North Korean Economy Watch

Korea Times
Ryu Jin
12/11/2007

Namkwang Engineering & Construction, a South Korean company which has recently been stepping up efforts for inter-Korean economic projects, plans to form a joint venture with a North Korean firm for construction works in the North and other countries.

Namkwang E&C CEO Lee Dong-chul told reporters Tuesday that his company, along with 516 Construction Company in the North, will seek to win construction orders in foreign countries including Angola as well as North Korean cities such as Gaeseong and Pyongyang.

“We signed a memorandum of understanding (MOU) for joint projects with the North Korean firm late last month,’’ he said in a press meeting. “They could be operated in the form of a joint venture, depending on the final agreement to be signed early next year.’’

Lee added that Namkwang would largely provide capital and construction technologies to the proposed joint-venture company while the North Korean firm would supply labor.

Founded about 50 years ago, 516 Construction Company is the only construction firm in the North Korean border city of Gaeseong where an inter-Korean industrial complex is located. It has constructed apartments in the city with more than 3,000 workers.

“Currently, the firm is building a steel-frame factory in the Gaeseong Industrial Complex including reinforced concrete, tiles and plaster work under a contract with us,’’ Lee said. “Maybe we can take part in construction works in Angola and Libya jointly.’’

Namkwang, which recently got government approval for cross-border projects, has invested some 7.6 billion won ($8.23 million) since October to build the steel-frame factory which would be used for the second-phase construction of the Gaeseong Industrial Complex.

Lee said that his company would also redouble efforts to get more orders for overseas construction in such countries as Angola, Libya and Vietnam next year. Namkwang has received orders worth $1.1 billion along with NIEC, a joint venture in Angola, since 2005.

Established in 1947, Namkwang has carried out a lot of large-scale projects in South Korea and also advanced to foreign countries such as Saudi Arabia, Iraq and the Philippines for construction of buildings, roads, dams and harbors on the back of its unique technology.

Institute for Far Eatern Studies
NK Brief No. 07-12-5-2
12/7/2007

Kim Yang-gon, head of the DPRK Workers’ Party Unification Front department, led a North Korean delegation to the South, and after two nights and three days, returned to the North on December 1. The last time a North Korean head of the KWP’s Unification Front department visited the South was seven years ago, when, in September 2000, Kim Yong-soon visited Cheju Island. Government authorities are saying that Kim’s trip to the South was publicized in order to facilitate the smooth implementation of the 2007 inter-Korean Summit Declaration

On the day Kim’s delegation arrived, the group visited the Songdo Free Trade Zone, where he and his delegation were moved by a presentation by officials explaining the value of an Inchon-Kaesong-Haeju ‘West Sea Belt’. On the second day, the group visited Daewoo shipyards in Koje, the Busan Customs House, and other facilities.

The trip was reminiscent of when DPRK Cabinet Prime Minister Kim Young-il led a group of more than thirty North Korean entrepreneurs to Vietnam last October, spending four nights and five days walking around tourist areas, an export-processing zone, port facilities, and other industrial areas.

The Unification Front department is but one department within the Workers’ Party responsible for policies toward the South and other countries. Unlike the foreign liaison department, Office 35, and the strategy office, the Unification Front operates openly, but distribution of propaganda leaflets, management of pro-North groups, enticement of overseas Koreans, and other activities are also underway.

The trip South by Kim’s delegation happened just before ROK presidential elections, and highlights the fact that there is barely a month left before North Korea must have its nuclear program frozen and fully disclosed. Kim’s trip to the ROK was promoted and publicized from the beginning, but little information was given to the press, other than coverage of tours of economic facilities.

Daily NK
Han Young Jin
12/7/2007

In North Korea nowadays, individual-use PCs concentrated in Pyongyang and Chongjin, Shinuiju and other large-size cities have been gradually increasing. The trend has been rapidly increasing due to the propagation of computers by North Korean party organizations, the administrative committee office and middle schools.

The computerized citizen registration project by the North Korean village office was completed around the Local People’s Assembly representative elections last July.

A source from Shinuiju, North Pyungan said in a phone conversation with DailyNK on the 5th, “Provincial organizations and the village office are taking on computer-based projects. Large-city wealthy people are also acquiring computers left and right due to their children’s education.”

The new-rich class, who have made huge profits from recent trade with China, believe gradually that “The outer society cannot do anything without computers. Our children have to learn computers, too, to not get behind.”

A majority of computers provided to North Korea are Chinese and South Korean-made and have entered through official trade with North Korea, but a portion has been going through smuggling. South Korean computers, with the exception of Korean software, are permitted. North Korea uses North Korean word processors, such as “Dangun” and “Changduk.”

A portion of the upper-class use the new model computers smuggled from China, but a majority use secondhand Pentium IV-processor or below imported from China. In North Korea’s Shinuiju, a computer (Pentium II) which includes a used CTR monitor is 100~120 dollars and a computer which includes LCD monitor is 300 dollars. The offering price for a used laptop is around 300 dollars.

He said, “People cannot connect to the internet via computers, but can use most programs set up on computers. The resident registration computerization project has been completed and in Pyongyang, networks between libraries are in operation.”

North Korea is the single country in the world that is not connected to an internet cable network. North Korea, while being endowed with the national domain suffix, “kp”, does not operate a domain. People cannot use internet, but can use software programs set up on individual computers such as MS-Word, Excel, and Photoshop.

In North Korea, after 2000, the import of used and new computers from China, Japan, and South Korea through individuals and companies increased dramatically. Around 2001, around 2,000 Samsung, LG and TriGem Computer were provided to North Korea’s main colleges such as Kim Il Sung University and Kim Chaek University of Technology.

Mr. Kim said, “Chosun (North Korea) people prefer LCD monitors, not CTR monitors. Computers that have been coming in North Korea are mostly made in China and South Korean computers such as Samsung, LG, and TriGem Computer have been widely distributed as well.”

Electronic Publications Service using Domestic Network Possible

North Korea prohibits internet, so computer education mostly focused on program usage are taught in colleges and high schools. In schools for the gifted and college computer majors nationwide, a new generation of software developers is being nurtured.

Major organizations in the area of software development are Chosun (North Korea) Computer Center (KCC), Pyongyang Program Center, and the Academy of Sciences.

Since 2002, North Korea has created a network connecting the libraries of Grand People’s Study House, Kim Il Sung University, and Kim Chaek University of Technology. The network has been expanded throughout Pyongyang and the provinces. Currently, a few high officials in Pyongyang can use reportedly the Grand People’s Study House’s electronic publications service at home.

Daily NK
Kwon Jeong Hyun
11/28/2007

A source inside North Korea reported on the 26th of November that the country’s food distribution system did not operate properly and the regime strengthened its control over the market in the Pyongyang areas in the second half of November.

“Most residents of Pyongyang’s core districts such as Joong and Botongang district received their food rations. However, only a half of those who live in Moonsu-dong, Chungryu-dong and Soryong-dong of the Daedonggang district received their rations,” the source said.

“An announcement was displayed on a board in front of the Soryong- 2- dong distribution office in the Daedongdang district, stating, ‘Rice to be redistributed as soon as enough rice is secured,’” the source said. The source added that the crop distributed to the people was composed of 80 percent Annam rice and 20 percent corn, and many people complained about its poor quality.

The North’s food distribution system has worked out well in the west Pyongyang area such as Joongu, Botongang and Pyungcheon district. However, the regime has intermittently distributed food rations to residents in the east Pyongyang area such as Daedongang, Dongdaewon, and Sungyo district.

For instance, in August, no food was distributed in the east Pyongyang area. In September, only a half of residents in the area received food rations. In the following month, all received their food. In November, not all received their rations as in September.

When there is no food distribution, people have to procure rice by themselves in the market.

Unfortunately, that is not an easy task. Since the North Korean authorities have fixed the price of rice at 700 won/kg in the markets of Pyongyang, many merchants are not willing to bring out rice for sales. Instead, they clandestinely sell rice at 1,300 won/kg only to individuals with whom they are acquainted.

The price of rice went up to a high of 1,800 won/kg in the mid October, but now remains steady at 1,300 won/kg. As long as the regime tries to control the price of rice, few merchants would sell rice in the open market, thus contributing to a hike in prices.

In the mid November, corn was sold at 500 won/kg, pork at 3,000 won/kg, an egg at 200 won each, Chinese cabbage at 500 won/kg, and domestic cabbage at 300won/kg in the markets of Pyongyang. The rice of cabbage has rapidly dropped as the state released cabbage into the market because November is a season of preparing Kimchi for winter. Domestic cabbage was sold cheap due to its poor quality.

The regime continues to control the markets in Pyongyang. It prohibits all females under 48 years old from doing business in the market. In addition, merchants are not allowed to sell more than 15 items. The regime enforces its market regulatory measures by having organized groups of inspectors composed of young people and ordered them to regularly patrol markets.

The source said, “As the food situation is getting worse and the state is intensifying its control over the market, Pyongyang citizens begin to express a sense of disappointment with South Korean President Roh.” The source said, “After the inter-Korean summit meeting, many fostered the hope that President Roh would help solve food shortage problems and the regime would adopt reform policies. However, that did not happen. As the state tightens its control over the market, life has gotten tougher.”

“Some even went to so say that President Roh should not have come to the North,” said the source, echoing the uneasy sentiments among Pyongyang citizens.

Institute for Far Eastern Studies
NK Brief No. 07-11-27-1
11/27/2007

Following Kim Jong Il’s August 26 announcement that, “Markets have become anti-Socialist Western-style markets,” measures to increase restrictions on markets across North Korea have also restricted individuals’ ability to migrate.

The Central Committee of the (North) Korean Workers’ Party released a statement in October, revealing that Kim Jong Il had stated, “The current state of anti-socialism should not be moderately opposed. A strong and concentrated attack must be laid out in order to thoroughly eliminate [this anti-socialist behavior].”

According to the Daily NK, an informant inside North Korea revealed that authorities are “contacting people who have applied for permission to travel to other regions at their trip destination and setting up interviews in order to verify that interviewees are conforming with their [stated] intentions,” and, “ultimately, long distance wholesalers are restricted in their movements, cause a reduction in the amount of goods circulating on the markets.”

Good Friends, a South Korean NGO for North Korean aid, also reported, “In North Hamgyung Province, if someone is absent from work for two days or not seen in their neighborhood, that person’s actions are carefully investigated,” and, “if someone does not check out, each of their family members are called in for interrogation.”

After the ‘Arduous March’, as market activity grew in North Korea, the number of whole-saling ‘middle-men’ grew considerably. These traders received travel permits by applying under the guise of visiting authorities, family matters, special occasions, or other personal reasons. Long-distance traders need a travel permit. In order to get such a permit, cash or goods were frequently offered as bribes.

Now, as it is becoming more difficult to receive travel documents, not only long-distance traders but also even normal vacationers are facing growing difficulties. In particular, people who need to travel to China for family visits are especially worried due to the increasingly strict issuance of travel permits.

The insider reported, “As markets grow, because wholesalers are gaining power as they make large amounts of money, authorities seem to be strongly restraining them,” and “if a wholesaler is caught, his goods are taken, leading to difficulties for market traders.”

According to a North Korean defector in the South with access to DPRK information, university students in Pyongyang are also being subjected to increasingly strict personnel inspections and restrictions. Even when they go to the library, they must fill out an exit record and can only remain out for one day before student leaders pay a visit to their home.

Students not strictly obeying school policies have their bags and pockets searched while being put under investigation and being further restricted. Of course, in the past, as well, students with problems faced inspections of their dormitory or personal goods, but recently, inspections of even everyday students are on the rise.

Daily NK
Kwon Jeong Hyun
11/15/2007

North Korean authorities have recently tightened regulations in markets as a warning against private economics, according to inside sources.

The regulation of Pyongyang markets has continued since President Roh Moo Hyun’s visit to North Korea in the beginning of October. North Korean authorities closed all markets in Pyongyang during the Inter-Korea Summit under the whitewash of mobilizing a welcoming crowd. Afterwards, when it reopened the markets, street venders and women under the age of 40 were restricted from engaging in business.

The North Korean inside source said in a November 12th phone conversation that “With the increase in Pyongyang markets, the authorities are not looked at in a favorable light. Regulations worsened after President Roh’s visit to Pyongyang.”

“A week or two before President Roh’s visit, regulations became strict, such as prohibiting outsider visits to Pyongyang and ceasing the operations of the jangmadang (markets). From that point on, the jangmadang has been persistently regulated.”

Leading up to the Inter-Korea Summit, North Korean authorities implemented other civilian regulations as well, such as issuing “special travel permits.”

One Pyongyang trading company head, currently in Dandong, China, said in a meeting with a reporter, “Regulations were tightened after word got out that a clandestinely filmed video clip showing Pyongyang markets had been widely broadcasted in South Chosun (Korea).” He surmised that a clip showing Pyongyang’s Sunkyo Market has been broadcasted on Japanese news programs three times since last month.

He also said, “A decree was issued by the Pyongyang People’s Committee that women under the age of 40 should be employed in enterprises. Our enterprise received the same decree, so we have to take in 200 female workers.”

He said however, “Too many workers have been dispatched, even though our enterprise business is not that large. We objected, saying that we can not receive them because we can not even give them provisions. Other enterprises in Pyongyang are in the same position.”

He emphasized, “People go to the market, because the state cannot sustain them. The party leaders also survive relying on the market, so regulation of the market is impossible. Market control can only be a temporary because the wives and daughters of party leaders are in the situation of selling goods as well.”

He also added, “The number of people in charge of general markets is exorbitant across the country. Those who received 30,000 won per month have to go into enterprises where they will only get 2 to 3,000 won. Restricting the market is something nobody wants.”

The North Korean state is currently prohibiting the undertaking of businesses by women under 40. In North Hamkyung Province, the business age limit will be fixed at 45 and above starting in December, so the members of the Union of Democratic Women have put up a significant resistance.

According to an internal Workers’ Party document which has recently come into the hands of a diplomatic source, the North Korean government is supposed to have given the order to “regulate the markets, as they are hotbeds for anti-socialist activity.”

The document, which was published last October under the auspices of the Central Committee of the Chosun Workers’ Party, read, “The Great Leader Kim Jong Il pointed out, ‘In order to absolutely eradicate this anti-socialist phenomenon, we have to unfold a concentrated offensive.’”

The document states, “Civilians were able to attain some comfort through the market; but now, it has deteriorated into a place that breaks societal order and national rules. In one city, several tens of thousands of merchants come out to the sidewalks and even car lanes and have brought about a severe disruption in traffic.”

The paper gives evidence to the fact that the North Korean government itself recognizes the citizens’ growing reliance on the market due to market revitalization, and that anti-socialist activities are rampant.

The document further criticized, “A more serious issue is that mostly women under the age limit are conducting business in the market, and women who have received high-level education under the auspices of the Party and the nation have thrown away their positions to go into sales, an act which forsakes justice and the most basic conscience.”

Additionally, it specifically addressed those who disseminate illegal South Korean film products, “middlemen,” referring to brokers who secretly sell nationally-regulated, military, and electronic goods, and Chapan-Jangsa (selling goods off trucks) who earn excessive profits from wholesales.

Yonhap
11/14/2007

North Korea’s prime minister arrived here Wednesday to hold talks with his South Korean counterpart on implementing agreements reached at the second-ever inter-Korean summit last month.

In last month’s summit in Pyongyang, President Roh Moo-hyun and North Korean leader Kim Jong-il called for denuclearization of North Korea, the establishment of a permanent peace regime on the peninsula and a range of economic cooperation and rapprochement measures.

Kim Yong-il is the first North Korean premier to visit here in 15 years. The prime ministers of the Koreas held eight rounds of talks until 1992. Inter-Korean minister-level talks resumed in 2000 following the first-ever summit between the leaders of the Koreas earlier that year.

Premier aims to build North Korean economy with inter-Korean cooperation
Yonhap
11/14/2007

North Korea’s prime minister is expected to make inter-Korean economic projects a top priority in the prime ministerial talks this week, watchers forecast on Wednesday.

Kim Yong-il, North Korea’s top official in overall economic policy, was due to arrive in Seoul on Wednesday for three-day talks with South Korean Prime Minister Han Duck-soo.

The talks follow last month’s inter-Korean summit held in Pyongyang, as well as Kim’s trip earlier this month to Vietnam, Malaysia, Cambodia and Laos. Kim’s Southeast Asian trip was aimed at finding ways to boost North Korea’s failing economy through regional cooperation.

Kim replaced his predecessor, Pak Pong-ju, as prime minister earlier this year after spending most of his career in maritime affairs and transport.

The 63-year-old career administrator served nine years in the military beginning in 1961 and graduated from the Rajin University of Marine Transport, leading to his bureaucratic career as a rank-and-filer in the Ministry of Land and Marine Transport.

He became head of the ministry in 1994, a position he held until he was appointed as prime minister on April 11.

The premier was praised by the North Korean people in 2005 for successfully modernizing the Ryongnam Ship Repair Factory near the western port of Nampo.

Kim is also well-known for having forged maritime communications and transportation agreements with North Korea’s allies, including China, Pakistan and Syria.

Some South Korean experts say Kim’s background represents a shift in North Korea’s economic policy, suggesting a move from isolation to economic expansion in the international community, as well an emphasis on reform and technology.

Korea Times
11/14/2007

U.S. and North Korean officials will meet in New York early next week to reopen talks on addressing Pyongyang’s alleged illicit financial activities, sources here said Tuesday.

Daniel Glaser, assistant treasury secretary in charge of terrorism financing, will lead the U.S. delegation to the talks scheduled Monday to Tuesday, according to the sources. It was not yet clear who will represent North Korea at the meeting. Previous sessions were led by O Kwang-chol, president of the Foreign Trade Bank of Korea.

The meeting is the first since the two countries resolved a banking issue that for over a year delayed North Korean denuclearization negotiations. The U.S. Treasury in September 2005 sanctioned Banco Delta Asia (BDA), a Macanese bank, for abetting North Korea’s laundering of money acquired through smuggling, counterfeiting and arms proliferation. The bank froze all North Korea-related accounts, and Pyongyang boycotted the denuclearization talks in protest.

The issue was settled with the release of some $25 million in North Korean money at the BDA early this year.

Sources said next week’s meeting will address North Korea’s suspected illicit activities that led to the Treasury’s sanctions, including Pyongyang’s counterfeiting of American currency.

North Korea has been accused of producing and circulating fake$100 bills, known as “supernotes” because of their near-authenticity, and smuggling contraband goods.

Bloomberg
Bomi Lim
11/13/2007

North Korea’s Daepung Investment Group will set up a $10 billion fund with China Development Bank to help Chinese firms operating in North Korea, Yonhap News reported, citing the company’s vice president.

The fund will be used to help Chinese companies build roads, railways and ports in North Korea, Daepung Vice President Bae Kyeong Hwan was quoted as saying. Bae didn’t say how much each country will contribute the fund.

Daepung also plans to set up a bank to attract investment from overseas, the report said.

China is North Korea’s biggest trading partner and an important provider of food and fuel. North Korea is isolated from most of the rest of the world and has received virtually no foreign investment.

Daily NK
Moon Sung Hwee
11/13/2007

Recent demand for small-sized TVs has been rapidly increasing in North Korea’s border regions, resulting in a huge price increases.

According to an inside North Korean source, the price of 12-inch (dubbed “chok” in North Korea) and 14-inch TVs, compared with prices this time last year, increased by 50 thousand to 100 thousand won (approx. USD15-30). Despite the increase, these small TVs are selling out, resulting in a supply shortage in stores located throughout the border regions.

Most 12-inch black and white TVs are Chinese-made. These TVs, which could have been purchased for a mere 150,000 won (approx. USD46) up until the end of last year, have recently sold for as much as 250,000 won.

The reason for the increase in the border region is that the state has strengthened inspections in these areas of those who watch Chinese TVs. The recent preference for small-size TVs comes from the fact that they are relatively easy to conceal.

A majority of border region civilians from North Pyongan to North Hamkyung Province can receive Chinese TV signals, thanks to the close distance. Among the channels able to be viewed is once broadcasted via Yanbian TV and South Korea’s China TV (www.openchina21.com). In accordance with a 2004 agreement between these two companies to promote broadcasting and cultural exchange, diverse South Korean dramas and movies as well as advertisements of South Korean products can be viewed.

The North Korean government collected remote controls to prevent the viewing of Chinese TV along the border region and implemented measures such as sealing the channels. Throughout the China-North Korea border region, inspections conducted by the No. 27 Bureau (under the Central Communications Office) are still very much underway.

The source said, “No. 27 Bureau agents come knocking at the door and turn on the TV at once to verify which channels have been viewed. Further, they inspect the state of sealed channels; if the seal has been damaged, the TV is confiscated.” When inspections take place, 30~50 sets are taken at a time, and in order to retrieve them, several thousand won in bribes is needed.”

However, in cases where these methods have failed to prevent the viewing of Chinese TV, technicians have entered homes and intercepted the circuits inside the TV, re-sealing the attached apparatus with high-strength adhesives. By doing so, the channels are forcibly fixed on Chosun Central TV broadcasting.

When the government carried out such invasive measures, the civilians put up a strong resistance, “Are they planning to just break TVs?” However, the government enforced the regulation of internal equipment, even when faced with civil rebellion.

The source said, “The apparatus inside televisions have been fixed so that people cannot watch Chinese TV channels, and inspections have been occurring randomly, so people have been watching and hiding small-size TVs in their homes.” This activity is reflected in the price increase.

One defector who has experience in selling used TVs in Rajin in North Hamkyung Province said, “Small-size TVs by which people could watch South Korean broadcasting were originally in high demand in South Pyongan, Kangwondo and South Hwanghae.” He said, “Since they cannot pass through customs, they are usually smuggled into and sold on the black market.”

The People’s Safety Agency handed down a decree stating that, “Those who pose a threat to the state and social system will be severely punished. Get rid of all kinds of places offering karaoke, movies, film subscriptions, PCs, and games.” It further emphasized the National Security Agency’s tightening of cell phone regulations along the border region.

Since last year, severe regulation of illegal films (foreign and South Korean DVDs and VCDs) has continually been enforced. Since this year, the North Korean government has gotten headaches from regulating the houses of civilians.

The North Korean government claims that the purpose of the regulations is “Destroying enemy maneuvers and directly impugn acts that pose a threat to society and the system.” North Korea’s opening and reform still seems far off.