North Korean Economy Watch

Institute for Far Eastern Studies (IFES)
NK Brief No.09-11-30-1

In an effort to seek new ways to develop the inter-Korean joint industrial complex in Kaesong, it is expected that the first joint complex between China and Vietnam will be inspected in the middle of next month. According to a high-ranking official in the South Korean Ministry of Unification, “If the Kaesong Industrial Complex (KIC) is to be made into an internationally competitive industrial complex, [we] need to take a close look at the processes and structure of the international market,” and, “In order to develop the KIC, we decided to inspect a foreign industrial complex, and the North has agreed.”

This inspection was agreed upon during the second round of inter-Korean working level talks in June, and is being looked at as a breakthrough in restarting talks between officials from the North and the South. The source added, “The thought is that the inspection will be of a China-Vietnam industrial complex,” and, “If this overseas inspection goes well, the 3-C problem (Communication, Conveyance, Customs) and issues of visits and sojourns by South Koreans in the complex, dormitories for the North Korean workers, the construction of roads for coming to and from work, and other issues will be advanced.”

The inspection team will include 10 officials from North Korea and 10 from the South, and plans to visit the site for ten days beginning on the 12th of next month. The South Korean delegation is expected to include representatives from the Ministry of Unification, the Ministry of Knowledge Economy, Korea Land Corporation, and members of the KIC management committee. The agreement between the two Koreas to inspect an overseas industrial zone is seen as a sign that inter-Korean relations are improving. It appears that North Korea is continuing to work toward improving inter-Korean relations.

At the very least, it looks like this inspection will foster an atmosphere in which Seoul and Pyongyang can resolve all of the problems, listed above, surrounding the KIC. In June of 2007, 14 Koreans, 7 from the North and 7 from the South, spent ten days and nine nights inspecting the joint Chinese-Vietnamese industrial complex, so expectations are that this visit will further boost inter-Korean relations and KIC competitiveness.

This story was also reported in the Joong Ang Ilbo:

The Unification Ministry announced yesterday that 10 officials from ech country will visit China and Vietnam for about 10 days in mid-December. Ministry spokesman Chun Hae-sung said the two Koreas will continue to discuss detailed itineraries and the makeup of the delegations. Chun added that the trip will be financed by the South’s inter-Korean cooperation fund. It is the third such joint trip to overseas industrial sites, but the first during the Lee Myung-bak administration. The previous two trips took place in June 2005 and March 2007.

The two Koreas have held four rounds of mostly fruitless working-level discussions on Kaesong this year and wrangled over land use fees and wage increases. During the second meeting in June, the South proposed a joint overseas trip, and Chun said the North recently agreed. “We hope the trip will allow the two Koreas to build a consensus on stable development of the Kaesong complex,” he said. “The officials will study legal structures, incentives designed to draw investments and customs clearance. We expect Kaesong to grow into a globally competitive complex.”

While it appears intent on improving inter-Korean ties at Kaesong, Seoul is in no hurry to resume suspended tourism to the North’s Mount Kumgang.

UPDATE: The South Korean government is showing no eagerness to resume tours to Kumgnagsan.  Its list of conditions for doing so are listed below in the original post.  The last item in the list (The DPRK needs to provide more transparency about how it spends the money it receives from the Kumgang resort) seems to be the most important to the South Korean government at this point.  According to the Joong Ang Daily:

While it appears intent on improving inter-Korean ties at Kaesong, Seoul is in no hurry to resume suspended tourism to the North’s Mount Kumgang. The South Korean government for the first time tied the Mount Kumgang tours to international sanctions, saying providing cash payments for the program would run counter to an existing United Nations Security Council resolution.

Speaking to reporters late Wednesday, a high-ranking Unification Ministry official said Seoul was reviewing the possibility of replacing cash with goods to pay North Korea for tours to Kumgang. “The issue of compensating the North for the tourism is related to UN Security Council Resolution 1874,” the official said.

He was referring to the resolution adopted in June, following North Korea’s second nuclear test in late May. The resolution states that member states must not provide financial assistance to North Korea, except for “humanitarian and developmental purposes directly addressing civilian needs.” The resolution also says that UN members must not provide “public financial support” for North Korea where such aid “could contribute to the country’s nuclear-related or ballistic missile-related or other [weapons of mass destruction]-related programs or activities.”

The Kumgang tours have been suspended since July of last year after a female South Korean tourist was fatally shot by a North Korean soldier in a nearby restricted zone. Last week, the North sent a message through Hyundai Group, the South Korean operator of the tours, that it wanted to talk to the South about the resumption of the tours, but Seoul has been lukewarm to the overture. The Mount Kumgang tour had been regarded as a major cash cow for North Korea. Since it is difficult to verify the use of cash in the North, the question of the program’s possible violation of the resolution has been raised in the past.

When the North made the proposal through Hyundai, one government official said he was “none too pleased” with the North because it could have sent its message through official channels.

I expressed some skepticism for “alternative payment mechanisms” below.

ORIGINAL POST: The South Korean government does not plan to allow South Korean tourists to return to Mt. Kumgang until the DPRK:

1. Cooperates in an investigation of the shooting of a South Korean tourist last year.

2. Implements measures to prevent a recurrence.

3. Guarantees tourist safety.

Recently, however, the South Korean government added another item to the list:

4. The DPRK needs to provide more transparency about how it spends the money it receives from the Kumgang resort.

According to the Hankyoreh:

The government’s attitude is in line with a statement given by President Lee Myung-bak in an interview with European news channel EuroNews on July 7, in which he namely said that there are suspicions that the massive aid given to North Korea over the last decade had been used to develop nuclear weapons. A government official said they were unable to block all of the cash entering North Korea from tourists spending money at Mt. Kumgang, but the government has concluded that at least the tourism fees should be transparent. Up until the project was suspended last July, Hyundai Asan, the company that operates the Mt. Kumgang tourism project, had sent North Korea 30 dollars per person for same-day tours, 48 dollars for two-day, one-night tours and 80 dollars for three-day, two-night tours. In total, Hyundai Asan had given North Korea an estimated 15 million dollars per year.

How can they achieve “transparency”? The Hankyoreh reports on a couple of ideas:

1. Pay North Korea in goods such as grain or sugar.

2. Open up an escrow account for North Korea that would limit the DPRK government to transferring money only for the import of specific non-military-use items.

I am skeptical that these latter two ideas could accomplish their goal.  If South Korea paid the DPRK in goods (food, fertilizer, equipment), these could simply be resold to China for cash–as previous aid has been.

If South Korea set up an escrow account for the North Korean government which would be restricted somehow, such as prohibitions on the purchase of dual-use technologies, (would I be too cynical to predict that funds in the account would be limited to purchases of goods made in South Korea?) not much changes from the example above–although now there is a greater opportunity for the DPRK to engage in strategic arbitrage.  If I was the DPRK official in charge of the escrow account, I would look for price differences in commodities and capital between South Korea and China.  When I saw a price differential, I would buy the cheap goods in South Korea using the escrow funds and sell them for a profit in China. This could potentially net the DPRK more money than the previous policy proposal, but it does bring the DPRK one step closer to trading futures contracts!

Even if the DPRK did not get into the arbitrage game, there is no getting around fungibility.  For example, if the DPRK spent the entire escrow account on food, it could  steer domestic resources towards more profitable exports and get the cash that way.

Either way, most of the money goes where the leadership wants it to go.

UPDATE:  China plans development zone on North Korean border
By Michael Rank

China is planning a major new development zone along the North Korean border aimed at boosting trade with its reclusive neighbour and throughout northeast Asia, a Chinese-language website reports.

The plan is to come to fruition under two separate deals: the border cities of Dandong in Liaoning province and Tonghua in Jilin province have signed an (unpriced) “development and opening up vanguard zone cooperation agreement” as well as a 440 million yuan ($64 million) “six-party cooperation agreement” with the Shenyang Railway Bureau, Changchun Customs, Dandong Port Group and Tonghua Steel (Tonggang) to build a “Tonghua inland port” with a duty-free zone, warehouses and international transit facilities that will be ready in 2012.

The Tonghua-Dandong Economic Zone will apparently stretch over most of the western half of the Chinese-North Korean border, a distance of around 350 km. The city of Tonghua is in fact some 80 km north of the border, but the report says the new zone will include the border post of Ji’an which is administered by Tonghua.

It gives few further details, but notes that when Premier Wen Jiabao visited North Korea last month he signed an agreement on building a new bridge across the Yalu river which would further boost Chinese-North Korean trade.

It also quotes the acting mayor of Tonghua, Tian Yulin, as saying that the new zone will transform the city from “inland” to “coastal” and “will promote trade between the inland cities of the northeast and North Korea and with the whole of northeast Asia.” The report adds that almost 60% of China’s trade with North Korea passes through Dandong.

This is not the only new development zone in China’s rustbelt northeast, which has been in severe economic decline in recent decades: a separate Chinese report announces the creation of another zone in Jilin, stretching from the capital Changchun in the centre of the province to the city of Jilin (or rather just part of it, for some unstated reason) as far as Yanbian on the North Korean border. This report does not mention North Korea directly but says the new zone will make the eastern border city of Hunchun an “open window” for regional trade, with Changchun and Jilin city “important supports.”

One-third of Jilin’s 26 million population live in the zone and it accounts for half of the province’s economic output, the report adds. See also this English-language report.

State-owned Tonghua Steel’s involvement in the Tonghua-Dandong zone is somewhat surprising as the ailing company has been rocked by unrest following an abortive attempt at a takeover deal by rival company Jianlong earlier this year. There was strong opposition to the deal on the part of workers who feared they would lose their jobs, and their fears turned to violence last July when a senior manager was murdered in mysterious circumstances.

The Chinese business magazine Caijing told how “the man’s death at the hands of unidentified killers uncovered an often antagonistic network of competing business interests and investors involved in Jianlong’s botched attempt to buy Tonggang.”

Tonghua Steel was in 2005 planning to sign a 7 billion yuan ($865 million), 50-year exploration rights deal with a North Korean iron ore mine, said to be the country’s largest iron deposit. The Chinese company was hoping to receive 10 million tonnes of iron ore a year from the Musan mine as part of its plans to increase steel production from a projected 5.5 million tonnes in 2007 to 10 million tonnes in 2010.

Tonggang boss An Fengcheng said at the time that agreement had already been reached with China Development Bank on 800 million yuan worth of soft loans and 1.6 billion yuan of hard loans, while “the remaining investment will come in in stages”. But it seems that the deal was never signed.

Caijing told how An, the steel mill’s chairman and Communist Party secretary, had “basically unlimited managerial control of Tonggang” and that the takeover by Jianlong was cancelled just a few hours after the murder of the manager Chen Guojin, who had come from Jianlong and was one of two Jianlong representatives on the board of Tonghua.

“There is no evidence to suggest An’s involvement in Chen’s death. But two weeks after the incident, he was sacked and stripped of all power by the Jilin provincial government. No other details of his removal were announced,” the magazine added.

ORIGINAL POST: According to the P.R. of China’s Global Times (Xinhua) via Adam Cathcart:

The Chinese government has approved a border development zone in the Tumen River Delta to boost cross-border cooperation in the Northeast Asian region, the provincial government of Jilin announced on Monday.The information office of the government said the pilot zone covering 73,000 square kilometers involved the cities of Changchun and Jilin as well as the Tumen River area.

Han Changbin, governor of Jilin, said the Changchun-Jilin-Tumen pilot zone was China’s first border development zone.

It is expected to push forward cross-border cooperation in the Tumen River Delta.

The delta, a 516-kilometer-long river straddling the borders of China, Russia and North Korea, was set up as an economic development zone in 1991 by the United Nations Development Program (UNDP) to promote trade.

In 1995, five countries – China, Russia, North Korea, South Korea and Mongolia – ratified the agreement on the Establishment of the Cooperation Commission for the Tumen River Economic Development Area (web page here). Japan participated in the program as an observer.

In 2005, the five signatories agreed to extend the agreement for another 10 years.

They also agreed to expand the area to the Greater Tumen Region and to further strengthen cooperation for economic growth and sustainable development for the peoples of Northeast Asia.

“Before the Changchun-Jilin-Tumen pilot zone was initiated, the Chinese part of the Tumen River area was mainly Huichun, a port city in Jilin, that has involved in the cross-border cooperation,” said Zhu Xianping, director of the Northeast Asia Research Institute of Jilin University in Changchun.

The 5,145-square-kilometer port city with a 250,000 population had limited industrial development capacity to develop infrastructure projects that will match the cross-border cooperation, he said.

Du Ying, deputy director of the National Development and Reform Commission, said that by bringing the two cities of Changchun and Jilin into the border zone, the zone could serve as a strategic platform to support the cross-border cooperation in the Greater Tumen Region.

Zhao Zhenqi, an assistant to the Jilin governor, said the central government has allowed the pilot zone to try new land use and foreign financing methods, such as sharing ports and sea routes with other countries in the region and setting up free trade zones.

Under the initiative of the pilot zone, local governments in the region could better interact to tackle development bottlenecks, he said.

The Northeast China region, rich in natural resources including coal and oil, is China’s traditional heavy industry base and granary. However, it also faces the challenges of industrial upgrading, resource depletion and financing bottlenecks.

Random thoughts and links:
1. The challenge facing north east China (as they see it) is the lack of a port city on the East Sea (or the Sea of Japan if you prefer).  This is where North Korea comes in.  China and Russia have long been trying to establish  use rights and/or control of Rason and Chongjin.  Russia recently built a “Russia-gague” railroad line from Rason to the DPRK-Russian border. The Chinese have been busy building roads.

2. (speculation) China is the DPRK’s largest trading partner.  International sanctions have given China monopsony power vis-a-vis the DPRK.  This means the Yuan goes farther in the DPRK than in other countries and it gives the PRC a financial incentive in the continued economic isolation of the DPRK.

3. Here is CCTV video.

4. Forbes covers this story here.

Institute for Far Eastern Studies (IFES)
NK Brief No.09-11-23-1
11/23/2009

Companies in the inter-Korean joint Kaesong Industrial Complex (KIC) have recorded a growth since North Korea abolished restrictions on traffic to and from the complex, as well as on the number and length of visits by South Korean workers.

According to the South Korean Ministry of Unification, companies in the KIC recorded September exports worth 3.42 million USD, 21.5 percent higher than the 2.82 million USD-worth of goods exported in September 2008. From May 2008 to July of this year, KIC exports were lower than the previous year every single month, but finally showed a 29% jump in August, the first time in 15 months. The increase in the value of the complex’s exports was helped by exports of machinery and household electrical appliances now being produced there.

There are currently 116 companies operating in the KIC, but according to the Ministry of Unification, at the end of September there were only 40,848 North Korean laborers working there, and the problems revolving around hiring more workers are clouding future prospects for the complex. As there are only around 40,000 North Korean workers living in Kaesong City and the surrounding area, it appears that the KIC cannot currently accommodate any new businesses. This poses a dilemma for the 18 construction projects currently underway, and puts on hold another 105 projects that have been allotted land within the KIC, but have not yet begun construction of any factories.

Furthermore, despite the fact that managers in the KIC are trying to maintain a sense of stability in order to attract further orders, if the North decides to close the door on friendly policies, the beginning of next year could see a reversal of the growth. The KIC is, at best, enjoying an ‘uneasy peace.’

KIC officials say that the primary issue at the moment appears to be whether roads to and from the complex will be constructed and whether the inter-Korean agreement reached during the Roh Moo-hyn administration to provide dormitories for 15,000 workers will be implemented. According to a survey of businesses, companies already in operation and/or under construction want to hire an additional 26,000 workers. However, with the current government closely linking the North Korean nuclear issue with inter-Korean relations, the road and dormitory construction, which would cost tens of millions of dollars, would have to be based on progress toward denuclearization, the likelihood of which, at this point, is cloudy.

The incumbent government also seems to put more weight on maintaining the current, relatively stable state of things in the complex than on further developing the group project. One problem they are working to solve is that officials managing the KIC are now prepared to rent out space in one ‘apartment-style factory’ in which many different companies operate production facilities under one roof, but are having difficulties finding willing clients, while current tenants complain about close quarters and a lack of space.

Some enterprising Swedes had some jeans manufactured in North Korea (where they can’t be worn in public) to be sold in the west.  The brand name is Noko Jeans.

The fist shipment  of appx 1,000 jeans arrived in Sweden on November 11, and the goods will go on sale December 4, 2009.

Here is a photo of the Noko jeans team with their shipment.

Here is a photo of all the  official stamps and approvals on the shipment.

IHere is their official web page: http://www.nokojeans.com/

Radio Free Asia
Song-wu Park
11/19/2009

North Korea is pulling back from Chinese mining investments in an effort to independently develop its industry and use the profits to create a self-reliant economy, according to a well-informed North Korean defector.

But analysts say it is unlikely that North Korea will be able to lock China out completely, because it lacks the infrastructure and capital needed to develop the country’s vast mineral resources.

The defector, who said he had worked as the director of a state trading agency controlled by the military in a major North Korean city, refuted South Korean news reports that suggested China was taking control of North Korea’s underground natural resources.

“Such statements are exaggerated and different from the truth,” the defector, who uses the pseudonym Kim Ju Song, said in an interview.

Kim attended closed-door sessions with U.S. legislators and congressional staff in Washington on Wednesday.

Several South Korean news organizations, including the Yonhap news agency, recently reported that China has increased its investment in North Korea, established firm control over North Korea’s underground natural resources, and plans to utilize North Korea as its “natural resource base.”

The reports said Beijing had laid out a U.S. $1.2 billion investment plan for North Korean mine development and that Chinese firms had bid for the long-term rights to mine anthracite, iron ore, and molybdenum deposits in the country.

But Kim Ju Song called the reports “distorted,” adding that the North Korean regime is averse to such investments because its current objective is to create a “self-reliant” economy.

“With its own style of self-reliant national economy as the foundation, North Korea hopes to develop and employ its own technologies to extract and process its underground natural resources, prior to selling them on the world markets,” Kim said.

“However, under the current circumstances, simply selling those natural resources at a bargain price would not earn North Korea that much money,” he said.

Kim said that while North Korea will sell China minerals that it is unable to exploit due to technological limitations, “it would be inconceivable for the North Korean regime to cede its mines to China.”

John Park, a senior research associate at the Washington-based United States Institute of Peace, said it is unlikely that North Korea will be able to effectively develop its mineral industry independent of China.

“It’s a chronic issue for the North Koreans to develop the transportation infrastructure that links up their mines,” Park said.

He added that much of North Korea suffers from shortages of the electricity required to develop profitable mines.

Park added that mining requires a “tremendous” amount of startup capital in order to purchase the equipment needed for mine development and mineral extraction.

“The Chinese state-owned enterprise model is so interesting is because of their government funding…These types of state-owned enterprise vehicles can actually sustain these early stage losses that private sector firms cannot,” Park said.

“From that functional capability standpoint the Chinese state-owned enterprise is one of the very, very few that can partner up [with North Korea],” he said.

Jennifer Lee, a researcher with the Peterson Institute for International Economics in Washington, said she doesn’t see North Korea “significantly” backing away from Chinese investment.

“But I can see why North Korea might want to lessen China’s near-monopoly state in that industry … with their Ju’che ideology and all,” Lee said, referring to the official state ideology of North Korea that roughly translates as “the spirit of self-reliance.”

Lee said she had heard reports that one of a group of North Korean delegates that visited New York last month was “eager to attract foreign investment other than from China.”

“I believe that they’re concerned that they are depending way too much on China alone,” she said.

But she acknowledged that North Korea lacks the infrastructure to refuse Chinese investment, particularly in light of international sanctions leveled against Pyongyang following testing of missiles and a nuclear weapon earlier this year.

Lee added that Beijing would be unwilling to allow North Korea to shrug off Chinese interests.

“They’re hungry for North Korean resources, especially because they can get [them] cheaper—being the only country with proper access to [North Korea],” she said.

‘Wary of Chinese influence’

Andrei Lankov, a Seoul-based North Korea expert who works as a commentator for RFA, said that while talks of a “Chinese takeover” are not unfounded, they may be exaggerated.

“North Korean leaders … certainly would not welcome an excessive growth of Chinese influence inside North Korea,” he said.

He called North Korea’s leaders “ethnic nationalists of a rather extreme kind” who dislike foreign influence over their domestic affairs.

“Some contacts are taking place and some agreements have been concluded,” Lankov said.

“North Korean feels ambivalent about these contacts—it needs Chinese money, but is wary of Chinese influence,” he said.

Park called Chinese premier Wen Jiabao’s October visit to the North Korean capital Pyongyang “the culmination of a Chinese process to rebuild the bilateral relationship” between the two countries, noting that Wen had presented a comprehensive package of suggested partnerships to North Korea’s leadership.

“But with all things related to North Korea, it’s up to North Korea if they want to accept it or what portions of it they want to accept,” Park said.

“North Korea does have a record of renegotiating, which has definitely scared off other foreign investors in the past,” he said.

Lee added that even if North Korea decides to lessen China’s impact on its mining industry, such a decision would not involve a significant break with its northern neighbor.

“It would probably go towards the diversification route, trying to attract other foreign investors and possibly replacing some of the Chinese investment in the long run.”

She said North Korea now thinks of its mining industry as a “cash cow” and is working towards making it more attractive to foreign investors through development and a crackdown on corruption.

Institute for Far Eastern Studies (IFES)
NK Brief No.09-11-20-1
11/20/2009

The recent hike in narcotics prices in North Korea appears to be due to rising prices on homes and in markets.

According to Daily NK, “Recent narcotics prices have grown considerably,” and, “If narcotics prices rise, market prices rise across the board.”

As North Korean officials crack down on narcotics production and distribution, the availability of Philopon and other narcotics has been sharply reduced. This reduction in supply is driving up prices.

Drug prices in North Korea first jumped sharply in February of last year, as officials began cracking down on production centers in Hamheung and Pyeongseong.

These raids were said to sharply reduce narcotics production, and in the same month the price of one kilogram of “Ice” shot up to 1,000 won (approx. 2,700 USD), and then again to as much as 2,000 won in April. As soon as narcotics prices rose, housing prices also increased and the price of all factory-produced goods in markets went up. It is as if inside North Korea, the rise in narcotics prices causes the price of everything to increase.

As late as fall 2007, a kilogram of Philopon ran for 5 million won, and could be easily found by those who were looking. By 2008, however, as officials cracked down harder on Philopon producers and dealers, the price had risen exponentially.

Another factor impacting drug prices in North Korea is the sharply growing number of users in China. Despite the efforts of Chinese police, they have been unable to curb the growing flow of narcotics across the border and into the border regions.

In October 2009, one kilogram of Philopon ran from between 50-70 million won, depending on the quality. When smuggled into China, the drugs bring between 150-200 thousand yen (80-100 thousand DPRK won), which when exchanged for ROK currency equals between 30-40 thousand won.

In North Korea, drugs determine housing prices, with the most expensive house in an average city going for the price of one kilogram of Ice. Rising housing costs drive up prices in markets, so that now a kilogram of rice sells for 2200 won.

The price of rice generally falls after the harvest season, but this year remained relatively unchanged. In April of last year, food prices shot up from 2000 to 3000 won for a kilogram of rice, and while this was also related to food shortages, the rising cost of narcotics played a large role.

The reason narcotics prices have such an impact is due to the particular nature of drug sales in North Korea. Drug peddlers deal in cash with narcotics producers, but as cash can be hard to come by, these dealers put up houses as collateral before taking the drugs to China.

In addition, most Chinese renminbi and U.S. dollars circulating in North Korean markets are from the cross-border drug trade, and the fees charged by money-handlers in North Korean markets drive prices up considerably.

Korea Business Consultants has published their October 2009 newsletter.  You can read it here.

Here is the newsletter table of contents:

COVER
– China eyes DPRK’s mineral wealth
– SinoMining acquires 51% of DPRK’s Hyesan Copper Mine
– Transformation and Modernization of North Korea
– DPRK sees peace pact with US as key to disarmament
– US “willing to engage DPRK directly”
– “DPRK Energy Sector Assistance to – Accompany Progress in… Discussions”
– Billy Graham’s son visits DPRK to deliver aid
– Lang visits Seoul

ECONOMY
– DPRK vows to expand trade
– China poised to give substantial aid
– DPRK films looking for joint producers

INTER KOREAN
– Buddhists from south, north call for reopening of Mount Kumgang tour
– Kaesong factory recognized for quality
– Frayed relations hindering development of mineral resources
– ROK aid to north falls
– Lawmakers call for use of rice surplus as DPRK aid
– Farmers demand rice price stabilization

POLITICAL
– Kenya establishes diplomatic relations with DPRK

CULTURE & SPORTS
– Eriksson to coach DPRK?
– DPRK’s Hong battles for gold at World Gymnastic Championships
– DPRK begins preparations for World Cup

KOREA COMPASS
– Mangyongdae
– Korean Proverb

1. Dutch import DPRK clothing and machinery (via Yonhap):

Dutch companies gave purchase orders to clothing and machinery firms in North Korea following their visit there organized by the Chamber of Commerce of the Netherlands in September, said the Japan-based Choson Sinbo in a dispatch from Pyongyang.

“Exchange and cooperation projects that were agreed to in meetings between the Dutch business delegation and the DPRK Commercial Office are entering the stage of implementation,” the report said. DPRK is short for the North’s official name, the Democratic People’s Republic of Korea.

“Production by the (North) Korean clothing and machinery trade firms is underway according to the agreements,” it added.

Dutch businesses along with firms from 14 other countries participated in the Pyongyang Autumn International Fair held Sept. 21 to 24. North Korea holds a trade fair twice a year to draw foreign investment and boost technology exchanges.

The Choson Sinbo said the Dutch firms then showed interest in the information technology area, machinery parts and clothing goods and held talks with pertinent North Korean companies, such as the Joson Computer Center and Unha Clothing Company.

After returning home, the Dutch produced a report on North Korea’s international economic relations for distribution at home and in other Western European countries, the newspaper said.

2. Seoul sets DPRK official assistance budget.  According to Yonhap:

According to its 2010 budget plan submitted to the National Assembly unification, foreign affairs and trade committee, the Unification Ministry allocated 1.18 trillion won (US$1.02 billion), about the same as the earmarked budget for this year, for inter-Korean relations and exchanges.

“The ministry has reflected the government’s policy to continue to proceed with humanitarian projects despite the strained phase in inter-Korean relations,” the ministry proposal said.

Broken down to specifics, 616 billion won has been set aside for the possible resumption of rice and fertilizer aid that was suspended after President Lee Myung-bak took office last year. The sum is slightly less than the 718 billion won for this year but remains mostly untouched. The ministry cited the fall of grain prices as the reason for adjustment.

The amount will be worth 400,000 tons of rice and 300,000 tons of fertilizer that had been annually provided to the North over the past decade. But Seoul officials have said they there is no immediate plan yet to resume the rice and fertilizer aid.

The ministry also set aside 18 billion won and 25 billion won to assist North Korea through non-governmental organizations or international agencies like the World Food Program.

For economic projects, including a joint industrial park in the North’s border town of Kaesong, the proposed budget earmarks 144.8 billion won, up 17 percent from the previous year.

“Massive economic cooperation projects were considered in preparation for the possibility of progress in the North Korean nuclear issue,” the ministry said.

It should be pointed out that Seoul has hardly touched its current inter-Korean assistance budget (here and here).  These sorts of policy moves are intended to offer Pyongyang a highly visible carrot.

3. Pyongyang’s 2009 Kaesong antics have unfortunately scared away more foreign direct investment from the Kaesong Zone, despite significant South Korean subsidies.  According to Yonhap:

Romanson Co., a South Korean watchmaker, said Thursday it has no intention to further invest in an inter-Korean industrial complex because of the political risks.

Romanson operates a plant in the industrial park in the North Korean border town of Kaesong, which turns out 40,000 watches per month. In 2005, the company invested 6.1 billion won (US$5.3 million) to build the factory.

4. And the first shipment of NOKO Jeans have arrived in Europe!  Learn more at their Facebook Page.  Here is a photo of the shipment on Flickr.

Apparently Kim Jong il is growing intolerant of North Korean television advertising anything other than how great he and his father are.  According to Yonhap:

“Recently, Kim saw the commercials while watching TV. He was enraged, asking where the commercials came from and describing them as the prototype of China’s early reforms,” one source said.

Starting July 2, North Korea’s television played commercials that showed young women in traditional clothes serving frothy mugs of Taedonggang beer billed as “Pride of Pyongyang.”

Other products, including ginseng and quail, soon followed in television advertisements, which had rarely been seen in the country, generating outside speculation that North Korea may be starting to embrace the capitalist mode of life.

But according to Yonhap News Agency’s own analysis, the commercials disappeared as of the end of August. The sources said Cha Sung-su, the North’s top broadcaster, has also been discharged.

One source said Cha may have been unduly victimized in the case because the commercials were a product of Kim’s earlier instruction to create “more interesting and diverse” television programs.

Cha, 69, is one of Kim’s closest aides, having accompanied him on public inspections at least six times since the leader reportedly had a stroke last year and then recovered.

He is the North’s top television man, having served on the communist country’s broadcasting committee for about four decades. He is also known in North Korea for his numerous poems.

I previously blogged about the beer commercials (as did most other K-bloggers) and included a link to a longer 10-minute “infomercial”.

Here is the actual commercial courtesy of the BBC. Here is the commercial on YouTube (without commercial interruption).

Here is the ginseng commercial (Koryo Insam).

Here is the quail restaurant commercial.