North Korean Economy Watch

According to China Economic Review:

Could North Korea be saved by Chinese-style reforms? In return for its continued support, China is pushing the rogue state to liberalise its economy, and Chinese firms are making inroads into various sectors, especially infrastructure and mining. Earlier this week, I interviewed Felix Abt, a Swiss business consultant who was appointed managing director of a pharmaceutical joint venture in Pyongyang with a brief to turn around the loss-making company, about his experiences over the last eight years.

How open is North Korea to foreign investment, and how many foreign companies are operating on the ground?

In 1992 the Supreme People’s Assembly adopted three laws allowing and regulating foreign investment — the Foreign Investment Law, the Foreign Enterprise Law, and the Joint Venture Law.

Since then, foreign investors have become active in a variety of industrial and service industries. There are a few hundred foreign-invested companies operating at present, mainly smaller sized ventures ($100,000 to $3 million) and of Asian origin (with China ranking No.1).

There are a few very large foreign investments, mainly in the telecom and cement industries. Western multinationals have been shying away from North Korea for fear of ending up on a sanctions list in the world’s largest economy. BAT sold its highly profitable tobacco factory due to political pressure in Great Britain to a Singaporean company a few years ago.

What sort of person sets up business in North Korea? What sort of industries have arrived and what sectors are not represented?

The domestic market is still very small and limited and and not much growth can be expected in the foreseeable future. So to talk about a promising emerging market at present would be a silly exaggeration.

However, North Korea is a very interesting location for the processing of products from garments to shoes to bags where you send the cloth or the leather and the accessories and they send you the finished products back.

The same goes for the extraction of minerals and metals, abundantly available in North Korea, in which case you would send equipment and get the mining products.

In addition, the manufacturing of low to medium technology items is very competitive and such products are already being made with foreign investment in North Korea from artificial flowers to furniture to artificial teeth. I was involved in making the business plan for the artificial teeth joint venture and know therefore that such products can be manufactured with a much better profit margin than for example in the Philippines where the artificial teeth had been produced before.

A particularly promising industry is IT due to the extraordinary quantity and quality of mathematicians unmatched by other countries. The first and only software JV, Nosotek, has seen remarkable successes within a very short time from its foundation and could become a subject of interest to investors who would never have thought of putting any money in North Korea until now.

How easy is it to do business there? Are most foreigners concentrated in Pyongyang or are they spread around?

It depends on the expectations, on the choice of the local partner and on the expatriate staff a company sends there. You need to thorougly select the most suitable local partner and an expatriate manager that is not only professionally competent but also can adapt to and cope with a demanding business environment.

The success of the pharmaceutical joint venture I was running in the past depended on a fast capacity building of the Korean members of the board of directors, managers and staff. I brought them to China where they visited the first foreign and Chinese invested pharmaceutical JV and I convinced its Chinese octogenarian architect to become a member of our company’s board of directors.

Since he faced very similar problems decades earlier he could convince the North Koreans quite easily why certain things had to be done in a certain way to make the business successful. We visited a great number of pharmaceutical companies, wholesalers, pharmacy chains in China and some of our staff even worked in a Chinese factory for some time.

When I wanted to set up the marketing and sales function I was first told that “companies in the DPRK usually don’t have a sales dept.”. I was asked to send a letter to the cabinet to explain my reasons to get the permit for doing so. The visits in China were surely important eye openers and helped getting things organised like in any other country.

The Korean managers and staff quickly acquired all the necessary skills and were able to run the day to day business (factory, import and wholesale of pharmaceuticals, pharmacies) alone when my term ended as managing director.

Many foreign business people are based in Pyongyang, but there are also many working in different places throughout the country, e.g. near mines in the mountains.

Hu Jintao has urged North Korea to speed up its economic reform, using China as a model. Could North Korea open up in the same way over the next few years?

The Chinese are better informed than the scholar and North Korea expert who recently wrote in the Wall Street Journal that the country’s elite would never agree to reform its economy as they fear the system would then collapse.

Together with the Chinese, I believe the risk of a collapse is much bigger if no reforms are carried out than if there are slow and controlled changes.

Once the economy starts taking off and people’s living standards rise the people will hardly challenge the system and the leadership even though the North Korean people know that South Korea’s economy is much more advanced.

Read the full story here:
Can North Korea embrace Chinese-style reforms?
China Economic Review
Malcolm Moore
9/23/2010

According to the Korea Times:

In North Korea, the price of rice and currency exchange rates have been on a roller coaster ride since the failed currency reevaluation last November, a ruling party lawmaker said Thursday.

In a booklet, titled “Collection of National Assembly’s Annual Audit: North Korea 2010,” Rep. Yoon Sang-hyun of the Grand National Party claimed that creating a thriving market is the key to resolving economic problems in the Stalinist society.

North Korea watchers said the presence of a free market was the result of the communist party’s halt of the public food distribution system after the devastating famine hit the impoverished economy in the wake of massive floods in the mid 1990s.

The lawmaker released the booklet based on data and reports from the Ministry of Unification.

According to him, the price of one kilogram of rice was approximately 20 won before the currency reform. But it skyrocketed after that and hit 1,000 won early this year.

The range in the price of rice in late July reached between 1,300 and 1,500 won.

Along with rice prices, Yoon said foreign exchange rates were on a volatile up and down fluctuation as well.

The exchange rate for the North Korean won against the U.S. dollar was 30 won per dollar. But the dollar rate was rapidly appreciated to 1,000 won per dollar this March and rose further to 1,300 won per dollar.

Citing a unification ministry’s report, Yoon said some 300 to 350 markets were open in the North and there are one or two markets for every country [sic:  “county”].

North Korean authorities implemented the currency reform last year in order to repress the markets, but the failed results proved their bold miscalculations, he said.

Read the full story here:
Rice prices on a roller coaster ride in N. Korea
Korea Times
Kang Hyun-kyung
10/28/2010

Aidan Foster-Carter wrties about the recent increase in China-DPRK “friendship” activities in the Asia Times: 

Over a month ago, in an article in these columns, I suggested a number of reasons why North Korea may well become a quasi-satellite of China.

Well, it’s happening even faster than I expected. In all the excitement about Kim Jong-eun’s coming-out for a second time, at the 65th birthday of the ruling Workers’ Party of Korea (WPK) on October 10, we risk missing another key aspect of that big Pyongyang parade.

The “reptile press” – one of my favorite North Korean phrases; yup, I’m a lizard and proud – all oohed and aahed at their first glimpse of the “young general”. Most paid less attention to a middle-aged chap also standing on the podium, not far from the clearly ailing Kim Jong-il. The one without a badge – meaning he isn’t North Korean. A rare privilege for a foreigner.

How now, Zhou
Meet Zhou Yongkang. Hardly a household name, yet ranked ninth in China’s politburo. A former minister of public security (2002-2007), he still has responsibilities in that key area.

Now Zhou has a new role too: he is China’s point man on North Korea. This seems to have been his first trip there, but it won’t be his last. Barely a week later, back in Beijing, he was on the job again, this time hosting a large visiting North Korean delegation (of which more below).

Zhou has been parachuted in above Wang Jiarui, the head of the Chinese Communist Party’s international liaison department, who in recent years had been China’s most frequent flyer to Pyongyang. Wang is still on the case: he was part of the October 10 delegation too, but clearly ranked below Zhou.

This seems less a demotion for Wang than a broadening of Beijing’s agenda. Wang’s main task, a thankless one, was and is to try to chivvy the Kims into line on the nuclear issue. That remains a key goal, but now in a wider context. China wants to deepen its overall relations with North Korea. To that end, bringing in a new more senior figure to take charge flatters the Kims, while Zhou’s background in public security is doubtless meant to reassure them.

China means business
Who else did Zhou bring along? Not the usual cross-section of the great and the good, but the neighbors: meaning senior figures from the three Chinese provinces – Jilin, Liaoning and Heilongjiang – which border or are close to North Korea. This trio had a special dinner with a quartet who are their North Korean equivalents: the party secretaries – provincial governors in all but name – from North Pyongan, Jagang, Ryanggang and North Hamgyong, the four provinces which adjoin China across the Yalu (Amnok in Korean) and Tumen rivers.

Not only dinner, but a deal. On the eve of Pyongyang’s parade, the two sides signed a trade agreement. No details were given, but again each side’s border bigwigs were in evidence.

Nor did it end there. A week later, one of North Korea’s rising stars led a big delegation to China, with provinces again prominent. Aged only 53, much younger than most of North Korea’s gerontocratic elite, Mun Kyong-dok is a new alternate politburo member. He also holds the key job of party secretary for Pyongyang. As such, on September 30 he gave a keynote speech in front of 150,000 people, congratulating Kim Jong-il on his re-election as leader.

October 16 saw Mun on the road, shepherding all 11 of North Korea’s provincial or big city party secretaries to – where else? – Beijing. Welcoming them, Zhou Yongkang – who else? – noted that this was “the first time that the secretaries from all the WPK provincial and municipal committees have visited China”, adding, “I wish that you will expand exchange with various Chinese regions you’re visiting and achieve success from your tours.” Mun replied that “We will study and learn the successful experiences from China.”

Maybe this time?
We’ve heard that before, even from Kim Jong-il – who forgets all about it as soon as he gets back home. But as Sally Bowles sings in Cabaret: “Maybe this time.” Sending such a large team – a full house, indeed – on the road in this way, including several younger and newly appointed provincial party bosses, looks like a real effort to take things forward. China won’t be impressed if its mendicant neighbor merely rattles the begging bowl again.

Mun’s team went on to – where else? – the northeast, visiting factories in Heilongjiang and Jilin. These provinces have in the past had bones to pick with their unneighborly neighbor, which too often fails to pay for coal or other goods – and sometimes doesn’t even return the railway wagons used to deliver them. That sort of tiresome trickery will have to stop. Time will tell whether North Korea has really turned over a new leaf in its business dealings.

Blood brothers
On another front, by a convenient coincidence October 19 was the 60th anniversary of China’s entry into the Korean War. The massed ranks of Chinese People’s Volunteers (CPV) – old British army joke: “I want three volunteers: You, you and you!” – turned the tide, saved Kim Il-sung’s bacon and stopped General Douglas MacArthur wiping the Democratic People’s Republic of Korea (DPRK) off the map.

Cue yet more love-ins. The state-run Korean Central News Agency (KCNA) ran a stirring headline: “Friendship Forged in Blood in Anti-US War.” Special events included a photo exhibition, a Chinese film week and performances by a visiting art troupe from the People’s Liberation Army (PLA). A delegation from the Korean People’s Army visited China, led by vice minister of the People’s Armed Forces Pyon Il-son: a hitherto obscure general, but evidently another name to watch.

China reciprocated by sending a better-known bigwig. (Speaking of which, he wears one – or so says Wigipedia.) Unlike Zhou Yongkang, who is new to this patch, General Guo Boxiong – vice chairman of China’s Central Military Commission – has had North Korean links for at least a decade; he visited in 2001 with then-president Jiang Zemin.

Usually the CPV anniversary is marked by a low-key wreath-laying and a few press articles. But 60 is a big one, and this time Pyongyang pulled out all the stops. There was a mass rally – “held with splendor”, gushed KCNA – with Kim Jong-il and Kim Jong-eun in attendance and much stirring rhetoric. The dear leader also hosted a dinner, again with his son present.

Even Arirang has got in on the act. North Korea’s striking yet introverted mass games have finally admitted (pace juche) that the Kims didn’t go it alone; they got by with a little help from their friends. KCNA on October 22 described a newly added scene, “Friendship Arirang”. This highlights the role of the CPV, portrayed with “drums of different sizes, ribbons, red flags and other hand props … several-dozen-meter-long dragons, pandas and lions.”

We helped you first
One wonders what Chinese visitors who are the mainstay of North Korea’s thin tourist trade make of such cliches – or the fact that, the way Pyongyang tells it, that is only half the story. For Arirang also, and first, depicts “the Korean People’s Revolutionary Army and Chinese armed units fighting together against the Japanese imperialists”. The implication is that this was somehow reciprocal: Korea helped China out, and then China repaid the compliment. Note also the disrespect: Korea had an army, China merely “armed units”. What, no PLA?

Pull the other one, comrades. True, a small but gallant band of Korean communists under Mu Chong, a veteran of the Long March, were with Mao Zedong in Yanan. Separately, the young Kim Il-sung was one of a few guerillas – under Chinese command – who skirmished with the Japanese in Manchuria before being chased across the border into the Soviet Union. Kim came back in Soviet uniform and set about purging rivals – including Mu Chong, who had to flee to China. All quite a can of worms, which it seems unwise of North Korea to risk opening.

CPV casualty figures tell their own story. This year Beijing quantified these. A staggering three million Chinese troops fought in what China still calls the “War to Resist US Aggression and Aid Korea”. Over 180,000 never came back. PLA statistics show 114,084 killed in action or accidents, with another 25,621 missing. A further 70,000 died from wounds, illness or other causes. There are 183,108 registered war martyrs. Others put China’s losses as even higher. With all respect to Mu Chong, a few Koreans’ sacrifices for China don’t begin to compare.

Nuclear hopes and fears
China’s many and mixed motives vis-a-vis North Korea now include never to get dragged into war like that again. To that end, Beijing still professes faith in the six-party talks on North Korea’s nuclear program which it hosts, even though these achieved little tangible – despite many hopes, and much talking-up – over five long years. (They began in 2003 and have been stalled since 2008.)

Here too there is fresh activity. Hardly had the cheers echoing in Kim Il-sung Square died away than the North’s long-time nuclear negotiator Kim Kye-gwan, newly promoted to first vice minister, led a delegation to Beijing on October 12. There followed four days of what KCNA called “an exhaustive and candid discussion on DPRK-China relations, resumption of the six-party talks and the regional situation, etc.” It added: “The DPRK is ready for the resumption of the above-said talks but decided not to go hasty [sic] but to make ceaseless patient efforts now that the US and some other participating countries are not ready…”

True. South Korea and Japan, like the United States, see no point in dusting off the six-party circus without clear signals from Pyongyang on two fronts: a serious will to give up nuclear weapons, as against playing games; and an admission that it sank the South Korean corvette Cheonan in March.

That is a hard gap for Beijing to bridge – especially if there is any basis to recent rumors that North Korea, so far from disarming, may be planning a third nuclear test. Somehow I doubt this. China’s fresh embrace of its tiresome neighbor is not unconditional. I would expect its price for propping up the Kims to be twofold: Market reforms – and no more nuclear tests.

Another bang would sorely tax China’s patience with this tiresome thorn in its northeastern flesh. Beijing is still sheltering number one son Kim Jong-nam, who on October 12 rained (or an earthier verb springs to mind) on little brother’s parade by declaring that he personally was against a third-generation succession. Might anyone try to change his mind? Jong-nam may look ghastly, but he is pro-reform. If Jong-eun proves a pest or a dud, China has alternatives.

Read the full story here:
North Korea: Embracing the dragon
Asia Times
Aidan Foster-Carter
10/28/2010

Pictured Above: Love North Korean Children Bakery (Sonbong, DPRK)

Michael Rank writes in the Asia Times:

North Korea is a land of hunger and poverty but the children of Hahyeon primary school look reassuringly healthy, thanks to a small, British-based charity that runs three bakeries in this isolated and highly secretive country.

The children receive their midday meals courtesy of Love North Korean Children, [1] which bakes 2,500 mandu or steamed buns each day for pupils in 20 schools in and around the northeastern coastal city of Sonbong, near the Chinese border.

“If we did not provide these buns the children would go hungry,” said the charity’s founder and powerhouse, South Korean-born George Rhee.

Rhee works indefatigably to make sure that his bakeries have sufficient supplies of flour and other essential items, all of which have to be imported from China, something of a logistical and bureaucratic nightmare.

“All of our food gets to the children. None goes to the North Korean army or government,” said Rhee, and as he travels to North Korea from London up to 10 times a year, he is in a position to know.

Rhee, 52, told how he was inspired to found Love North Korean Children as a result of his own childhood experiences. He was one of eight children – he has six brothers and a sister – and when his father’s land reclamation business went bust, it left the family penniless. His parents were forced to put him and his twin brother in a children’s home.

The home was a cruel place and the children often went hungry, and it was this experience that made Rhee decide that he wanted to help the children of North Korea.

“At first I was thinking of opening an orphanage, but the government wouldn’t allow that. They say North Korean leader Kim Jong-il is our father, so there is no need for orphanages. So then I decided to open a bakery,” Rhee recalled.

Rhee first visited North Korea in 2002, and opened the charity’s first bakery the following year, in Rajin, close to Sonbong. I visited him there last month. He recently handed over responsibility for the Rajin bakery to a Korean-American group, but he also runs a bakery in Pyongyang, and this year opened a new bakery In Hyangsan, about 150 kilometers north of the capital.

He puts the cost of flour and equipment for the Sonbong and Pyongyang bakeries at about US$6,300 each per month, and for the Hyangsan bakery at almost double that, as it feeds twice as many children.

Rhee is a minister in the Assemblies of God Church and has its backing for his charity. Most of the costs are borne by three Dutch Christian foundations, the Barnabas Fund, Stichting Ora and Dorcas Aid International, but Rhee hopes to build more bakeries in North Korea and recently went on a fundraising trip to South Korea to talk to local companies and churches.

“There is a lot of interest in what we are doing. I am hopeful that we will be able to raise more money to open more bakeries,” he said.

Rhee said he hopes to open a fourth bakery in Haeju, the hometown of his late father, who escaped by boat to South Korea at the height of the Korean War in 1951.

“The North Korean government says we can. The only question is money,” he added.

Although the children at the Sonbong school looked healthy and well fed, they are among the lucky ones. Rhee said some of the children whom his bakeries feed are thin and pale, even with the extra food they receive from Love North Korean Children.

“I have even seen dead children in the streets. The situation for children in North Korea is terrible,” he stressed.

The United Nations World Food Program (WFP) bears this out. It says 33% of the population is undernourished and 23% of children under five are under-weight for their age.

“Public rations are reportedly far from sufficient and daily food consumption for most households is poor”, the WFP reports. Many people are forced to survive by cutting down on the number of meals per day, eating more wild foods – grass and bark in some cases – and less maize and rice, and reducing portion sizes for adults so that children can eat.

Although conditions have improved since the mid-1990s, when hundreds of thousands, possibly millions, of people died in a terrible famine, North Korea remains one of the world’s poorest countries.

Aid workers and diplomats say the government bears much of the blame, with an inflexible, highly centralized food-distribution system that results in a large proportion of the population going permanently hungry.

The WFP tactfully avoids blaming the government, referring to “a lack of arable land, poor soil management, insufficient water reservoirs to combat drought, shortages of fuel and fertilizer, outdated economic, transport and information infrastructure, and a general vulnerability to natural disasters”.

It quotes the Food and Agriculture Organization as saying North Korea needs to import 25% of its grain requirements, “but economic constraints mean the DPRK [Democratic People’s Republic of Korea] will struggle to meet its food import needs.”

All this means that small organizations like Rhee’s do a valuable job in feeding people who would otherwise go hungry, although the paranoid, xenophobic nature of the regime makes their work extremely challenging.

Until recently, a number of South Korean charities were active in North Korea, but the Seoul government ordered them out after the sinking of the naval ship the Cheonan in March in which 46 South Korean sailors died.

The South Korean government blamed North Korea for the sinking, and relations between the two countries, cool at best, went into the deep freeze.

Surprisingly perhaps, Rhee strongly supports the Seoul administration’s tough line, as he believes most of the South Korean charities were naive and were unable, or unwilling, to prevent the North Korean government from diverting much of the food they provided to the million-strong army.

“I support President Lee Myung-bak in this,” Rhee said. “These South Korean organizations were foolish” in not monitoring where food and other supplies were going.

Love North Korean Children was not affected by the ban, however, as it is a British-registered charity and Rhee, who has lived in the UK for 20 years, is a British citizen.

“The North Koreans cooperate well with us. It isn’t easy but we help to make sure that people get fed,” he said.

I had unexpected proof that the North Koreans appreciate Rhee’s efforts. During my visit to North Korea, officials constantly complained to me about photographs I was taking and at one point deleted some pictures on my camera.

I was concerned that they would delete more photographs when I left the country, as frequently happens.

I need not have worried, however. The customs officer who checked my camera at the North Korean-Chinese border was well disposed towards us, as his children were fed by Love North Korean Children. He took just a quick look at my photographs and waved us through.

You can see the author’s photos from Rason here.

Read the full story here:
British bakeries a lifeline in North Korea
Asia Times
Michael Rank
10/27/2010

Institute for Far Eastern Studies (IFES)
NK Brief No. 10-10-25-1
10/25/2010

There has been a sharp drop in inter-Korean exchanges resulting from the chill in relations on the peninsula. This has led to a mere 3.6 percent of the inter-Korean cooperation fund being tapped as of the end of September. In 2009, 8.6 percent of the allocated funds were spent, but this year, even at the end of the third quarter, not even half that much has been allocated.

The National Assembly’s Unification, Foreign Affairs and Trade Committee found in an audit of the Ministry of Unification’s public documents that almost 1.2 trillion Won had been allocated for inter-Korean cooperative projects, but a mere 41.7 billion Won had been spent. 1.4 billion Won was spent on socio-cultural exchanges, while 13.1 billion Won was spent on humanitarian aid, 10.7 billion Won supported economic cooperative projects, and 16.7 billion Won was advanced in support of those companies and groups planning additional projects. On the other hand, the Ministry of Unification is loaning 60 billion Won from the inter-Korean cooperation fund to South Korean companies invested in economic cooperative projects that are suffering losses due to the May 24 measures, which restrict exchanges due to the sinking of the Cheonan.

In 2008, the first year of Lee Myung-bak’s administration, only 18.1 percent of the inter-Korean cooperation fund was spent, and this percentage has fallen every year since. Now at an all-time low, it appears that the rate of spending will continue to fall in the future. With the May 24 measures, the Kaesong Industrial Complex was exempted from trade restrictions. In addition, other inter-Korean trade worth approximately 80 million USD (90 billion Won) has been permitted. This includes 639 different cases of imported goods manufactured from raw materials or parts sent to the North prior to the May 24 restrictions, amounting to 31.15 million USD, and 269 cases of pre-ordered exports amounting to just over 49 million USD.

On the other hand, losses due to the halt of tourism to Mount Keumgang and Kaesong have amounted to 628.5 billion Won over the last two years. According to a report submitted to the National Assembly by the Korea Tourism Association on the impact of halting these tourism projects, losses of 548.2 billion Won had been incurred by August, and that is expected to grow to 628.5 billion Won by the end of the year.

Mount Keumgang tours were halted in July 2008, while Kaesong tours were stopped in November of the same year. Since then, the Korea Tourism Association has lost 10.5 billion Won in profits, while private-sector companies including Hyundai-Asan and its partners have lost 465.2 billion Won. In addition, restaurants, rest stops, visitor centers and other businesses in the border town of Koseong, Kangwon Province have lost 72.5 billion won due to the lack of tourists travelling across the border to Mount Keumgang, pushing total losses by the government and private sector to over 500 billion Won.

According to Bloomberg:

The two sides of Chang Gwang Street (Satellite image here) in North Korea’s capital of Pyongyang show the gap between the Stalinist country’s elites and its capitalist-minded citizens. On one side, English-speaking officials mingle with Dutch traders at the Koryo Hotel. There, those with foreign currency can buy Heinekens for about a buck a can at the official exchange rate of 100 North Korean won to the U.S. dollar.

Across the street, a saleswoman at one of the private markets still allowed by the authorities giggles when a foreign guest says he doesn’t have the 200 won needed to buy a steamed vegetable bun. She flips the placard to reveal the cost in dollars, the currency of a country that doesn’t have diplomatic ties with North Korea. The price: 20 cents, implying an unofficial exchange rate of 1,000 won to the dollar.

Old Asia hands say this is one of the biggest spreads between the official and unofficial currency rate they have ever seen in the region. Back in the 1980s the gap between the official and market rates in China was not nearly as great as in North Korea today, says Ken Dewoskin, a director of Deloitte’s China Research and Insight Center in Beijing, who began his career watching China in the mid-1960s and first traveled there in 1977. “Even closed economies like Cambodia in the 1960s had only a 2-to-1 pricing discrepancy,” he says.

President Kim Jong Il moved late last year to revalue the won and limit the amount of cash that North Koreans could exchange for newly printed bills. The policy was designed to clip the wings of the private merchants who were increasingly creating an economy beyond the control of the authorities, according to the University of Vienna’s Rüdiger Frank, a political scientist who specializes in North Korea. The impact of the abrupt policy shift extended far beyond the merchants. “The revaluation not only wiped out people’s savings, but their trust in the government and their currency,” says Ha Tae Keung, founder of Open Radio for North Korea. “There’s a widespread belief among North Koreans that their money is going to get further devalued and they’ll get poorer just by holding onto it.”

The currency turmoil came amid mounting speculation that Kim Jong Il’s health was failing. Last month he promoted his son, Kim Jong Un, to four-star general, setting the stage for the country’s second hereditary power transfer. The government extended an unprecedented invitation to international media to witness the Oct. 10 anniversary celebrations marking the 65th anniversary of the Workers’ Party of Korea.

The next day, Pyongyang residents queued up as usual to spend their won at the Chang Gwang Street market. Twenty-four shoppers patiently lined up to buy a small cone of vanilla ice cream at 20 won each. A similar number waited for shaved ice with sweet bean paste at 5 won a bowl. Fifteen were there to buy sweet potatoes at 60 won per kilo. No one was seen lining up to purchase sausages, which at 1,700 won each were priced at the equivalent of 16 cans of Heineken beer at the Koryo Hotel.

While price tags at the hotel are in won, the national currency isn’t accepted there. That wasn’t a concern for guests and shoppers buying foreign goods—Scotch whisky and Syrian olive oil were on offer—with dollars, euros, and Chinese yuan.

One hotel worker, who said he made about 2,500 won a month, said the government provided people with food and other necessities such as clothing and housing. The free markets like the one across the street were there to supplement their diets, he said, adding: “We don’t operate like a capitalist country.”

Read the full story here:
In Pyongyang, the Dollar Commands Respect
Bloomberg
Michael Forsythe, Bomi Lim, Frances Yoon and Zeb Eckert
10/21/2010

According to the Choson Ilbo:

The senior secretaries of all North Korea’s 11 metropolitan and provincial party committees paid a rare collective visit to a senior member of the Communist Party of China in Beijing on Tuesday.

The North Korean delegation led by Mun Kyong-dok, the senior secretary of the Pyongyang municipal party committee, met with Zhou Yongkang, a member of the Politburo Standing Committee who ranks ninth in the hierarchy, to discuss economic cooperation.

Zhou was quoted by the official Xinhua news agency as saying it was “the first time” in the history of bilateral relations that senior secretaries of the Workers Party’s metropolitan and provincial committees have visited China as a group. “I wish that you will expand exchange with various Chinese regions you’re visiting and achieve success from your tours.”

The North Koreans also met with their Chinese counterparts to discuss investment in development projects in the North. The Chinese officials were in Beijing to attend the fifth plenary session of the 17th Communist Party Central Committee.

A South Korean government official said, “The North Korean officials’ visit to Beijing is equivalent to all 16 South Korean metropolitan mayors and provincial governors flying to Washington as a group to discuss exchange and cooperation with ruling-party lawmakers and state governors in the U.S.” He said since Kim Jong-il’s son Jong-un was established as the official successor to the leadership, the North and China have increased the frequency of personnel exchanges “to discuss more substantive matters than before.”

The profiles of the Chinese delegation that attended the 65th anniversary celebrations of the North Korean Workers Party were also exceptional. It included senior officials of the three Chinese northeastern provinces — Sun Zhengcai, the secretary of the Jilin provincial party committee, Chen Xi, the deputy secretary of the Liaoning provincial party committee, and Du Yuxin, the deputy secretary of the Heilongjiang provincial party committee.

They were welcomed at Sunan Airport by Ju Yong-sik, the senior secretary of the party committee in Jagang Province, a border region. The senior secretaries of the party committees in all four North Korean provinces bordering China — Ju from Jagang Province, Ri Man-gon from North Pyongan Province, O Su-yong from North Hamgyong Province and Kim Hi-taek from Yanggang Province — attended a dinner that evening in honor of the Chinese delegation.

“There have recently been more signs of the North and China deepening and developing economic cooperation, including various development projects focusing on the border areas,” a Unification Ministry official said. “It seems that after the North’s Workers Party and the Chinese Communist Party finished talks at headquarters level, their provincial party committees have now begun concrete cooperation.”

Military exchanges are also increasing ahead of the 60th anniversary of the day the Chinese joined the Korean War on Oct. 25.

The official North Korean Central Broadcasting Station on Tuesday reported a delegation of Chinese People’s Volunteer Veterans led by Wang Hai, a former Air Force commander, and the People’s Liberation Army’s art troupe arrived in Pyongyang for the anniversary.

O Kuk-ryol, vice chairman of the National Defense Commission, and Pak Jae-kyong, vice minister of People’s Armed Forces, hosted a reception for them.

On Oct. 14, a North Korean Army delegation led by Pyon In-son, another vice minister of People’s Armed Forces, visited China, to tour PLA units. Quoting the North’s official Rodong Sinmun daily, Xinhua said, “Friendship bonded by blood in the previous generations is being handed down to the next generation.”

A South Korean security official said, “The North is apparently trying to counter the South Korea-U.S. military alliance, which has been strengthened since the sinking of the Navy corvette Cheonan in March, by intensifying military ties with China, as well as attempting to escape international economic isolation by leaning on China.”

Mike has more at NK Leadership Watch.

Read the full story here:
N.Korea, China Grow Ever Closer
Choson Ilbo
10/21/2010

Reuters published a concise report of the DPRK’s recent restrictions on market activity which is compiled from work by Marcus Noland and Stephan Haggard.  Here is the Reuters report:

Reclusive North Korea has imposed a series of measures since 2008 to rein in market activity, foreign trade, and activity across the border.

A Peterson Institute for International Economics policy brief published this year outlines some of the rules put in place:

2008
January – Women under 40 banned from trading in markets, followed by efforts to redeploy them to workplaces.

April – Wide-ranging Antisocialist Conscience Investigation of Sinuiju, the country’s main land port with China, including the books of trading organizations. Restrictions placed on carrying merchandise on bicycles and carts in Sinuiju.

July – Party, police, and market management office coordinate efforts to limit large sales in the Pyongsung market, an emerging wholesale center for the country in Pyongan province.

October – Nationwide ban on sale of shoes in markets and new restrictions limiting trade in foodstuffs to individually cultivated fruits and vegetables.

November – Major directive announcing the conversion of markets back to the more restrictive farmers’ market format. Markets to be open only on the 1st, 11th, and 21st of each month, and to be limited to retail sales of individually cultivated food; other foodstuffs and manufactures to be sold through the ‘public distribution system’ and state-run stores. Major cities, including Pyongyang, Hamheung, Soochun, Kaesung, and Chungjin, set up model farmers markets.

2009
January – National Security Agency special investigative unit scrutinizes names, number of family members, and livelihoods of households in the National Border Area suspected of involvement in border crossing and trade. Public education campaigns and increased punishment for border crossing.

March – New controls over lodging and movement without passes in National Border Area [and] imposition of strict movement controls in connection with the Supreme Peoples Assembly elections; intensified controls following the elections.

May – Announcement of 150-day campaign accompanied by renewed implementation of market restrictions on women under 40 and restricted items, including products of joint ventures, industrial goods, and American and South Korean products. Punishment of emergent back-alley markets and ‘sell and run’ sales. Public education campaigns against market activities.

June – Closure of Pyongsung market in Pyongan province.

July – Increased control and surveillance over households in National Border Area with defectors.

November – North Korea announces a reform to replace all currency in circulation with new bills and coins.

The Peterson Institute report mentioned in this article can be found here (PDF).

I should also point out that many of these dictates were uniformly unenforceable and many have been rescinded (including the 10-day rule) since the currency reform was implemented.

Read the full story here:
Factbox: How North Korea has tightened controls
Reuters
10/20/2010

According to the Daily NK:

Three North Korean Senior Middle School students have been caught trying to carry explosives into North Korea, according to a Radio Free Asia (RFA) report today.

Citing a source from Hyesan, RFA reported, “On the 11th, immediately after Chosun Workers’ Party founding day, 15-year old Songbong Senior Middle School student Kang and two others were caught trying to bring explosives in from China,” adding, “As a result of this, the security authorities have been put on emergency alert and the border totally closed.”

The RFA report explains that the three crossed the border into China with the help of border guards and smuggled back 10kg of explosives in two bags, but were caught at the entrance to a village by a community watch guard unit consisting of workers.

According to another source, “I’ve heard a number of rumors, including that they brought the explosives to destroy the bridge that passes by Wangdeok Station.” However, the source added, “Whether this is true or not I cannot say.”

Wangdeok Station is among a number of stations in North Korea on lines reserved for the exclusive use of Kim Jong Il.

The North Korean authorities are apparently at a loss to explain the case, because the students were just the children of normal workers; they did not have criminal records and were only interested in literature and reading.

Since the event occurred, the Yangkang Province authorities have stepped up security, with provincial committee cadres and students from Hyesan Agriculture University patrolling in the area around Bocheonbo Combat Victory Monument and the local statue of Kim Il Sung. They have also dispatched tens of guards to idolization sites such as Hyesan Revolutionary Museum and Kim Il Sung Revolutionary Activities Institute.

The report also added information on further similar cases: in 1997, a group of people were arrested after smuggling explosives into the country, allegedly in order to blow up the city’s statue of Kim Il Sung, and there has also been an arson case involving Kim Jong Suk Art Theatre and persons with complaints against the Kim Jong Il system.

It should be stated that stories such as these should be regarded with some skepticism since almost all of the facts are unverifiable.

For what it is worth, here is a satellite image of the  Wangdeok Leadership Train Station in Hyesan ( 41.448124°, 128.277445°):

According to the Daily NK:

In Dandong, the number of people studying the Chosun language (Korean) is increasing, while real estate prices are rising on the back of rumors that Shinuiju, just across the North Korean border, will soon be opened up to trade and investment.

One anonymous Korean-Chinese trader who already engages in business with North Korea in the area told The Daily NK on the 15th, “The rumor among Chinese traders who have recently been in North Korea has it that ‘The North Korea authorities will open Shinuiju sooner or later.’”

As a result, he said, “There is currently an upsurge in the price of apartments and shops in Dandong, while the number of people wanting to learn the Chosun language is increasing.”

The trader explained that for the last three or four years the real estate market in Dandong has been flat. However, with reports of Kim Jong Eun’s internal appointment as the successor spreading earlier this year, the price of Hanquosheng, Dongfang Minzhu, Taiyang Dasha and other luxury apartments has increased by more than ten percent over the course of the summer.

The source pointed in particular to the fact that the price of apartments under construction in the Langtou Port area has gone from 2,000 Yuan/m² (approximately $300) in May to 3,200 Yuan/m² (approximately $480) in October. The neighborhood has particularly bright prospects as it is the location for the planned Second Yalu River Bridge under an agreement made during the visit to Pyongyang of Chinese Premier Wen Jiabao in 2009.

The Daily NK’s Korean-Chinese source explained that those primarily responsible for fuelling the real estate gains are Korean-Chinese from the Northeastern provinces of China.

He reported, “Since Dandong has geographical advantages, being cool in summer and warm in winter, as well as being able to provide for North Korea’s development of Shinuiju, the city has emerged as the best investment location for Korean-Chinese people.”

“The expectation that Kim Jong Eun is still young and has experience of life in Switzerland; therefore he knows well the need to develop the country and will have no choice but to make that decision, is driving the investment by Korean-Chinese,” the source added.

Naturally, the presumption that Shinuiju will soon offer some new opportunities for business is producing a new trend for learning the North Korean language.

Wang, a 21 year-old student from a university in Dandong said, “Chinese students know that South Korean is different from Chosun,” and went on, “Until now, South Korean has been all the rage thanks to Hallyu (as the South Korean cultural influence in wider Asia is known), but recently the number of students wanting to learn Chosun has been drastically increasing.”

There are presumed to be roughly 3,000-4,000 North Koreans residing in Dandong, including students. Some of them exchange languages with Chinese students, while some others give private classes for between five and ten Yuan an hour.

Alongside which, private Korean language institutes in Dandong are enjoying increased demand.

One South Korean who manages a Korean language institute in Dandong told The Daily NK, “In the case of Korean language institutes in downtown Dandong, each class has seen an increase of four or five students for this fall semester. Alongside Hallyu, the expectation that Shinuiju will open up has meant that the number of Chinese young people wanting to learn Korean is steadily increasing.”

Read the full story here:
Shinuiju Development Making Waves in Dandong
Daily NK
Park In Ho
10/18/2010