new divisions, the paper said.

Although its number of artillery pieces changed little over the past two years, its 170mm self-propelled artillery and 240mm multiple rocket launchers deployed on the front line are capable of carrying out a “massive surprise bombardment” on the South Korean capital of Seoul and its neighboring areas, the paper said.

North Korea is “presumed to have secured about 40 kilograms” of weapons-grade plutonium by reprocessing spent nuclear fuel rods four times by 2009, the paper said.

Concerns about the North’s nuclear weapons program deepened last month when Pyongyang, which conducted two nuclear tests in 2006 and 2009, revealed a uranium enrichment facility to a visiting U.S. scientist. The uranium enrichment program could give the North a second route to build a nuclear bomb.

“Given that North Korea claimed that some 2,000 centrifuges are operational in November 2010, the North is presumed to have pushed for the highly enriched uranium (HEU) program,” the paper said.

Early this week, Chang told reporters that his ministry decided not to revive the “main enemy” tag for the North to “minimize controversy,” because the defense white paper is an official government document that is “used internally and externally.”

Thursday’s defense paper clarified that the “North Korean regime and military are our enemy” that poses a “grave threat” to the South’s security by “staging military provocations such as the torpedo attack on the Cheonan warship and the shelling on Yeonpyeong Island.” Forty-six sailors were killed when the North allegedly torpedoed the Cheonan warship in March in the Yellow Sea.

“Not using the expression ‘main enemy’ does not mean that we softened our stance,” Chang said.

The new description is aimed at sending a strong message of warning to the North and clarifying that the North Korean regime and its military, not the people, are aggressors, according to the official.

South Korea first used the label “main enemy” for North Korea in its 1995 white paper after North Korea threatened to turn Seoul into a “sea of fire” a year earlier. Seoul stopped using the expression in 2004 in an apparent bid not to antagonize Pyongyang amid then-thawing ties.

In its defense paper published in 2008 under the government of President Lee Myung-bak, South Korea called North Korea an “immediate and grave threat” to its national security.

The two Koreas are still technically at war because the 1950-53 Korean War ended in a truce, not a peace treaty. About 28,500 U.S. troops are stationed in the South, a legacy of the three-year war.

The New York Times has more.

Additional information:
1. This web page does not focus on military affairs (except when it overlaps with Google Earth research or broader economics), but I have put some military information resources here for the convenience of readers.  Please let me know if anything should be added.

2. I have kept a chronological list of Yonpyong stories here.

3. I have kept a chronological list of stories related to the DPRK’s new uranium facilities here.

Read the full story here:
N. Korea deploys new battle tanks, boosts special forces
Yonhap
Kim Deok-hyun
12/30/2010

According to Yonhap:

Closing a tense year in cross-border relations, North Korea is faxing New Year’s greetings to South Koreans likely to support the resumption of cross-border aid next year, an official said Thursday.

A total of 35 organizations, including local governments near the border with the North, and 15 South Korean activists, have so far received such faxes, the government official said, asking not to be identified by post or name.

North Korea has often used fax documents this year to deny its involvement in the deadly March sinking of a South Korean warship and its responsibility for the artillery exchange between the two countries in the Yellow Sea in November.

Two South Korean marines and two civilians were killed in the artillery attack on the island of Yeonpyeong. The latest North Korean fax offensive did not refer to the attack, but contained calls for the South to honor their past two summit deals promising economic aid and cooperation for the North, the official said.

“We are here sending New Year’s greetings. We wish you success in your patriotic activities toward the reunification of the (Korean) nation and the defense of peace and stability under the banner of the inter-Korean declarations,” the fax was quoted as saying.

North Korea has sent similar faxes to South Korea annually since 2001, according to the official. The two countries held their first summit in 2000, and the second one took place in 2007.

The official said the recipients this year included the Incheon city government and the Gangwon provincial government, both of which are headed by liberals supporting assistance to North Korea.

“The North also appears to be trying to create a rift and trigger an anti-government struggle among us,” the official said.

The ties between the Koreas deteriorated after a conservative government took power here in early 2008, suspending unconditional aid and pushing the North harder to take denuclearization steps.

The two Koreas remain technically at war after the 1950-53 Korean War ended in a truce rather than a peace treaty. South Koreans are banned by law from contacting North Koreans without prior approval.

Read the full story here:
N. Korea faxing New Year’s greetings to S. Koreans
Yonhap
Sam Kim
12/30/2010

According to Yonhap:

South Korea has spent only 5.6 percent of its funds earmarked for promoting humanitarian and economic ties with North Korea this year, the unification ministry said Sunday, as inter-Korean relations tumbled to their worst in decades.

As of the end of November, the ministry said it had endorsed spending worth some 62.6 billion won (US$54.4 million) from its South-North Cooperation Fund, or 5.6 percent of the total allocated for this year.

Just over half the sum, or about 32.8 billion won, went toward financing loans for inter-Korean trade and economic cooperation, while another 27.8 billion won was spent on improving exchanges among families separated across the border and other humanitarian projects.

The low spending rate apparently reflects the ban on cross-border exchanges following the deadly March sinking of a South Korean warship, blamed on a North Korean torpedo attack, and escalated tensions on the peninsula since the North’s artillery attack on a southern island last month.

The fund’s implementation rate ranged from 37 to 92.5 percent between 2000 and 2007, but nosedived after President Lee Myung-bak took power in 2008 with a hard-line policy on the North. That year, the rate stood at 18.1 percent before dropping further to 8.6 percent in 2009.

Read the full story here:
S. Korea spends 5.6 pct of inter-Korean cooperation fund
Yonhap
12/26/2010

According to Yonhap:

Inter-Korean trade has fallen about 30 percent this year, largely affected by South Korea’s move to cut almost all business relations with North Korea after the North sank one of its naval ships in a torpedo attack in March, the customs office said Wednesday.

According to data provided by the Korea Customs Service (KCS), trade between the two Koreas amounted to US$464 million during the January-November period, down from $649 million recorded a year earlier.

In May, a multinational team of investigators released a report saying that North Korea torpedoed the South Korean warship Cheonan on March 26 near their disputed western maritime border, killing 46 sailors. The North has denied any involvement.

In response, the Seoul government suspended almost all business relations with Pyongyang on May 24 with the exception of the industrial complex in the border town of Kaesong, where South Korean firms are doing business in cooperation with workers from the North.

South Korea’s exports to the North came to $130 million during the cited period, down 28 percent a year earlier, while imports dropped 29 percent on-year to $334 million, the data showed.

Despite such a sharp shrinkage, trade through the Kaesong industrial complex, tallied in a separate statistic, remained robust. Trade amounted to $1.31 billion during the 11-month period, up 62 percent from a year earlier.

“There have been some disruptions due to heightened geopolitical tensions but the overall number of companies operating there increased compared with a year earlier, which resulted in a hike in production,” a KCS official said.

The official said that companies in the North Korean border town numbered 121 as of November this year, up from 93 a year earlier. An economic recovery in the South also helped boost production in factories there, the official said.

South Korea is the North’s second-largest trade partner after China. A suspension of inter-Korean business would significantly impact the reclusive communist nation’s efforts to secure cash, according to experts.

The two Koreas remain technically at war as their 1950-53 conflict ended in a truce, not a peace treaty.

Read the full story here:
Inter-Korean trade falls sharply amid heightened tensions
Yonhap
12/22/2010

According to the Washington Post:

Hoping to better predict when North Korea might collapse, South Korea is spending $1.6 million to come up with a formula that measures the stability of the world’s hardest-to-measure country.

The formula will take into account political loyalty in the military, recent economic output, even the ups and downs of leader Kim Jong Il’s health – all despite a lack of verifiable information on any of those factors.

“The major problem with this is the lack of data,” said one senior government official, who spoke on the condition of anonymity because the project, known as the North Korea Situation Index, is underway.

When the Unification Ministry finalizes the index within the next month or so, its assessment – probably expressed as a single number, the official said – will represent an attempt to introduce some certitude into the increasingly polarized debate about the North’s life expectancy.

Predicting the date of the reclusive state’s demise has long been a favorite parlor game among policymakers in Seoul and Washington, but a year of significant developments – with North Korea unleashing several military provocations, drawing closer to China and all but formalizing a hereditary power transfer – has somehow bolstered two opposing views. Where some see evidence of a nation in disarray, others see a nation stronger than it has been in years.

“Unification is drawing nearer,” South Korean President Lee Myung-bak said last week of the state of affairs on the peninsula, adding that North Korea’s control of its people is unsustainable.

“That’s either wishful thinking or irresponsible,” said former foreign minister and opposition member Song Min-soon. “There are no grounds to say that. Even in the drastic case, like Kim Jong Il dying tomorrow, the succession has been paved, and I do not think the regime will collapse.”

Veteran analysts often describe North Korea as a paradox – and a poor target for statistical analysis. Just enough information trickles out that experts and officials can form whatever opinions they please. A year ago, for instance, Pyongyang authorized a drastic currency revaluation that wiped out many citizens’ savings. Some experts now say that mistake fomented still-bubbling dissent. Others, noting that it did not cause an uprising, say it merely demonstrated the extent of Pyongyang’s social control.

A year ago, the North had no anointed heir set to take over should Kim die. Now it does – except that Kim Jong Eun is 27 or 28 and might not be ready.

And unlike a year ago, U.S. visitors to Pyongyang are coming away impressed, noting widespread electricity, bustling markets and busier-than-usual streets. North Korea might, however, be focusing its efforts on its capital as it prepares to celebrate the 100-year anniversary in 2012 of the birth of founder Kim Il Sung.

“North Korea is the land of contradicting pictures,” said Katy Oh Hassig, a North Korea specialist at the Institute for Defense Analyses, which conducts research for the Pentagon. “It’s both stable and instable. It is stable in the sense that with the military, the elites, there’s still an imposed level of control. But it’s unstable because of the level of frustration among ordinary people – not spoken or expressed, but it’s brewing beneath the surface.”

Even those working to develop the Situation Index admit that measuring North Korea’s stability involves more guesswork than science. According to the senior official, much of the input comes from non-quantitative sources, such as interviews with recent defectors or anecdotal accounts of North Korean political dissent.

Then there is the challenge of determining the state of Kim Jong Il’s health, among the biggest variables in assessing the North’s stability. Diplomatic cables released in recent weeks by the WikiLeaks Web site describe the 68-year-old as a chain smoker and a recreational drug user. The senior official said that in an effort to measure Kim’s health, South Korea keeps track of his field trips to factories and military bases. This year, he has made 153 on-the-spot visits – a supposed sign of stable health.

The South also analyzes photos and video of Kim, such as those taken during an Oct. 10 parade to mark the 65th anniversary of the Workers’ Party, sometimes submitting the footage to its own team of doctors. During the parade, Kim was seen limping on his left leg, evidence of an August 2008 stroke. But he was also seen standing – and he had been out late at a public festival the night before.

North Korea has long outlasted predictions of its demise. After Kim Il Sung’s death in 1994, South Korean diplomats told the United States that North Korea would collapse within two years. A year later, Washington-based expert Nicholas Eberstadt, voicing a widespread opinion, wrote, “There is no reason at present to expect a reign by Kim Jong Il to be either stable or long.”

“The whole question about predicting or foreseeing revolutions or regime changes is, at best, an art – and never has been a science,” Eberstadt now says. “But there’s always a desire on the part of policymakers to know the unknowable, and sometimes they’ll pay big bucks to learn the unknowable.”

Collecting and verifying information from within North Korea is exceptionally complicated.  Fortunately today we have more sources of information than ever.  Not only are there the DPRK’s offical and quasi-official news outlets, we also have significant satellite imagery, 20,000 defectors in the ROK, and multiple organizations that specialize in getting information: Daily NK,  Rimjingang, Good Friends, PSCORE, Open Radio, North Korea Intellectual Solidarity, etc.

Here is a great paper on the complexities of obtaining and analyzing information from the DPRK.

Read the full story here:
Seoul undertakes effort to measure North Korea’s longevity
Washington Post
Chico Harlan
12/19/2010

According to Yonhap:

Output at an inter-Korean industrial complex in the North Korean border city of Kaesong rose by over 10 percent in October from the previous month, data released by the Unification Ministry said Sunday.

In October, companies in the Kaesong complex produced goods totaling US$29.41 million in value, up by $2.72 million, or 10.2 percent, from $26.69 million in September, according to the data.

The figure increased by 8.9 percent from the same month last year, they showed.

Total output for the Kaesong complex had been on the decline since the Cheonan incident in March, in which 46 sailors died in a torpedo attack blamed on North Korea. The figure hit $26.41 million in July.

The data also showed that the number of North Korean workers in the border town complex marked 44,958 in October, rising steadily from 42,397 in March.

“Although the North shelled Yeonpyeong Island on Nov. 23, North Korean workers have been on the rise,” said a ministry official. “According to unofficial statistics, 45,300 North Koreans are working in Kaesong today.”

The Kaesong industrial park is considered the last remaining major symbol of reconciliation efforts between the two Koreas, whose relations have been tense over the past three years. The park began operating in 2004 as a product of the first inter-Korean summit held four years earlier.

Read the full story here:
Output for Kaesong industrial complex increases 10 pct in October
Yonhap
12/19/2010

According to the Choson Ilbo:

Young North Koreans apparently prefer American soaps and films to South Korean ones, and they can now watch both easily. A defector who gave his name as Kim (43) and used to sell TV sets in the North said, “Used color TVs imported from China have both PAL and NTSC options, so there’s no problem receiving South Korean TV signals,” even in remote South Hamgyong Province.

North Korea and China use the PAL format to receive TV signals, while South Korea and Japan use the NTSC format. Some European countries and the Middle East favor SECAM. Most models manufactured after the 1990s allow users to shift formats.

“In South Hamgyong Province, only a few households are able to capture TV signals, but reception is quite good in Hwanghae or South Pyongan provinces,” Kim said. “People there look forward to the evenings when dramas are broadcast.” He said North Koreans also enjoy watching news and current events programs as well and power their TVs with their car batteries during power outages.

Another defector surnamed Yoo (40), who used to sell DVDs in the North and came to South Korea late last year, said North Koreans have grown tired of South Korean TV soaps with their stereotypical plots. “Nowadays, ‘Rambo 4,’ ‘007 Casino Royale,’ and other American action films or TV dramas like ‘Prison Break’ are popular,” she added.

According to Yoo, South Korean TV soaps like “Winter Sonata,” “All In” or “Autumn in My Heart” were popular in the early 2000s, while “Jewel in the Palace” and other historical dramas grew popular in the late 2000s. Recently, action movies are gaining more attention.

North Koreans also prefer American movies to Korean ones. “Practically everyone knows ‘Titanic.'” The movie classic “Gone with the Wind” is popular among upper-class North Koreans in Pyongyang, while young people enjoy action films. “DVDs of American movies or TV dramas fetched the highest prices,” she said. “But now USBs with American TV programs are more popular than DVDs.”

Additional information:
1. Titanic is rumored to have been screened in Pyongyang cinemas.

2. Also, Tom and Jerry was shown on North Korean television in the 1980s. See here and here.

3. We have heard conflicting reports about just how tolerant the North Korean government is of foreign films.

Read the full story here:
N.Korean TV Viewers Favor American Shows
Choson Ilbo
12/18/2010