North Korean Economy Watch

From the Korea Herald:
 
The South Korean Ministry of Science and Technology yesterday announced this year’s cooperative science and technology projects between South and North Korea.

The ministry selected 15 projects, including new and ongoing ones. They are regarded as having future viability and continuity, the ministry said.

These projects will be supported for the next three years at least, while being evaluated on a regular basis, the ministry said.

For the South-North cooperative science projects, the ministry has invested a total of 4.8 billion won from 1999 to 2005. The ministry has allocated 650 million won for this year.

The 15 projects include the Korea Transport Institute’s peninsula-wide traffic specifications; Korea Center for Disease Control & Prevention’s study on malaria in North Korea; the Korea Research Institute of Chemical Technologies’ study on chemical products as basic necessities; Pohang University of Science and Technology’s training program for computing specialists; Inha University’s initiative to develop North Korea’s wind power resources; Korea Institute of Machinery and Materials’ research on North Korea-originated magnesite; Korea Research Institute of Bioscience and Biotechnology’s development of cold-resistant sweet potatoes to alleviate North Korea’s food shortage.

Also, there are Andong University’s South-North comparative study on fossils in the paleozoic era; Korea Institute of Geoscience and Mineral Resources’ peninsula-wide geological map; Science & Technology Policy Institute’s analysis on North Korea’s science and technology policy; Seoul National University’s parasite control technology; and Korea Institute of Science and Technology Information’s project for North Korean infrastructure building.

The project selection utilized the Korea Institute of Science and Technology Information’s analysis tool for documents and patents, the ministry added.

Dubbed “KITAS,” the tool has helped the ministry analyze North Korea’s 22 different kinds of academic documents, which amounted to 38,000 volumes.

The ministry then selected promising areas of cooperation, which include biotechnology, machine manufacture, and non-metal mineral exploitation.

With its food crisis, North Korea has a particular interest in biotechnology, such as plant breeding and rabbit cloning, the ministry said.

“I think biotechnology cooperation between the two Koreas will be very promising,” said Yoon Dae-sang at the ministry’s science-technology cooperation division.

Yonhap
5/1/2006

South Korea could capitalize on North Korea’s emerging prowess in the biotechnology sector to foster inter-Korean cooperation in this modern scientific field, a report by a state-run institute in Seoul said Monday.

The communist country, often viewed as stunted politically and economically, possesses considerable competitiveness in the field of biotechnology, the report by the Korea Institute of Science and Technology Information (KISTI) showed. This, it said, is partly due to the need to alleviate the country’s chronic food shortages.

The institute cited 38,737 papers published in North Korea from 1985 to 2005, to show how scientists there have published a wealth of biotech papers related to medicine and clinical testing of plants and animals.

“North Korea has built up certain fields that can be developed by the two Koreas in the future,” said a KISTI researcher, declining to be named.

North Korean scientists have published many papers on biological agents designed to facilitate growth of tissues and micro-organisms, he said.

The country also reported the world’s second successful cloning of a rabbit and has demonstrated a level of expertise in fields like protein structure analysis, enzyme research and genetics, he added.

Biotech is one of the key future growth industries being pushed by Seoul, so cooperating with the North is being viewed as a potentially win-win deal.

In addition, the report said, South and North Korea can conduct joint works on areas like non-metal research and technology to help in the mining of natural resources.

The report by the institute comes after scientists from both countries promised to expand cooperation in the scientific field.

South Korea’s science minister Kim Woo-sik pledged earlier in the day, to continue state support for joint South-North Korea science cooperation. Seoul plans to provide 650 million won (US$710,200) this year after having spent 4.8 billion won from 1999-2005.

Korea Times
4/27/2006

South Korea’s state-run resources development corporation on Thursday announced the opening of a joint graphite mine in North Korea.

The 50-50 joint venture between the Korea Resources Corp.(KORES) and a North Korean firm can produce 3,000 tons of graphite per year.

Of that, South Korea will import 1,830 tons every year for the next 15 years. This amount is equivalent to 20 percent of the South’s domestic demand.

The corporation has invested $10.2 million into the mine in Chongchon, South Hwanghae Province. It is estimated to hold 6.25 million tons of graphite.

Graphite from the mine can be used in batteries, brake-lining for cars and flame-proof or heat-resistant materials. The first batch of graphite is to arrive in South Korea in the second half of the year.

The joint development pact was signed in March 2003 with a formal deal signed four months later. South Korea transferred mining materials and other equipment to the mine in early 2004 and development got underway shortly afterwards.

According to Yonhap:

The number of North Korean workers at a South Korean-run industrial complex in the North Korean border city of Kaesong rose 22 percent every month over the past one and a half years, the South’s Unification Ministry said Wednesday.  Production increased 36 percent every month due largely to a rise in the number of South Korean factories operating in the complex, according to the ministry.

As of Friday, a total of 6,859 North Korean workers, including 1,047 construction workers, were registered at the complex.

South Korea hopes to promote the Kaesong complex as a role model for inter-Korean economic partnership, while officials in Washington express concern over its possible negative impact on the multilateral efforts to end North Korea’s nuclear weapons program.

From the Korea Times:

A delegation from the South Korean Catholic Church left for Pyongyang early Wednesday to tour regions in the North it has provided with humanitarian assistance, the Archdiocese of Seoul said.

The 61-member delegation from the Seoul archdiocese, led by Monsignor Choi Chang-hwa, will take field trips in and around Pyongyang until Saturday, it said.

“This is the first time a Catholic delegation has traveled to North Korea on such a large scale, and with laymen included,” Ma Young-ju, an archdiocese’s public relations official said.

Pyongyang sent an Air Koryo plane to Incheon International Airport to pick up the delegation, Ma said.

The Seoul archdiocese has provided food and equipment worth 11 billion won ($11.6 million) since it started assisting in the midst of a deepening food shortage in the North in 1995.

It helps operate flour factories in Nampo and Shinchon on the North’s west coast and provides 1,200 tons of flour annually, according to the archdiocese.

From the Asia Times: 

The only currency used in the complex is the US dollar.

No foreign investors have yet signed up for the zone

Washington requires high-tech products destined for North Korea that include US intellectual property to undergo stringent export controls. This has irritated many in the South – particularly after the process delayed the transfer of telecommunications equipment. It also appears highly unlikely that Kaesong-built products will be included in a free-trade agreement between Seoul and Washington that is under negotiation.

Officials of the complex say they have assisted local villagers with heating briquettes and rice, but there is otherwise neither trade nor contact across the fence, indicating that the experience of capitalism is strictly insulated. This assumption is buttressed by relations inside the complex: despite talk of inter-Korean fraternity, social contact between Northern and Southern workers is non-existent.

While the railways between the two Koreas were reconnected in early 2004, theoretically linking Seoul and Sinuiju on North Korea’s Chinese border, it is uncertain when trains will start to run through Kaesong.

“There will be talks on opening the line in July, but it is not certain,” said a South Korean official at Dorasan Station, a giant steel-and-glass edifice on the southern side of the border. The lack of rail transport complicates his firm’s logistics costs, said Stafild’s Moon, whose head office is on the south coast of the peninsula, in Busan.
 

From the Standard (China) and LA Times:
3/2/2006

The Kaesong industrial park is only an hour from Seoul but it’s like traveling to the moon, writes Barbara Demick
It takes barely an hour to drive from downtown Seoul to the other side of the demilitarized zone, but the culture shock is such that you might as well be commuting to the moon.

Mobile phones, books, newspapers, magazines, videos, laptops, MP3 players and many other appurtenances of 21st-century life must be checked on the south side of the border.

Also best left behind are any wisecracks about the North Korean regime, or in particular its leader, Kim Jong Il.

“You’ve got to watch what you say,” said Kim Yi Gyeom, a South Korean telecommunications worker standing in a long line of Monday-morning commuters waiting to go north. “The spirit of openness has not come to North Korea yet.”

In the boldest experiment to date with inter-Korean cooperation, nearly 500 South Koreans are working side by side with more than 6,000 North Koreans in a year-old industrial park just north of the DMZ.

South Koreans are assuming all the financial risk, having invested more than US$2 billion (HK$15.6 billion).

The South would like to reduce political tensions and reap the benefit of inexpensive North Korean labor so its manufacturers can compete with China.

For the North Koreans, the Kaesong experiment is a way to build its economy with only the most limited dose of openness to the outside world. But the political risk is all for the North Korean government, which fears that contact with the better-fed, better-clothed South Koreans could endanger its grip on power.

“It is natural that there is a culture gap,” said Hwang Boo Gi, director of the Kaesong Industrial District, who led a group of foreign journalists through the park Monday.

“We are talking about the difference between capitalism and socialism.”

Or as a North Korean official, Han Cheol, said diplomatically, “We like to emphasize what we have in common, like our heritage, and not our differences.”

Nevertheless, the contrast is particularly glaring when coming from Seoul, the high-tech, neon-lit capital of the world’s 12th-largest economy, a mere 58 kilometers away. Around the industrial park, which lies outside the center of the city of Kaesong, there is little but desiccated rice paddies and yellow hills denuded long ago by people scratching for firewood. Nearby is an abandoned agricultural college, its crumbling facade decorated by a faded red sign trumpeting the achievements of the North Korean Workers’ Party. Scrawny goats graze outside two-story white- washed houses with windows made of plastic sheeting.

The industrial park itself is surrounded by 8km of perimeter fencing and poker-faced, rifle-toting North Korean soldiers.

Inside the fenced compound everything from the toilets to the machinery are South Korean-made, mostly the latest, state-of-the-art models. Although all 11 companies now operating in the 9.31-hectare pilot project are South Korean, the North Koreans keep a tight rein over the work environment. No South Korean money is accepted here, even at a Family Mart convenience store set up for the exclusive use of South Korean employees.

North Korean patriotic music in praise of Kim Jong Il blares over the loudspeakers of a futuristic warehouse where North Korean women in crisp royal blue uniforms stitch athletic shoes using brand-new sewing machines.

The monthly salaries of US$57.50 for each North Korean worker – regardless of position – are paid directly to the North Korean government, which in turn gives the workers about US$8, more than double the average monthly salary. South Korean companies have asked repeatedly to pay the workers directly and to give bonuses for better work, but have been refused.

Even New Year’s gifts such as extra food and warm clothing could be given only after elaborate negotiations to make sure everybody was getting the same.

South Koreans, many of whom live for weeks at a time in modular housing in the complex, have their own cafeteria and their own medical clinic, all off- limits to North Koreans.

Last year, stories appeared in the South Korean media about a purported Romeo-and-Juliet romance between a North Korean woman and a South Korean man. But people at Kaesong said the story was apocryphal because the North Korean women are never alone.

There have been countless cases of culture shock. When Shinwon held a fashion show in October – complete with disco music, strobe lighting and slinky models in denim mini-skirts – it offended the conservative sensibilities of some North Koreans.

For their part, some South Koreans were taken aback recently to see the North Koreans workers dancing and singing enthusiastically to an accompaniment of accordion music at a fuel- pump factory. It turned out they were rehearsing in anticipation of Kim Jong Il’s birthday on February 16.

As is often the case, many misunderstandings resulted from acts of kindness.

South Koreans have tried covertly to give medicine from their private clinic to ailing North Koreans.

One South Korean employee was accused of trying to bribe a North Korean soldier when he gave him two packages of instant ramen noodles, according to a military source.

In a more serious incident, a South Korean was caught trying to distribute Christian literature, which is strictly anathema in the communist country, the source said.

“Almost every day something happens, some small quarrel or misunderstanding. But because Kaesong is so important to Kim Jong Il, the North Koreans choose to ignore it,” said Lim Eul Chul, a scholar at South Korea’s Kyungnam University who has written extensively on Kaesong.

Both sides have ambitious plans for Kaesong. When fully completed in 2012, the enclave is supposed to encompass 64.75 square kilometers and employ 700,000 workers.

The biggest impediment to the project’s success might be North Korea’s ongoing nuclear weapons program and its hostility to the United States. The tensions have limited the nature of the products manufactured at Kaesong to low technology – with anything having potential dual use for military purposes prohibited – and mostly confined sales to the domestic market within South Korea.

Although Shinwon Apparel, for example, supplies clothing to Kmart and Wal-Mart, among others, those garments are largely produced in Vietnam. US officials, who earlier this month announced negotiations toward a free- trade pact with South Korea, have said they would not consider Kaesong products to be labeled “Made in South Korea.”

With no progress on the horizon in its long war of nerves with the United States, the North Koreans have no choice but to chum it up with South Korea. If they are merely holding their noses and tolerating the presence of the South Koreans for their money, they go to pains not to show it.

The well-disciplined North Korean cadres who were showing foreign reporters around Kaesong Monday all lavishly praised their South Korean counterparts.

From the JongAng Daily:

The government is being criticized for easing conditions on loans funded from the inter-Korean cooperation funds that were given to the Korea National Tourism Organization for Mount Kumgang tour projects. On Monday, the government decided to lower the interest rate on a loan given to the organization in June 2001 by 2 percent.

The organization originally received a loan of 90 billion won ($93.7 million) with an interest rate of 4 percent and repayment over a five-year period, after a three-year deferment. However, the payback period has now been extended to 10 years at an interest rate of 2 percent.

The Unification Ministry said yesterday that the organization asked the government to make changes to the conditions of the loan, arguing that under the tours’ current profit structure it was unable to repay the funds. This request was acceded to.

The ministry said that after an accounting firm had reassessed the loan, the decision was made with all relevant government organizations involved agreeing to make changes to its conditions.

Nevertheless, the argument that the profit level is too low for the organization to make its payments seems weak as the number of tourists taking trips to the North’s Mount Kumgang has increased over the years.

Only 57,000 people made the trip in the year the loan was granted but by last year the number of visitors had increased to 301,000.

The organization paid the 90 billion won to Hyundai for operating rights to the Kumgang hot springs and resort. Hyundai made a payment of 29 billion won to the North, for which it had been in arrears.

In response, some civic groups argued that public funds should not be used to finance such projects in the North.

Los Angeles Times
Barbara Demick
11/20/2005

A South Korean activist gives birth while visiting Pyongyang for an anniversary event. Some in the South suspect the timing was contrived.

While watching child gymnasts tumbling in unison across the field of Kim Il Sung Stadium in a performance heralding the miracle of the North Korean economy, Hwang Seon felt a sharp cramp in her abdomen.

Within minutes, the 32-year-old South Korean tourist was whisked by ambulance across town to Pyongyang’s maternity hospital. There, doctors delivered a 7-pound, 6-ounce girl who has become an instant celebrity and rare source of optimism in this often-forlorn North Korean capital.

The baby is the first born in the North as a South Korean citizen. Her birth Oct. 10 has been hailed as a mystical sign that the half-century-long division of the Korean peninsula is coming to an end.

“Our precious unification baby girl,” is how North Korea’s official KCNA news agency put it.

Hwang, who was more than eight months pregnant when she traveled to North Korea, spent two weeks recuperating in the maternity hospital, where she was treated without charge to around-the-clock nursing care. Her meals included seaweed soup, a Korean traditional postpartum treatment.

North Koreans suggested naming the baby Tongil, or “Reunification”; but that sounded like a boy’s name, so the parents instead opted for Kyoreh, meaning “One People.”

“Everybody said her birth was a lucky omen for the Korean people,” said Hwang, a left-wing political activist who favors rapprochement with the North.

Hwang and her daughter are the best-known South Korean visitors to Pyongyang recently. But from late September until early this month, visitors from the South came in unprecedented numbers to view mass games marking the 60th anniversary of North Kore&s ruling Workers’ Party.

During October, 7,203 South Koreans flew to North Korea on nearly 100 nonstop flights connecting the estranged neighbors.

For the first time, planes bearing the insignia of South Korea’s leading carriers, Korea Air and Asiana Air, became regular sights on the tarmac of Pyongyang’s seldom-visited Sunani airport; North Korea’s national carrier, Air Koryo, likewise was a frequent visitor to Incheon. Previously, there were only occasional charter flights between the airports for special events.

South Koreans in Pyongyang stood out in their colorful Gor-Tex jackets like exotic birds against the monochsomatic North Korean landscape. Almost all carried digital cameras, a rarity in the North.

While North Koreans trudged through the empty boulevards on foot, the South Koreans were transported in fancy tour buses, some of which sported color television monitors and video recorders.

The South Koreans were not permitted to go out unescorted and had to wear large nametags around their necks. At one point, a disoriented man in his 80s, born north of the border, tried to wander out of a Pyongyang hotel in search of his home village, but was blocked by a courteous but insistent North Korean doorman, said a South Korean visitor who witnessed the encounter.

Overall, the South Koreans said, they got the impression that North Korea was on a charm offensive. For example, when some tourists complained about a scene in the mass games that showed North Korean helicopter commandos battling what seemed to be South Korean soldiers, the material was promptly cut out.

The mass games were blatantly designed to tug at the heartstrings of South Koreans. Named “Arirang” after a popular Korean folk song, the program was replete with sentimental tunes and operatic skits about separated families reaching for one another across barbed wire. The show used more than 100,000 performers, many of them holding colored cards to make up intricate mosaics.

Keeping on message, the finale used a backdrop of doves with a message: “The last wish of the father [referring to the late North Korean founder Kim Ii Sung] is reunification of the fatherland.”

When North Koreans speak of reunification, their meaning is radically different from what Americans might think in recalling the collapse of the Berlin Wall in 1989 and the absorption of the communist East by West Germany. Instead, the North Koreans describe a loose confederation under which their nation would keep its own system of government while receiving massive economic aid from the South.

“We don’t want what happened in Germany,” tour guide Pak Gyong Nam said as he showed visitors a 185-foot-high stone arch portraying two women in traditional Korean dress (one representing each Korea) touching hands across a broad thoroughfare known as Reunification Street. “We would be one country, but two governments.

“If Korea is reunified, South Korea will bring in technology and investment. We have great confidence in the future. If we are reunited, no problem.”

The sentiment explains in large part why North Koreans were so enthusiastic about the so-called unification baby.

“Have you heard about the South Korean woman who gave birth?” asked Kim Kyoung Kil, a North Korean lieutenant colonel who was escorting tourists at the demilitarized zone the day after Hwang and her newborn crossed on their way back to Seoul. “It means reunification is near. Only the Americans are preventing it.”

The reunification baby’s birth — which took place on the exact date of the 60th anniversary of the Workers’ Party founding — fits so perfectly into North Korean propaganda that many suspect it was contrived.

Hwang has issued a denial, saying that her due date was 20 days away when she made the trip and that she had scheduled a caesarean section in Seoul for the following week because of complications from a previous birth.

“Even my friends think it was planned, but it’s not so,” said Hwang, who lavished praise on the medical care and nursing she received. “They were very impressive…. Everybody was wonderfiul to me.”

Other South Korean tourists, most of whom were visiting on a two-day tour that cost $1,000, expressed mixed sentiments about their experience.

Student activists and union members who marched onto the field with a pro-reunification flag were greeted by wild applause from North Koreans in the audience.

But some of the southerners were dismayed by what they saw as an unabashed celebration of totalitarianism.

“Rather than being impressed by the extravagant brightness and precision of the mass games, I was shocked at how mechanical those people were and realized how oppressed they are,” said Lee Yong Hoon, a 62-year-old businessman from Suwon. “I realize we can’t rush into reunification until North Koreans can accept concepts of freedom and individuality.”

More than 1 million South Koreans have visited North Korea since 1998, but most have gone only to Mt. Kumgang, in a border-area enclave open to tourists.

The visits last month were the first mass influx of tourists to the North Korean capital. They coincided with a period of rapidly accelerating economic and cultural exchanges between the Koreas.

South Korea’s national assembly is expected Dec. 1 to approve a humanitarian and economic aid package for the North worth $2.5 billion — nearly double last year’s allocation. And the two announced this month that they might field a joint team for the 2008 Olympics in Beijing.

South Korea’s largesse has come under some criticism because of the North’s nuclear program, the subject of six-nation talks. The Bush administration, along with the conservative establishment inside South Korea, has taken the position that rewards should be deferred until the Pyongyang regime dismantles its nuclear weapons.

“Our government is in collusion with North Korea, creating the false illusion that all is quiet on the northern front, when it is not,” said Lee Dong Bok, a former South Korean intelligence official and assemblyman. By allowing its citizens to visit Pyongyang for mass games, he said, “South Korea is helping North Korea promote its propaganda.”

Technically, South Koreans need waivers from their country’s National Security Law — which prohibits support of North Korea— to visit Pyongyang.

Hwang Seon, the baby’s mother and a former student radical, served 34 months in South Korean prisons largely because she made an unauthorized trip to North Korea in 1998.

“The last time I came back [to South Korea] from North Korea, the National Intelligence Service was waiting for me to arrest me,” Hwang recalled. “This time, I held my baby in my arms and was welcomed back with flowers.”

Hwang’s husband was not able to meet his wife and new daughter upon their arrival home. He is in hiding, wanted by South Korean authorities on charges of pro-North Korean activities.

BBC
10/25/2005 

North Korea has admitted it is holding 21 South Koreans either captured during the 1950-53 Korean War or subsequently, the South Korean government has said.
Seoul had pressed the North about 52 POWs and 51 citizens it believes were abducted after the war.

Seoul has been raising the issue for decades, but has recently been wary of campaigning too hard for fear of damaging relations, analysts say.

It is not clear why the normally secretive North Korea has responded.

“North Korea has confirmed there are 11 abductees and 10 prisoners of war alive in the North,” a South Korean Unification Ministry official told Reuters news agency on condition of anonymity.

Of the other South Koreans whom Seoul had inquired about, the North said 10 kidnapped citizens and six POWs were dead, and the rest unaccounted for.

Many people in South Korea believe around 1,000 South Koreans are alive in the North.

These include more than 540 POWs, according to the Red Cross.

Reunions

A number of the kidnapped South Koreans will be able to see their families again during the next round of reunions between relatives who ended up on different sides of the Korean border after the war ended, Yonhap news agency reported. This is scheduled for 5-10 November.

Japan also believes its citizens are being held in the North against their will.

It has been much more vociferous in its inquiries, and in 2002 Pyongyang admitted it had abducted 13 Japanese citizens in the 1970s and 80s, but said eight of them had since died.

The five still alive returned to Japan three years ago, but Tokyo questions whether the others are really dead, and believes there may be yet more held captive in the North.