North Korean Economy Watch

According to the AFP:

South Korea said Monday it would provide 26 billion won (22.2 million dollars) for humanitarian projects in North Korea, the second donation this month to its communist neighbour amid easing relations.

The unification ministry said it would donate 15.2 billion won to the World Health Organization’s programme for malnourished children and 4.7 billion won to the UN Children’s Fund UNICEF.

Spokesman Chun Hae-Sung said some six billion won has been allocated for a variety of other projects run by private groups.

“We decided to assist North Korean infants and children through private and international organisations, after considering the urgent situation in North Korea,” he told a briefing.

On December 18 the South shipped swine flu medication worth 15 million dollars to the North.

It was the first direct aid to Pyongyang from Seoul’s conservative government since it took office in February 2008.

Relations between the two Koreas have been interesting recently.   Official assistance from the South Korean government is at a near-term low, and the South Korean government spent little of the funds it appropriated for inter-Korean projects this year (See: here, here, and here).  South Korea has also tightened import rules for a number of North Korean goods (to protect local businesses), halted the export of luxury goods to the DPRK, and blacklisted DPRK businesses sanctioned by the UNSC. In addition, 2009 saw turmoil in the Kaesong Industrial Zone and a (predictable) naval clash along the NLL.

“Economic relations,” however, seem to have turned the corner recently.  Despite several months of decline, inter-Korean trade increased in the past two months.

Institute for Far Eastern Studies (IFES)
NK Brief No.09-12-9-1
12/9/2009

Aid to North Korea and investment into inter-Korean cooperative projects by the South Korean government appears to be hitting a record low in 2009, dropping to a level not seen since the year 2000.

According to the South Korean Unification Ministry, between January and the end of November of this year (2009), the government dispensed a mere 6.1 percent of the nearly 1.12 trillion won allocated. Just over 68.3 billion won were spent on cooperative projects between North and South Korea. This is considerably less than last year, when only 18.1 percent (only 231.2 billion won of an allocated 1.275 trillion won) was put to use.

In each year since 2000, the South Korean government has failed to spend all funds set aside for inter-Korean cooperation. In 2000, 81 percent of funds were distributed, while in 2001 that fell off to 56.1 percent, and then in 2002 dropped to 50 percent. In 2003, this bounced up to 92.5 percent, then fell to 65.9 percent in 2004, rose to 82.9 percent in 2005, dropped back to 37 percent the next year, and jumped back to 82.2 percent in 2007. Looking at how the disbursed funds were spent, one can see that humanitarian aid was especially reduced.

Following the North’s nuclear test, rice, fertilizer and other government aid was suspended, while indirect assistance from private-sector organizations was also reduced. This led the government to spend only 0.9 percent (from January through November) of the 811.3 billion won set aside for humanitarian aid in 2009.

Despite the fact that the South Korean government has spent such a small portion of the inter-Korean cooperation budget over the last two years, it has been decided that if there is movement on the North Korean nuclear issue, a budget increase of 190 million won will be sought for inter-Korean cooperation next year.

UPDATE:  According to AFP:

South Korea is preparing to ship medical supplies worth more than 15 million dollars to help North Korea fight an outbreak of swine flu, officials said Monday.

The unification ministry, which handles cross-border ties, said the shipment would include antiviral drugs for 500,000 patients — Tamiflu for 400,000 and Relenza for 100,000 — and sanitation supplies.

The aid will cost an estimated 17.8 billion won (15.3 million dollars), which will be financed by a state fund for inter-Korean cooperation, it said.

Spokesman Chun Hae-Sung said Seoul would send the shipment as soon as possible, and definitely by the end of the year. But the North, which had accepted the offer, had not yet set a firm date.

The drugs shipment will be the first direct South Korean government aid since relations soured last year, although Seoul has funded assistance to Pyongyang through private groups.

North Korea Wednesday reported nine cases of (A)H1N1 in the capital Pyongyang and the city of Sinuiju bordering China. No death toll was given.

Observers say the virus could pose a particular threat to the North because of malnutrition amid persistent food shortages and a lack of drugs such as Tamiflu.

Good Friends, a Seoul-based welfare group with cross-border contacts, quoted an unidentified Sinuiju city official as saying more than 40 people had died of the swine flu in the border city alone.

The World Health Organization, however, told Yonhap news agency that all nine North Korean patients have recovered.

Yonhap quoted Suzanne Westman, coordinator of outbreak alert and response at the WHO’s New Delhi office, as saying no additional cases were reported in the isolated communist country.

The first of the patients, all children aged between 11 and 14, was discovered on November 25 and the last case on December 4, she said, adding that three of the infections were in Pyongyang with the other six in Sinuiju.

“All contacts have been identified, put in isolation and treated,” she told Yonhap, adding that North Korea had a solid surveillance system and a sufficient number of physicians is believed to be able to handle the outbreak.

ORIGINAL POST: According to KCNA:

Anti-A/H1N1 Flu Campaign Intensified

Pyongyang, December 9 (KCNA) — New Influenza A/H1N1 broke out in some areas of the DPRK amid the growing of its victims worldwide.

According to the Ministry of Public Health, nine cases were reported from Sinuiju and Pyongyang.

The relevant organ is further perfecting the quarantine system against the spread of this flu virus while properly carrying on the prevention and medical treatment.

The State Emergency Anti-epidemic Committee has taken steps to enhance the role of prevention and treatment centers at all levels and increased checkup stations across the country while directing efforts to the medical treatment of its cases.

According to Yonhap:

The World Health Organization (WHO) is working “closely” with the North Korean government to help stem the spread of an Influenza A outbreak there and assess the scope of flu infections among North Koreans, a WHO spokesperson said Wednesday.

North Korea said earlier in the day that it has confirmed nine domestic cases of H1N1 virus infections. The highly infectious disease may be particularly dangerous to the North Korean people, who are mostly undernourished and may have weakened immune systems.

“We are working closely with the (North Korean) government to see what is required and if they need any assistance from WHO,” Aphaluck Bhapiasevi, a WHO spokeswoman on the H1N1 pandemic, said over the telephone.

Bhapiasevi also said there are likely more cases of the H1N1 virus than announced, as people who have mild symptoms are not tested.

“In any country, there may be more cases than have been laboratory-confirmed,” she said. “They may not reflect actual number of the cases.”

In May, WHO provided 35,000 Tamiflu tablets each for North Korea and about 70 other underdeveloped countries to help fight possible outbreaks. Seoul officials say the North would need millions of tablets to safeguard its 24 million people.

Through its office in North Korea, the world health body has been making “preliminary assessments” of the scope of the outbreak, she said. “We have been discussing support that would be required.”

According to the AP, the DPRK will accept ROK assistance as well:

North Korea agreed Thursday to accept medicine from South Korea to fight an outbreak of swine flu, a Cabinet minister said, in a development that could improve relations between the nations after a deadly maritime clash.

“Today, the North expressed its intention to receive” the medical aid, Unification Minister Hyun In-taek told reporters.

North Korean state media reported Wednesday that there were nine confirmed swine flu cases in the country. South Korea plans to send the antiviral Tamiflu to the North, Health Ministry spokesman Lee Dong-uk said, without giving specifics.

South Korea’s Yonhap news agency said South Korea plans to send enough doses of Tamiflu for about 10,000 people. It cited a government official it did not identify.

The move came two days after South Korean President Lee Myung-bak offered unconditional aid to North Korea to help contain the virus — the government’s first offer of humanitarian aid since Lee took office in early 2008 with a hard-line policy toward the North.

(h/t NK Leadership Watch)

According to Yonhap:

Trade between South and North Korea grew for the second consecutive month in October amid improving global economic conditions and eased cross-border tensions, customs data showed Tuesday.

According to the data provided by the Korea Customs Service, inter-Korean trade totaled US$172.6 million last month, up 5.9 percent from the same month a year ago.

Shipments to the North totaled $71.9 million in October, while those from the communist country came to a monthly record $100.7 million, the data showed.

This marked the second straight month of expansion since September when trade turned positive after declining for the previous 12 months.

See the September trade increase story here.

See analysis of the previous year here.

Read the full article below:
Inter-Korean trade grows for 2nd straight month in Oct.
Yonhap
11/17/2009

Friday, November 13, 2009 (KCNA):

The head of the north side delegation to the North-South General-Level Military Talks on Friday sent the following notice to the south side, clarifying the truth behind the recent armed provocation in the West Sea and the principled stand of the Korean People’s Army on it in connection with the south side’s sophism making profound confusion of right and wrong over the incident:

It is the politically motivated shameless provocation to resort to a futile military adventure to preserve the illegal “northern limit line” still today when the times have changed.

Warships of the navy of the south Korean forces described the exercise of the right to self-defence by a patrol boat of the north side as “an act of trespassing on the above-said line” and preempted the firing of direct sighting shots and “shots aimed at destroying it”, not “warning shots” though they were well aware that the patrol boat and its crew sailed to confirm an unidentified object. This was an inexcusable deliberate and open military provocation.

The rash action perpetrated by them, firing thousands of bullets and shells with several warships involved at a time was a premeditated action of the rightwing conservative forces and bellicose military group of the south side to stem the trend of the situation on the Korean Peninsula which has shown a sign of detente through the third skirmish in the West Sea.

Upon the authorization, I notify the south side of the following principled stand of the KPA on the gravity of the incident:

1. The south side should make an apology to the nation for orchestrating the recent incident and putting it into practice and take a proper measure to promptly punish the prime movers of the incident as maniacs of confrontation with fellow countrymen and harassers of peace.

2. The south side should behave with discretion as required by the times and the desire of the nation, clearly mindful that its stand to preserve the “northern limit line” no longer works.

3. Reminding again that there exists in the West Sea of Korea only the extension of the Military Demarcation Line in the waters set by the KPA side, it will take merciless military measures to defend the extension from this moment.

4. The south side will be held fully accountable for having disturbed the reconciliation and unity of the nation and hamstrung the efforts to achieve peace and reunification and have to pay a dear price for them.

Just one day later–from the Associated Press:

A North Korean cargo ship entered South Korean waters Saturday — a sign that trade has been unaffected by a recent deadly naval clash off their western coasts, an official said.

The ship dropped anchor west of Seoul just one a day after North Korea’s military threatened to “take merciless military measures to defend” itself and warned that South Korea would be forced to pay a heavy price for the recent firefight over their disputed maritime border.

A Unification Ministry spokesman says, however, that neither side has taken any measures to restrict inter-Korean trade — one of few legitimate sources of foreign currency for the impoverished communist North.

The naval skirmish was the first in seven years and came ahead of a trip to Seoul by President Barack Obama, who arrives Wednesday. A senior South Korean military officer said one North Korean officer died in the fight and three others were wounded. South Korea suffered no casualties.

South Korea responded by putting its 680,000-member military on guard, though officials said they have seen no evidence of unusual North Korean moves.

The cargo ship, delivering silica to a South Korean company, passed through the disputed border Saturday and is scheduled to enter Incheon port on Monday, said a Port Authority official. He asked not to be identified because he was not authorized to speak to media.

The decision to permit the North Korean ship entry was made before the clash, Unification Ministry spokesman Chun Hae-sung said. North Korean ships have docked 35 times at the port the in the first nine months of the year, according to the Port Authority.

South Korea is the No. 2 trading partner of North Korea, with trade volume reaching $1.1 billion in the first nine months of this year, according to the Ministry, which handles inter-Korean affairs.

“Silica” is silicon dioxide, and it is more commonly known as sand.  Read past posts about the DPRK – RoK trade in sand here.

UPDATE: According to the Washington Examiner:

The ship unloaded 1,750 tons of silica at Incheon Port, west of Seoul, and sailed back to the North later Monday, according to port official Lee Jin-wu. The ship departed from a North Korean port last Thursday, two days after the neighboring countries clashed along their disputed western sea border.

UPDATE: Contrary to earlier reports (below) that South Korea was set to begin importing sand from the DPRK, it turns out that they are tightening import restrictions on goods from the DPRK.  According to Yonhap:

The government has tightened rules on imports of sand, pine mushrooms and anthracite from North Korea, the Unification Ministry said Tuesday, in an apparent move to keep a close eye on cash flows into Pyongyang.

The three items have been allowed into South Korea only with a declaration to the customs office, but the toughened rules now require their importers to receive approval from the unification minister, said ministry spokeswoman Lee Jong-joo.

“Inter-Korean trade volumes of pine mushrooms, sand and anthracite have rapidly increased recently,” Lee said in a press briefing, without specifying the hike rates.

“This revision was prepared in consideration of two things — transparency of inter-Korean trade and keeping the import volume at a proper level,” she added.

Seoul has so far required approval from the unification minister, only when excessive imports of a certain item are feared to harm local producers. Those three items are not considered to fall into that category.

North Korean sand has been rumored to be linked to the country’s military. The concerns prompted Seoul to ban local sand importers from traveling to North Korea after it launched a long-range rocket in April, and such trips are not still allowed.

Last year, US$73.35 million worth of sand, $14,93 million of pine mushrooms and $25.1 million of anthracite were imported from North Korea. Sand was the largest imported item, while anthracite was 9th and pine mushrooms 18th.

With the tightened entry rules, the government can “make a judgment on the site about whether each business is appropriate and get sufficient information about them, thereby enhancing the transparency of inter-Korean trade and its soundness,” the spokeswoman said.

Read the full Story here:
South Korea stiffens import rules on N. Korean products
Yonhap
10/27/2009

ORIGINAL POST: RoK looking to import sand from DPRK (again)
According to Yonhap:

South Korea has suspended sand imports from North Korea since April, when the North test-fired a long-range rocket. Seoul had banned sand importers from traveling to the North.

South Korea first brought in North Korean sand for use at local construction sites in late 2002, as part of an inter-Korean accord signed by leaders of the two Koreas in 2000.

“The government is reviewing the resumption of imports of the North’s sand, given strong requests from businesses and the overall state of current inter-Korean relations,” an informed government official said, requesting to be unnamed.

The South Korean government is expected to decide soon whether to lift the travel ban on sand importers as well, according to officials.

Seoul reportedly placed the travel restriction on sand importers due to suspicions that payments for sand shipments were pocketed by military authorities in the North.

Read other stories about the sand trade here.

Read the full story below:
Seoul mulls resuming sand imports from N. Korea: sources
Yonhap
Tony Chang
10/22/2009

According to Yonhap:

Inter-Korean trade grew for the first time in 13 months in September amid improving global economic conditions and eased cross-border tensions, customs data showed Monday.

According to data compiled by the Korea Customs Service, trade between South and North Korea amounted to US$173.17 million last month, up 2.6 percent from a year earlier when the global financial turbulence first began following the collapse of Lehman Brothers.

Also according to Yonhap however, the DPRK and RoK failed to agree on an aid-for-family reunions deal:

The two Koreas on Friday ended their day-long negotiations over further cross-border family reunions and other humanitarian issues without reaching any concrete agreement, with Pyongyang asking for resumption of aid by Seoul, officials said.

In the meeting arranged by Red Cross offices from both sides, South Korea proposed holding new rounds of reunions for families separated by the 1950-53 Korean War next month in both Seoul and Pyongyang, and again around February at the North’s Mount Kumgang resort.

But aid is not off the table.  According to the Korea Times today:

The government has been reviewing whether to subsidize non-government organizations through the inter-Korean cooperation fund in order to provide aid to North Korea, according to the Ministry of Unification, Monday.

“The government is mainly checking plans to offer health and medical care,” ministry spokesman Chun Hae-sung told reporters. “But details have yet to be determined.”

Chun reiterated that Seoul is sticking to its existing stance that it will provide North Korea with humanitarian assistance regardless of the political climate.

According to government sources, the subsidy would total less than 1 billion won (about $853,000).

The plan, however, is not related to North Korea’s request for humanitarian aid made during the inter-Korean Red Cross talks last Friday, the sources said.

Seoul has also been reviewing whether to provide the reclusive state with government-level support such as food and fertilizer aid, according to ministry officials.

The inter-Korean cooperation fund has served as a lifeline for cross-border business projects, including the Gaeseong Industrial Complex and the Mt. Geumgang tourism program, which has been suspended.

It is also a main source of South Korea’s economic aid to the impoverished North.

The cash pot was introduced in 1990 in order to boost personal exchanges, economic cooperation and trust-building between the two Koreas.

In August, the ministry approved a plan to subsidize 10 civic groups with approximately 3.6 billion won ($3 million) from the fund for relief activities involving North Korean babies, pregnant women and other social minorities.

The government originally planned to distribute the money starting from April but North Korea’s provocations postponed the plan.

As reported before, the South Korean government has spent just 5% of the funds it budgeted for inter-Korean projects this year.

At the same time North Korea is soliciting aid from South Korean and Western religious origanizations.  See here, here, and here in just the last few days.

UPDATE 2: (hat tip to a couple of appreciated readers) Park Soo-me reports on the proliferation of South Korean films in the DPRK:

“It’s safe to assume that a majority of North Korean residents have watched a South Korean film or a soap opera at least once,” said Kim, who left North Korea in 2004, and established a think-tank in Seoul called the “North Korea Intellectuals Solidarity.”

The group, which frequently communicates with their inside contacts in the North, recently broke revealing news that a group of North Korean students were caught watching “Haeundae,” a mega-hit South Korean disaster film locally released just over a month ago, at a computer lab inside a Pyongyang college.

The defector group cited an anonymous source in Pyongyang who told their reporter that the government is tightening a crackdown of digital files, as South Korean films smuggled through China are endangering the North’s dictatorial regime.

A student identified only as “Choi” said he had downloaded the film at his relative’s house in Cheongjin, a city about 50 miles from the Chinese border. He was arrested for promoting the ideology of his enemy state, not for circulating a pirated film.

Since the late 1990s, South Korean dramas and films were illegally traded in the North through local businessmen frequenting the Chinese borders. The phenomenon is not unlike that from the young Soviets in the 1970s, who secretly acquired rock ‘n’ roll records and American videotapes through its black market, despite the country’s ban on the cultural products of the capitalist state.

Last year, an insider from another defectors’ group based in Seoul broke news that DVD compilations of South Korean adult films and TV dramas are becoming popular in the North, as the sales of the average South Korean soap opera has declined in recent years. Such DVDs were found in a North Korean market in Cheongjin, the group said through its newsletter.

The situation in the North has gotten to the point where Oh Yang-yeol, a professor at the University of North Korean Studies in Seoul, published a paper on “Hallyu in North Korea: Now and Future.”

The term hallyu recalls the Korean wave of pop culture that hit Southeast Asia in the early 2000s. Oh’s paper stresses the spread of South Korean fashion, drama and music among the younger generation of North Koreans.

In a separate release by the Korean Institute of National Unification, experts have quoted North Korean defectors who have testified that South Korean melodramas like “Autumn in My Heart” and “Winter Sonata” have become a such hit in the North that a special squad was once organized to crack down on the violators.

But not all dramas smuggled into the North are soft, touchy-feely soap operas. Among the works that have been found and blacklisted by the Northern authorities include films like Park Chan-wook’s “Joint Security Area,” a story which is essentially built around a forbidden friendship between solders from the North and South who are stationed in the Demilitarized Zone that divides the two countries.

On the distribution side, South Korean films and TV dramas are appearing in the North faster and with a broader reach, as evident in the recent case of “Haeundae.”

“In the past, it normally took up to six months for a South Korean film to arrive in the North,” Oh said. “Now, it takes little over a month. In wealthier neighborhoods in Pyongyang we start to see local girls imitating the hairstyle and fashion of South Korean celebrities who starred in the latest TV dramas.”

Irritated by the spread of hallyu — often referred to as the “yellow wind” in the North — authorities have tightened censorship regulations and house inspections to encourage “ideological discipline.” But there is a limit as to what they can do.

Although limited to a privileged few, more computer-savvy Koreans in Pyongyang are finding easier alternatives to enjoy pop culture from the outside world, making the North’s isolation more difficult. Internet access is limited to an Intranet for most people in the North. But USB drives are becoming more common among local college and middle school students, and frequent traffic between North Korea and China is increasing opportunities for cross-border smuggling of pirated films from Hollywood and Seoul.

Read the full story below:
Pop culture making inroads into North Korea
Hollywood Reporter
Park Soo-mee
10/8/2009

UPDATE 1: Although the Donga Ilbo previously reported that the DPRK was growing more tolerant of foreign films (below), Channel News Asia reports the DPRK is clamping down:

The student in Pyongyang was caught on September 5 while watching a digital copy of “Haeundae” with his dorm friends, the North Korea Intellectuals Solidarity said in a newsletter posted on its website.

The student allegedly acquired a file of the film at a relative’s house in the northeastern port city of Chongjin and downloaded it onto his college computer, it said.

The case prompted authorities to launch an extensive probe aimed at preventing the spread of the movie, the group said, quoting a “correspondent” in the North.

The inspection revealed that tens of thousands of North Koreans have secretly seen foreign films, it said.

Defectors say South Korean pop songs and movies are popular in the isolated communist country, despite a steady campaign to weed out what state media has termed “decadent foreign culture and ideals”.

In December 2007, three North Koreans including a schoolteacher were sentenced to death for smuggling illegal adult films from China and South Korea, according to Good Friends, a Seoul-based aid group working in the North.

ORIGINAL POST: According to the Donga Ilbo:

Recently, the North has televised the shows “International Common Sense,” “Animals in the World,” and “Foreign Culture,” programs which had been abolished long ago. Those programs even show the daily lives of Westerners.

A few days ago, a video clip was aired in which North Korean singers in military uniform played the guitar and sang Italian songs. When broadcasting sports, Pyongyang used to simply air competitions in which North Korean athletes participated, but when airing the IAAF World Championship in Athletics in Berlin last month, the North summarized footage of major events and televised them.

North Korea’s attitude toward foreign movies has also changed. CD-ROMs containing foreign movies have been manufactured by the state-run Hana Electronics, which has sold them across the nation. Most of the CD-ROMs include foreign movies aired by Mansudae TV, which serves Pyongyang only.

A CD-ROM is priced at 1,500 North Korean won (41 U.S. cents) and a DVD goes for 7,500 won (2.07 dollars). CD-ROMs of cooking game programs as well as those on the lives of famous soccer players such as Diego Maradona and Franz Beckenbauer are also on the market.

The North has also embraced world-famous animated films. The Disney productions of “Cinderella,” “Pinocchio,” “Sleeping Beauty” and “Robin Hood” are available across the nation. The popular American cartoon “Tom and Jerry” is called “The Magic World of a Mouse” in the North.

The proliferation of foreign movies has also led to an increase in secret movie rental stores. Government-manufactured CD-ROMs can be rented out at 300 won (eight cents) per day and illegal movies can be borrowed at 500 won (14 cents) per day.

Yet most foreign programs broadcast in North Korea are created in China, which, in turn, has encouraged North Koreans to adopt the Chinese way of life. Mansudae TV routinely broadcasts Chinese soap operas like the drama “Unnamed Hero” and “Vertical Blow,” which shows the training of China’s special forces.

Despite the apparent liberalization of North Korean television, Pyongyang has toughened its punishment for those watching South Korean TV programs. In the past, punishment for watching a South Korean program was usually avoided through a bribe but the offense is now considered more severe than a drug-related crime.

Read the full story here:
N. Korea Growing More Tolerant of Foreign Movies
Donga Ilbo
9/19/2009

UPDATE: Although South Korea has signaled willingness to increase spending in North Korea (below), it appears they have come nowhere close to spending their current budget.  According to Yonhap:

South Korea has so far this year spent less than 5 percent of its annual budget earmarked to promote reconciliation with North Korea, the Unification Ministry’s data showed Wednesday.

The meager spending of the inter-Korean cooperation budget mirrored stagnant economic exchanges yet to be enlivened despite a recent thaw in political relations.

The data showed that South Korea has set aside 1.16 trillion won (US$990.94 million) for this year’s inter-Korean cooperation budget, which includes 43 billion won transferred from last year, to support joint business projects and provide industrial and humanitarian aid to the North.

The budget spending as of the end of September amounted to 55.9 billion won, 4.8 percent of the total, according to the data.

In a detailed breakdown of expenditures, the ministry spent 10.6 billion won, or 11.3 percent of the 93.8 billion won budget earmarked for the South Korean-run factory park in the North’s border town of Kaesong. Planned projects to build a dormitory for North Korean workers and modernize roads there have also not begun. The Kaesong park hosts about 110 South Korean firms with 40,000 employees from the North.

Humanitarian aid was the area in which funds were held back most. Out of the earmarked 819.8 billion won, the ministry has spent a meager 0.9 percent, or 7.7 billion won, so far. Unification Minister Hyun In-taek said in a parliamentary audit Tuesday that Seoul will decide when to resume its rice and fertilizer aid, crucial to food supplies in the North, after “considering the climate of future inter-Korean relations.”

For social and cultural exchanges, the ministry spent 2.2 billion won, or 25.3 percent of the earmarked 8.7 billion won. Loans for inter-Korean cooperation projects amounted to 11.3 percent, or 21 billion won out of 186.6 billion won.

ORIGINAL POST: According to Yonhap:

South Korea’s government proposed a 30 percent increase in its budget spending aimed at supporting inter-Korean economic cooperation projects for next year, the finance ministry said Tuesday.

According to the Ministry of Strategy and Finance, the budget set aside for inter-Korean economic cooperation next year will amount to 398.2 billion won (US$339.6 million), compared with 304.6 billion won assigned for this year.

Citation:
Seoul proposes 30 pct increase in budget for inter-Korean economic cooperation
Yonhap
10/6/2009

Last year we reported on an effort to bring Russian natural gas to South Korea via a pipeline that could either go through North Korea or across the East Sea (aka Sea of Japan).  If the pipeline was to cross the DPRK, they stood to gain by leasing the land for the pipeline.

According to news this week, the plan has been indefinitely shelved.   According to the story:

Plans to import Russian natural gas through a North Korean pipeline have been shelved due to strained inter-Korean relations, the head of South Korea’s state-run energy company said Tuesday.

Korea Gas Corp (KOGAS) (KSE:36460) president Choo Kang-soo said unless North Korea specifically asks for the pipeline to be built on its soil, Seoul will not pursue the piped natural gas (PNG) project but opt to import liquefied natural gas (LNG) directly from Russia by ship.

“An understanding has recently been reached with Russian partners on this issue,” the chief executive said, adding that recent developments like the nuclear standoff raised the importance of creating a “controllable schedule” for getting the gas on time.

He pointed out that the inability to control cross-border issues has made the PNG plan less viable.

Under a blueprint announced in 2008, Seoul said it wanted to import 7.5 million tons of Russian gas starting in 2015 to ensure a steady supply of fuel. Seoul had previously relied heavily on imports from Southeast Asian countries, which have since hiked up prices.

The deal, valued at more than US$100 million, called for a pipeline running from Russia’s far east to South Korea through North Korea.

Choo hinted that because Russia is eying both the Japanese and Chinese markets, it also prefers to transform its natural gas into LNG for overseas sales.

KOGAS, meanwhile, said that the total amount of fuel that will be imported from Russia will equal 20 per cent of South Korea’s projected natural gas needs in 2015. In 2007, the country bought 7.8 million tons of gas for home use alone, with more being spent on power generation and various fuel needs.

Russia has an estimated 38 billion tons of natural gas and announced plans to spend US$28 billion to link the Krasnoyarsk, Irkutsk, Yakutsk and Sakhalin gas fields into a unified gas supply system that can facilitate exports.

Statistically speaking, natural resource exports are bad news for good governance and economic development.  This is because resource-dependent governments never need to develop the policies and institutions necessary to promote sustained entrepreneurship in the private economy from which they can extract tax revenue. Since non-democratic countries are supposed to love natural resource exports because they essentially translate into free hard currency, I am surprised the DPRK could not set politics aside and cash in on this deal.

Also, what does this say about Russia’s relationship with the DPRK?

Read the full story here:
S Korean plan to import Russian natural gas via N Korea on hold
TradingMarkets.com
9/29/2009