North Korean Economy Watch

Despite tensions between North and South Korean this year, South Korea is still delivering promised energy aid to the North:

Under a six-nation accord signed last year, South Korea has started delivering energy assistance to North Korea.

This week’s shipment included 600 tons of round steel bars.

Seoul has so far provided assistance worth 124,000 tons of heavy fuel oil.

Read the full story here:
South Korea supplies the North with energy
Birmingham Star
08/08/08 

According to the Korea Times, the end of official North-South dialogues has put plans on hold to expand housing for workers in the Kaesong Industrial Zone. 

From the article:

Officials at the complex expressed concerns that South Korean companies intending to set up operations there may be unable to do so as a lack of housing will likely see manpower shortages.

According to the Gaesong Industrial District Management Committee, the number of North Korean workers at 72 companies operating in the site totals 30,084 and the figure could reach 40,000 by late this year.

Besides, approximately 80,000 to 100,000 workers would be needed by 2010 when 450 companies are expected to settle in the industrial park.

However infrastructure projections show that less than 60,000 North Korean workers will likely be able to commute to the industrial site.

Currently, North Korean workers head for their workplaces by 88 commuter buses and bicycles and the authorities promised to provide an additional 100 buses until the year’s end.

South and North Korea agreed last December to build dormitories to accommodate 15,000 North Korean workers.

The two sides were to conduct a geological survey early this year and start construction work in the first half of the year following the agreement but the suspended talks have hindered the plan.

After conservative President Lee Myung-bak vowed a tougher line toward the North, the communist North kicked South Korean officials out of its territory in March and cut off official communication channels.

The Seoul government recognizes the lodging problem as urgent. Yet, it admitted it cannot find a solution at the moment since the North is rejecting any talks.

Read the full story here:
Gaeseong Complex Lacks in Lodgings for N. Korean Workers
Korea Times
Kim Sue-young
7/9/2008

Kim Dong-Jin, head of South Korean steel company POSCO’s China branch, visited Pyongyang Tuesday for talks on purchasing more of the DPRK’s coal, iron ore, and other raw materials.

According to the AFP: 

POSCO, the world’s fourth largest steelmaker, has imported 200,000 tons of coal from North Korea every year.

South Korea’s investment in the North’s rich mineral resources has been sluggish due to the standoff over the North’s nuclear programme and mixed views on whether such investment can be profitable.

North Korea has promoted raw material exports as a means of generating much needed hard currency for some time.  Unfortunately, this development strategy will bring the fewest benefits to the North Korea people. Look at any oil-exporting country for comparison.  Raw materials exports generally enrich the politically connected—and workers, who in North Korea are unable to leave their jobs or negotiate their wages, generally (pun alert) get the shaft.

South Korean firms operating in the North, however, do tend to offer better working conditions than North Korean or Chinese firms.  If POSCO launches operations in North Korea, hopefully public pressure and the profit motive will see an increase in productivity, wages, and working conditions for the DPRK’s miners.

South Korea apparently also operates a graphite mine in North Korea.  If anyone has any information on this, please send it my way.

Read the full story here:
POSCO eyes NKorea raw materials
AFP
6/25/2008

Although political tensions have risen between North and South Korea (list here), Yonhap reports trade between the two countries has increased this year!

According to Yonhap:

South Korea’s trade with North Korea in the first five months of this year surged 30 percent on-year thanks to brisk industrial exchanges that offset a sharp drop in humanitarian aid, the Unification Ministry said Tuesday.

Inter-Korean trade volume increased to US$734.25 million in the January-May period, up from US$562.92 million during the same period last year, according to ministry data. The increase was notable in the commercial sector, which posted US$685 million worth of trade over the months, up 52 percent year-on-year.

However, exchanges in non-commercial areas significantly contracted due to strained inter-Korean political ties. Non-commercial trade dropped by 56 percent to US$49.2 million.

I have been unable to locate this information on the MoU website.  Perhaps it is not listed in English.  If you find it, please send me the link. 

Read the Yonhap article, see below:
Inter-Korean trade rises despite political chills
Yonhap
6/25/2008

UPDATE 3: 0-0 Draw in Seoul

From the Associated Press (via the IHT):

Amid an atmosphere of goodwill, South Korea and North Korea tied 0-0 in a 2010 World Cup qualifier Sunday.

With both teams already through to the final round of qualification, the match had the feeling of a friendly from start to finish. The visitors were given a rousing reception when they appeared for warmups. The respective anthems were played before 55,000 fans in Seoul’s World Cup Stadium, including 500 North Korean supporters. At the final whistle, fans applauded both sets of players.

Both teams finished with 12 points, though South Korea took the top spot in Group Three due to superior goal differential.

The draw for the final round of Asian qualification will be made on June 27 and matches begin in September.

UPDATE 2: North Korea tops Jorday 2-0, next stop Seoul!

From the Associated Press (via Herald Tribune):

North Korea reached the final stage of Asian qualifying for the 2010 World Cup with a 2-0 win over Jordan on Saturday, ensuring neighbor South Korea also progressed.

Two goals from Hong Yong Jo gave North Korea 11 points from 5 games, meaning it can finish no lower than second in Group Three, and therefore progresses to the final 10-team round that will decide Asia’s berths at South Africa 2010.

North Korea travels to Seoul for the final match to take on South Korea on June 22.  The match had been in some doubt as North Korea officials demanded that the game be held in a third country or on the southern island of Jeju. The Korean Football Association refused to compromise and North Korea finally agreed Friday to play the match in Seoul. The team will arrive in the South Korean capital on June 19.

Read the full story here:
World Cup: North Korea beats Jordan 2-0, puts North and South Korea in last qualifying round
Associated Press (via Herald Tribune)
6/14/2008

UPDATE 1: North Korea’s World Cup Football shenanigans made headlines earlier this year when Pyongyang refused to raise the South Korean flag and play its national anthem in a regulation match.  FIFA responded by moving the game to Shanghai, China, where North Korean Economy Watch was able to attend.  Well the DPRK men’s team has risen to second place in its qualifying bracket (see original post below), and now that it has only two games left, Pyongyang again inserts politics into sport.

From the Korea Times:

The South’s Korea Football Association (KFA) had a meeting with its North counterpart in Gaeseong Tuesday, and the North side asked the KFA to host their match, scheduled for June 22 at Seoul World Cup Stadium, in another country due to a cold relationship between the two sides and ongoing rallies in Seoul.

The North Korea Football Association also asked Mohamed bin Hammam, the president of the Asian Football Confederation (AFC), last month to change the site of the June 22 match.

However, FIFA, which has already selected referees and match supervisors, ignored the North’s pleas, and the KFA also stated that it would stick with the original schedule.

South Korea’s action compelled the North to propose Jeju Island, where the North’s under-17 squad participated in the U-17 World Cup last year, as an alternative. But the original plans were not changed.

ORIGINAL POST:The North Korean national men’s team toppled Turkmenistan 1-0 last week in the 2010 World Cup qualifier.  With the game heading toward a goalless stalemate, Choe Kum Chol scored with 19 minutes remaining to put the North Koreans in sight of a place in the final round of qualification.

North Korea now has 8 points, putting the team at the top of group 3. 

On June 14, North Korea will host Jordan in Pyongyang.

On June 22, North and South Korea will meet in Seoul.  For coverage of their March game in Shanghai, click here.

Read the full stories here:
North and South Korea draw 0-0
Associated Press
6/22/2008

North Korea downs Turkmenistan 1-0 in World Cup qualifier
Herald Tribune (via Associated Press)
6/7/2008

N. Korea Disputes Match Location
Korea Times
Kang Seung-woo
6/11/2008

From Reuters:

North Korea has greatly reduced malaria infections at home but mosquitoes carrying the disease are crossing the heavily armed border and infecting hundreds each year in the South, a provincial governor said on Tuesday.

Kim Moon-soo, governor of Gyeonggi province which surrounds Seoul and shares a border with North Korea, visited the communist state this month to discuss food aid and ways to keep malaria in check.

Kim said there were about 60,000 civilian infections in North Korea in 2003 while in 2007 the number was reduced to an estimated 7,430.

In his province, 677 people were infected last year with malaria by mosquitoes that had crossed the no-man’s land Demilitarized Zone buffer dividing the two countries technically still at war.

The infection rate in the province, though, has fallen since 2001 when several thousand people were infected, according to South Korean government statistics.

South Korea has worked with the World Health Organization since 2001, when an estimated 300,000 civilians were infected in the North, to eradicate malaria on the peninsula.

Seoul said earlier this month it would provide aid valued at $1.8 million to combat malaria in the North.

Read the full article here:
North Korea fights off malaria as disease heads South
Reuters
Jon Herskovitz
5/27/2008

Institute for Far Easter Studies (IFES)
NK Brief No. 08-5-22-1
5/22/2008

Earlier this month, the South Korean government announced that it would seek to relax regulations concerning cooperative ventures and exchanges with North Korea. Currently, South Korean companies, organizations or individuals wishing to enter into business agreements with North Korean partners were required to get government permission not only for the project, but for the individuals involved in the project.

On May 8, the Ministry of Unification announced plans to abolish the system granting (or denying) permission to individuals involved in these ventures, and to maintain only the system through which it grants authority to carry out specific projects.

Cross-border traffic faced similar red tape, as permission was required not only for goods being imported or exported, but for the importers and exporters themselves. The new plan includes measures for these import and export regulations to be loosened so that it is only the goods that need review, not the people involved in the trade. In addition, trucks and other equipment used to carry goods across the border will be certified for a period of five years, more than twice as long as the current two-year licensing system.

The government is also moving to ease requirements calling for South Korean citizens to report all contact with North Koreans, and instead to require reports on conversations only if the topic falls outside that of the approved project.

Reflecting the growing amount and diverse nature of inter-Korean cooperative projects, and the ROK government’s policy of encouraging such exchange, this new proposal is aimed at reducing the red tape and paperwork hassles necessary to launch and carry out these projects by reducing the amount of information required by the applicant and the volume of cross-checking required by government offices. At the same time, the proposal calls for the introduction of fines for those found to be filing false applications or reports.

If this proposal does not get mired in the Cabinet or other committees, it is expected to reach the floor of the National Assembly sometime in June.

With the likelihood that food is coming into short supply in North Korea, the authorities and individuals alike have implemented strategies to minimize the adverse effects.

I am keeping a running list of official and civil responses here as they appear in the media.

1. The DPRK supposedly ended rations for mid-level cadres (party and state employees), though food can still be purchased in markets. Unless the government is hoarding its grain supplies, this probably has the effect of improving food distribution (transferring food stocks outside Pyongyang), though not to the satisfaction of those who were used to receiving it for “free.”

2. The DPRK asked China for food aid. (Requested 150,000: tons of corn. Received: 50,000 tons on their first ask)

3. Propaganda extolling people not to waste food has been distributed to workers.

4. The DPRK has started cracking down on liquor production/sale.

5. Lets grow potatoes!

6. Distributing food stocks to military families from military warehouses.  This will hopefully take some of the pressure off the price of grains in the markets.

7. Solicit food aid from the US.

8. Officials begin to demand more bribes!

9.  The KPA halts military exercises to assist in farming.

10.  Propaganda campaign to educate the population about alternative foods (Good Friends via OneFreeKorea)

11. China increases food export quota

Even as realtions sour between North and South Korea, the South plans to donate US$1.18 million worth of anti-malaria supplies to the North via the UN World Health Organization.

Seoul has made similar anti-malaria donations since 2001, reducing the DPRK’s malaria cases to about 7,500 last year from some 300,000 in 2001.

Read the full article here:
South Korea to provide anti-malaria supplies to North Korea
Associated Press
5/2/2008

The Daily NK reports that South Korean businesses have delayed moving into the zone, or canceled their plans outright:

78.5 percent of those firms which received lots at the Kaesong Industrial Complex in the second round of the first stage of distribution in June last year have not begun construction of their facilities. 62.4 percent of them have not even hired a firm for construction,” said the Korea Federation of Small and Medium Business (KFSB) in a report released on April 27. For the report, the KFSB selected 85 firms out of all those firms which received lots and conducted a survey on how these firms are preparing their move into the Complex.

Companies distributed with lots in June last year are required to begin construction of their facilities within two years after the initial distribution contract. It is true that these firms have enough time to build their facilities. However, a number of firms have expressed that they would not move into the Complex.

The report says, “13 out of a total of 167 firms have already told the KFSB that they would not move into the Complex, and five of them have canceled the contract.”

59 percent of the firms including those 13 said that they would relinquish their rights to move into the complex because they are unable to raise enough money. 64 percent of these firms said that the reduced government funding has contributed to their financial difficulties.

Read the full article here:
South Korean Firms Postpone Their Move into the Kaesong Industrial Complex
Daily NK
Choi Choel Hee
4/28/2008