North Korean Economy Watch

Daily NK
Jeong Jae Sung
9/18/2007

North Korea has requested for negotiations to begin at the Inter-Korean Summit Talks on the co-development of the Kaema Plateau, also known as “the roof of Korea.” The request was taken into consideration by the Ministry of Unification.

In light of North Korea’s request, the Ministry has recently conducted a survey of North Korean defectors from South Hamkyung, Yangkang and Jagang, where the Kaema Plateau is located, regarding the significant geographical features, the status of current development at the plateau, and the intentions of the North Korean government.

Kim Hyung Seh (pseudonym), a North Korean defector from Yangkang, stated that “I was told by interested parties at the Ministry of Unification that right after the Summit Talks North Korea will deliberate the Kaema Plateau development issue and that they needed my cooperation for a sound investigation.”

According to Kim, the questions asked focused on the North Korean government’s purpose in developing the Kaema Plateau, the potential value of this site as a tourist resort, and wether or not there is enough possibility for tourism given the ever increasing number of visitors from Mongolia.

He asserted that “the Kaema Plateau is a huge forest which has no value as a tourist attraction at the moment. All the particular tourist attractions in North Korea retain villas owned by Kim Il Sung and Kim Jong Il, but there are none at Kaema Plateau, which speaks for itself.”

Kim also added that the affiliates of the Ministry of Unification did not know where the Kaema Plateau was.

“It is difficult for North Korea to develop the area around Kaema Plateau, which is why they followed the shoreline to develop their railways. In order to make this project possible, the basic transportation infrastructure such as airline facilities, roads and railroads must be established first” advised Kim.

The Ministry of Unification has denied every having conducted these surveys. Regarding the interviews with defectors, one affiliate of the Ministery said “We have not held such meetings,” and another said that “We have met [with the defectors], but we never asked about the Kaema Plateau issue.”

Kim Joong Tae, the Director of the Ministry of Unification’s Inter-Korean Economic Cooperation Team, who interviewed Kim, told the DailyNK that “North Korea has never suggested the development of Kaema Plateau. The Ministry merely asked North Korean Defectors about tourism development at Mt. Baekdu.”

The Kaema Plateau is situated across the Middle and Southern region of Yangkang Province, South of Northwest Hamgkyung and East of Jagang. The total area is 14,300 km2 and the height is 1,340m. It is the highest and widest plateau in the entire peninsula, also known as “the roof of Korea.”

Kaema Plateau has abundant forest resources which provide avariety of material lumber. There is also a rich supply of mineral resources, including steel, magnesite, gold, apatite, and copper.

The only source of transportation infrastructure is the military airfields in Pungseo and Jangjin.

It is probable that North Korea’s reason for suggesting the development of Kaema Plateau is to make it tourist site, showcasing various amusment parks and ski resorts. As it is now, this area is completely restricted to civilian traffic. If transportation in the high region is developed, this could be applied for military purposes.

Lee Jin Young (pseudonym), a defector currently residing in South Korea’s Yangcheon district, explained that “the Kaema Plateau is so treacherous that it is only used as a military training field for Special Forces. This was the one area that allied forces could not get control of, even during the Korean War.”

She also added that, “rather than developing Kaema Plateau as a tourist attraction, they should develop the Baekmoo Plateau which includes Mt. Baekdu. The suggestion to develop the Kaema Plateau can only be seen as their intention to construct a better transportation infrastructure.”

Therefore, even if South Korea were to agree to the co-development of Kaema Plateau, there will be huge difficulties regarding the expansion of the social infrastructure and compromising with the military. In particular, the construction of Korean roads, railroads and airfields in the region is sure to cost a lot of money.

Yonhap
Sohn Suk-joo
9/6/2007

Inter-Korean trade surged 36.1 percent in the first eight months of this year, compared with the same period of a year earlier, the Unification Ministry said Thursday.

The two-way trade volume increased to US$1.05 billion in the January-August period, up from $775.52 million in 2006, thanks to brisk trade of fishery items and light industry products made at a joint industrial complex in the North Korean border city of Kaesong.

The industrial complex is the crowning achievement of a landmark summit between the leaders of the two Koreas in 2000. South Korean businesses use cheap North Korean labor to produce goods in Kaesong where some 26 South Korean factories employ about 15,000 North Korean workers.

“Inter-Korean commercial trade increased 37.1 percent to $809.71 million, while non-commercial trade rose 32.8 percent to $245.41 million during the same time span,” the ministry said in a statement.

Daily NK
Han Young Jin
9/4/2007

Distribution with “Korea” Trademark…”Rice Cookers Popular”

In the North Korean jangmadang (market), South Korean products are drawing huge popularity among citizens and are publicly being sold, relayed an internal source on the 30th.

The source said, “In the Pyongyang, Shinuiju, Hamheung, Chungjin, and other large-scale jangmadangs, South Korean products with the “Made in Korea” label is fairly popular among wealthy people.”

In the past, South Korean products were secretly sold in the North Korean market. When selling South Korean products, we sold them after removing the product label, “Made in Korea.” However, recently, only products with the label are recognized as South Korean products of good quality and sold at a high price.

The source added, “‘Made in Korea’ lends credibility to the people. Without this, people do not believe that the product is a Korean-made good. The label has to be there because Chinese products are disguised as South Korean goods.”

The South Korean product which is most sold in North Korea is the electric rice-cooker (Cuckoo), instantaneous water heaters, cosmetics, aromatics, computers, toothpaste, medical goods and a variety of sweets. Also, North Korean citizens have a lot of confidence in South Korean medicine. South Korean-made medicine or sweets are not discarded even after the expiration date.

He said, “Because Chinese-made products are no good, people who have money usually used Japanese products. In the place where Japanese products became rare, Korean-made products are now occupying that place.”

In Dandong, China, Kim Chi Duk (pseudonym), who is engaging in North Korea-Chinese trade met with the reporter and retorted, “Currently in Chosun (North Korea), Japanese-made products are still counted as number 1. Then there are South Korean-made products, then Chinese-made products. Poor people, even when the quality is lower, use Chinese-made products and those with money use South Korean products or Japanese-made products. What is the issue if one is buying with his or her money?”

He said, “Those with some amount of money use at least one or two South Korean products.”

The source relayed, “Currently in the Shinuiju market, South Korean toothpaste is 5,000 won (USD1.85), 1 set of aromatics (machinery and 2 bottles of gas) is 30,000 won (USD11.1), and one pack of Time cigarettes (tax-exempt) 3,000 won.” However, “Time,” a kind of South Korean cigarettes are counterfeit goods made in China, so is offered at a cheaper price than their domestic price.

Mr. Kim said, “Those who trade in North Korea request for South Korean-made goods, but I do not know whether they plan to export them or to use them. The authorities do not allow American-made goods, but is there anyone who doesn’t like the dollar? If it is not a big issue, they use everything.”

Korea Times
Andrei Lankov
8/30/2007

At 10:00 in the morning of July 4, 1974, Lee Hu-rak, the director of the Korean Central Intelligence Agency (KCIA), convened a special press conference. It was just the place to drop a bombshell. He told the journalists that in May and June, secret high-level exchanges had been conducted between the North and South Korean governments.

Lee himself went to Pyongyang, while Seoul was secretly visited by Kim Yong-ju, the younger brother of then North Korean President Kim Il-sung. In those days Kim Yong-ju was considered as a likely heir to the North Korean dictator (Kim Jong-il was still too young).

The visits themselves were a sensation since for the two decades following the end of the 1950-53 Korean War there were virtually no government-level contacts between the two Koreas. These secret talks produced a document which is known as the “July 4 Declaration” to the Koreans, but in English language publications it is usually referred to as the “1972 Declaration.”

The declaration stated that both Korean governments were committed to eventual unification, and that this unification should be reached independently (without the involvement of foreign forces), peacefully and with respect to their political and ideological differences.

Frankly, it was not very precise wording. However, in one regard the document was important indeed: for the first time in decades it stated that both Korean states, at least theoretically, were ready to coexist and negotiate.

The declaration produced much hype in the international media, and was welcomed as a “great breakthrough.” Of course, this was not the case, and all long-time Korea watchers knew only too well that from time to time some events would be presented by the world media as a “great turning point” _ only to be forgotten or made irrelevant in few years.

Still, the 1972 Declaration was surely a sign of new times: grudgingly, each Korea began to accept existence of the other side. Not its right to exist, God forbid, but merely its physical existence as a rather unpleasant but unchangeable fact.

This turn took place just after the worst period of confrontation, when the two Koreas seemed to be on the eve of a second Korean War. In 1968 North Korean commandos stormed (unsuccessfully) the presidential office of Cheong Wa Dae in Seoul, and they waged campaigns in the mountain ranges along the eastern coast of South Korea.

Seemingly influenced by the success of the Vietnamese Communist guerrillas, the North Korean strategists believed that a Communist revolution could be started in the South as well.

However, by 1970 Kim Il-sung and his coterie finally realized that their hopes for a Vietnam-style uprising in the South were unfounded. Perhaps, the news from Germany where the Eastern and the Western states finally recognized each other, also had some impact: Koreans always paid attention to events in Germany, another divided country.

South Korea changed its strategy as well. Since 1948, the South Korean state had not made a secret of its willingness to use all means, including military ones, to achieve unification and the “liberation” of the North from “Communist slavery.” (The North Korean leaders, in their turn, vowed to save Southerners from “Capitalist hell”).

However, on August 15, 1970, President Park Chung-hee said that unification should be achieved peacefully. He addressed the North Korean leaders (the same people who tried to kill him two years earlier) and urged them to engage in peaceful economic competition.

This statement reflected a new confidence in Seoul: throughout the first decade of the dictatorial but efficient rule of Park, South Korea’s economy was booming. The South Korean leaders thought they would win the economic competition. We know now that they were correct in this assumption.

Hence, negotiations made sense, at least as a way to win time. Indeed, for a short period after the 1972 Declaration there were a number of exchanges and contacts. The Red Cross societies of both Koreas were engaged in the negotiations of a painful question: the arrangement of meetings between members of separated families.

For all practical purposes, in those years the Red Cross societies acted as major channels of dialogues, hence both sides staffed these NGO-type bodies with high-level officials. The first rounds of talks led to nothing, but even the fact that both Koreas were willing to talk was seen as a great novelty after 25 years of division, war, and propaganda.

In 1973, the ROK government made it clear that it would tolerate the participation of North Korea in international organizations. Shortly before that, the principle of mutually exclusive international recognition had also been dropped: a foreign country could henceforth have ambassadors stationed both in Seoul and in Pyongyang.

However, the declaration did not change as much as newspaper readers worldwide were led to believe in those July days. Neither side was going to compromise too much. Domestically, both sides continued with their propaganda war, an enterprise, which was quite hysterical in the South and much worse in the North.

The generals planned future military operations, and secret services were conducting their silent war with the same zeal. Nobody was willing to give in, and talks were interrupted in 1973. They resumed only a decade later, and by that time the situation in and around Korea had changed dramatically.

Prof. Andrei Lankov was born in St. Petersburg, Russia, and now teaches at Kookmin University in Seoul.

Choson Ilbo (Hat Tip DPRK Studies)
8/30/2007

Three South Korean terrestrial TV stations agreed in July to pay tens of millions to North Korea annually for footage from North Korea’s state-run Korean Central Broadcasting Station. An SBS executive said South Korean TV stations have used TV pictures aired by KCBS for free, but in July, the Korean Foundation for South-North Economic and Cultural Cooperation, as a proxy of the North Korean TV station, concluded negotiations with three TV stations whereby SBS will pay about W20 million every year to KCBS through the foundation. MBC will pay slightly more than that, and KBS will pay about W30 million.

The foundation, chaired by United New Democratic Party member Im Jong-seok, was established in 2004. It held talks with the three terrestrial networks for a year and a half. In the talks, the three argued it was unreasonable for South Korean TV stations to pay for North Korean footage in programs that aim at promoting mutual understanding, and they generally rejected the idea of unilaterally paying North Korea when the North does not pay South Korean broadcasters for footage.

Yonhap
8/29/2007

The labor union of Hyundai Motor Co. decided to provide aid to North Korea to help a South Korean humanitarian group expand a corn-noodle plant in North Korea, union officials said Wednesday, despite the union’s steps to stage a possible strike next week.

The workers at Hyundai, South Korea’s largest automaker, are scheduled to vote Thursday on whether to launch a walkout over higher wages and better working conditions, almost an annual ritual for the 44,000-strong union.

In a statement, the union said it will provide the aid worth 500 million won (US$530,786), including noodle-processing machines, a minibus, a truck and a power generator, to the corn-noodle plant in the North Korean capital of Pyongyang.

The aid will be provided via the Seoul-based humanitarian group Movement for One Korea, an official at Hyundai’s union said by telephone from Ulsan, a port city on the nation’s southeast coast where Hyundai’s main plant is located.

“We decided to provide the aid to help North Korea recover from its food shortage and to implement the union’s corporate social responsibility,” said the official, refusing to give his name.

The timing and other details have yet to be decided, he said.

It is the first time that a union of a private company has decided to give aid to North Korea.

The North has had to rely on international humanitarian aid for the past decade, due to floods, drought and economic mismanagement.

Earlier in the day, conservative newspapers questioned the Hyundai union’s rationale, criticizing it for deciding to give aid to the North as the strike looms.

“It’s an inappropriate time for Hyundai Motor’s union to do this as public criticism is mounting over its 13th consecutive annual strike,” Bae Son-geun, a professor at Korea University, was quoted as saying by the daily Dong-a Ilbo.

Hyundai and its union have had 10 sessions of formal negotiations. The union is demanding an 8.9 percent increase in monthly basic salary, after rejecting the company’s offer of a 5.4 percent rise.

The strike vote will be held on Friday and the outcome is to be announced later in the day or early Saturday, union officials said.

So far this year, Hyundai workers staged a 13-day partial strike over a bonus dispute and a proposed free trade agreement with the United States which they argued could hurt the livelihoods of farmers and factory workers.

Hyundai’s union has held walkouts every year except 1994 since its foundation in 1987. In the past 20 years, the union has gone on strike for 313 days, costing the company 8.94 trillion won (US$9.53 billion) in total lost sales, according to the automaker.

Yonhap
8/26/2007

South Korea will likely lose 2.2 trillion won (US$ 2 billion) in its food loan to North Korea, because the price was set by international market standards, an opposition lawmaker said Sunday.

Since 2002, South Korea has loaned 2.1 million tons of rice worth 2.86 trillion won to North Korea to help alleviate chronic food shortages in the impoverished communist country.

The loan was offered at international prices at the time of the shipments, although 2.1 million tons of the shipment were homegrown products, whose domestic price is four times higher than international prices, said Rep. Hong Moon-pyo of the Grand National Party.

Citing data from unification and agriculture ministries, Hong said the total monetary value of the South Korean food loaned to North Korea during the period comes to 2.86 trillion won.

North Korea is required to pay back the loan at international market prices, which currently stand at US$380 on the average, the lawmaker said.

“According to the terms of the contract, South Korea will not be able to recover about 2.2 trillion won, so the difference should be offset by taxpayers’ money,” Hong said, adding that the government should unveil the exact amount of the loan and its conditions.

Yonhap
Sohn Suk-joo
8/23/2007

South Korea made Thursday the first delivery of 7.1 billion won ($7.5 million) worth of emergency aid to North Korea to help the communist country recover from flood damage, officials said.

About 40 truckloads of instant noodles, blankets, emergency kits and mineral water were delivered to the border town of Kaesong via a reconnected road in the western section of the Korean Peninsula. The aid shipment will be completed by the end of this month.

On Tuesday, Pyongyang requested more help from the South, and the Seoul government is considering what to offer in response to the North’s plea for construction materials and heavy equipment, they said.

Devastating floods are believed to have destroyed a revised 14 percent of the North’s farmland, South Korean officials said. South Korea, other countries and international agencies are extending a helping hand to the North.

The number of dead and missing is estimated at more than 300, with the homeless numbering about 300,000. An estimated 46,580 homes of 88,400 families were destroyed or damaged, according to the North’s media.

“The total damage would be 10 times more than that of last summer in terms of money,” Cho Yong-nam, chief of North Korea’s flood damage control committee, said in an interview with the Choson Sinbo, a Japan-based pro-North Korean newspaper which usually reflects the views of the communist country.

The severe flood damage caused the two Koreas to postpone their second summit, originally scheduled for late this month, until early October. Their leaders are to meet Oct. 2-4 in Pyongyang.

According to North Korean officials, the expressway linking Pyongyang and Kaesong has been damaged by the heavy flooding, interfering with transportation. Roh plans to travel to Pyongyang via the overland route, and South Korean officials expressed hope that the expressway will be repaired before the summit takes place.

Yonhap
Sohn suk-joo
8/22/2007

North Korea’s most powerful organization is leading efforts to clean up damage from heavy floods and restore the country’s infrastructure, the North’s state media reported Wednesday.

The National Defense Commission (NDC), the highest decision-making body under the communist country’s constitution that was revised in 1997 to reflect its “songun” or military first policy, supervises relief operations involving military forces and equipment.

“We’ve achieved recovery and restoration by appealing to party, government and labor officials to go out to damaged areas under the guidance of the National Defense Commission,” Kim Kyong-san, a senior official of the Pyongyang Railway bureau, said in an interview with Radio Pyongyang.

According to North Korea watchers, North Korea’s cabinet has usually spearheaded flood relief efforts in the communist country in the past. The NDC’s involvement signifies the extent of the damage and is also meant to speed up restoration ahead of the summit between President Roh Moo-hyun and North Korean leader Kim Jong-il, who leads the commission, they said.

Meanwhile, North Korea is in the final stages of restoring the railway line in Pyongyang.

“The Pyongyang railway line is fundamental in connecting the country to the east and west. All workers have labored hard and are urged to do more at the final stage,” Kim Kyong-san said.

Devastating floods are believed to have destroyed a revised 14 percent of the North’s farmland, South Korean officials said. South Korea, other countries and international agencies are extending a helping hand to the North.

The number of dead and missing is estimated at more than 300, with the homeless numbering about 300,000. An estimated 46,580 homes of 88,400 families were destroyed or damaged, according to the North’s media.

This year, South Korea is providing 400,000 tons of rice to the North, while it plans to send 7.1 billion won (US$7.5 million) worth of relief goods to North Korea.

On Tuesday, Pyongyang requested more help from the South, and South Korea is considering what to offer in response to the North’s plea for construction materials and heavy equipment.

The severe flood damage caused the two Koreas to postpone their second-ever summit, originally scheduled to be held late this month, until early October. Their leaders are to meet Oct. 2-4 in Pyongyang.

According to North Korean officials, the expressway linking Pyongyang and Kaesong has been damaged by heavy flooding, interfering with transportation. Roh plans to travel to Pyongyang via the overland route, and South Korean officials expressed hope that the expressway will be restored before the summit takes place.

Yonhap
8/17/2007

South Korea is to send 7.1 billion won ($7.5 million) worth of emergency aid to North Korea next week as part of efforts to help the communist country recover from the damage wreaked by recent heavy rains, the South’s point man on the North said Friday.

“We will prepare to send emergency aid to North Korea early next week,” Unification Minister Lee Jae-joung said in a press briefing, noting that the aid will consist of instant noodles, bottled water, powdered milk, blankets and medicine.

Lee said that South Korea will also discuss ways of sending equipment and additional aid needed to overcome the damage in the North after transporting the emergency aid via inter-Korean sea and land routes.

International aid agencies are also trying to help the North to cope with floods that have swept away a large part of its farmland, raising the specter of worsening food shortages.

North Korea allowed the United Nations World Food Program (WFP) to send four assessment teams Friday to areas struck by the flash floods.

On Thursday, the North’s state media said that about 46,580 homes had been flooded or destroyed, while more than 300,000 people were displaced. North Korean officials told international aid agencies that at least 200 people were dead or missing.

WFP officials will travel Friday to 10 hard-hit counties to assess the situation, hoping to start emergency food aid using supplies already in the country as part of ongoing hunger relief efforts.

South Korean President Roh Moo-hyun is to meet with North Korean leader Kim Jong-il on Aug. 28-30 in Pyongyang, the first summit in seven years. The floods are not likely to have an impact on the summit, South Korean officials said.