North Korean Economy Watch

Via China Knowledge:

Henan Yima Coal Mining Group, one of the leading state-owned coal miners in Henan Province, said the company planned to invest in a 10-million-ton coal mine and a 1.2-million-ton coal chemical project in North Korea, the China Daily reported.

The Chinese coal miner and the Anju Coal Mining Association, the country’s largest coal miner with nearly ten coal mines, signed an agreement on Dec. 12 to develop the two projects.

Under the agreement, the two projects, with Yima Group holding controlling stakes, will be built by stages. Auxiliary facilities, such as power plant and coal-selecting plant, are also expected to be jointly constructed by the two companies.  North Korea is rich in coal resource [sic], a main energy source of the country’s self-dependent economy.

Source:
Chinese coal miner taps into North Korea
China Knowledge
12/31/2008

In the last round of six party talks, the media focused on North Korea’s deteriorating relationships with Seoul and Tokyo and the DPRK’s reluctance to agree to a credible nuclear verification protocol.  When the talks failed to produce any forward momentum, it looked like energy aid was to be suspended:

After the meeting, U.S. State Department spokesman Sean McCormack said that Japan, Russia, China, the United States and South Korea had allegedly agreed that fuel would not be shipped until progress was made on specific steps to verify Pyongyang’s nuclear activities. (RIA Novosti)

Russia, however, disputes this claim—but likely for for its own economically rational reasons.  Russia has been very strategic in its relations with Pyongang—focusing on securing a stake in the Rajin Songbon port and leaning on Pyongyang to allow construction of a natural gas pipeline to South Korea.  As a result, they have refused to suspend their portion of energy aid:

Russia plans to complete fuel deliveries to North Korea as part of a denuclearization deal, the head of the Russian delegation at six-party talks on Korea’s nuclear problem said on Sunday.

“We expect that we’ll be able to supply our entire quota of 200,000 metric tons in the near future,” Russian Deputy Foreign Minister and chief North Korea negotiator Alexei Borodavkin said. (RIA Novosti)

and…

[…]Russian Deputy Foreign Minister and chief North Korea negotiator Alexei Borodavkin, who said his country will proceed with a third batch of 50,000 metric tons of fuel oil this month in accordance with previous six-party talks agreements. (UPI)

Despite ending energy assistance, the US maintains it will continue food assistance:

North Korea will receive 21,000 metric tons of U.S. food aid this month as part of an assistance agreement, the State Department said.

“Our humanitarian program will continue,” spokesman Sean McCormacktold reporters in Washington yesterday. The aid will be delivered at the end of December, he said.

The U.S. in May agreed to resume food assistance to North Korea in a deal that will see the communist state receive 500,000 metric tons during the 12 months starting in June. The U.S. has so far provided 143,000 metric tons of aid, McCormack said. (Bloomberg)

Read more here:
Russia to complete fuel supplies to North Korea – envoy
RIA Novosti
14/12/2008

Korea Gas Seeks Stakes in Australia, Oman, PNG Fields, CEO Says
Bloomberg
Shinhye Kang
12/11/2008

Russia to make N. Korea fuel shipment
UPI
12/14/2008

North Korea to Get 21,000 Tons of Food Aid From U.S. This Month
Boomberg
Kevin Cho
12/2/2008

Working Paper (Download PDF here)
Marcus Noland, Peterson Institute for International Economics

Abstract: This study finds that North Korea’s nuclear test and the imposition of UN Security Council sanctions have had no perceptible effect on North Korea’s trade with its two largest partners, China and South Korea. Before North Korea conducted an underground nuclear test, it was widely believed that such an event would have cataclysmic diplomatic ramifications. However, beginning with visual inspection of data and ending with time-series models, no evidence is found to support the notion that these events have had any effect on North Korea’s trade with its two principal partners.

In retrospect, North Korea may have calculated quite correctly that the direct penalties for establishing itself as a nuclear power would be modest (or, alternatively, put such a high value on demonstrating its nuclear capability that it outweighed the downside risks, however large). If sanctions are to deter behavior in the future, they will have to be much more enthusiastically implemented.

Keywords: Sanctions, North Korea, Nuclear, United Nations, Trade equations
JEL codes: F51, P2, D74

This subject was covered in the Washington Times this morning.

Institute for Far Eastern Studies (IFES)
NK Brief No. 08-12-17-1
2008-12-17

As the end of the year approaches, North Korea has launched a ‘Year-end Battle’ in order to encourage every sector of the economy to meet annual production targets, without exception.

On December 1, (North) Korean Central Broadcasting announced, “workers, laborers and technicians of the harvesting industry sector overcome difficulties and barriers with indomitable moral strength, while thoroughly accomplishing the (New Year) Joint Editorial’s fighting tasks, focusing all strengths on the struggle to brightly wrap up the deeply meaningful year,”while also reporting on the production innovation of the nation’s mining and smelting facilities.

The program also announced that each North Korean region’s hydroelectric power plants, “brightly bring the year to a close, while the issue more important than any other is ensuring the People’s Economy electrical use, strongly demanding power production, is supported,” reporting that efforts were being focused on ensuring power production equipment was operating at full capacity, and electrical production was being expanded.

Rail transportation in Pyongyang, Kaechun, Anju, and other areas also reported high achievements in distributing coal for electrical production and ores sent to metal factories, as efforts are put into the ‘Year-end Battle’, according to the broadcasters.

One member of the North Korean Cabinet’s office of light industry announced on November 30 that, in accordance with this year’s New Year Joint Editorial’s ‘prioritization of the lives of the people’, the government invested in the Sariwon Weaving Factory, the Haeju Textile Factory, etc., “struggling to produce more good-quality cloth” in textile factories under the guidance of the office of light industry’s department of textile industry management.

North Korea’s broadcasts also reported that the Ranam Coal Mine Cooperative Enterprise, the Musan Mine Cooperative Enterprise, the Chungjin Tractor Accessories Factory and others were also engaged in this ‘Year-end Battle’.

In South Hamgyung Province, a new lecture hall and electronic library were built at the Hamheung Medical Science College, and construction was underway to expand the number of classrooms. Also, the Heungnam Basic Foods Factory, the Hamheung Orthopedic Surgery Hospital and the Sinheung Irrigation were under construction as each locality is pushing forward with selected economic construction projects.

The end of sunshine?
According to Yonhap (here and here), Friday, November 28, was the last day of the Kaesong day tours (210 tourists made the trip) and the last day the “train to nowhere” made its inter-Korean trip.

As for the Kaesong Industrial Zone (KIZ)…According to (Bloomberg), on December 1 the DPRK cut the number of “windows” available each day for South Korean vehicles to enter and leave the KIZ from 19 to 6 (though the Donga Ilbo claims just 3), and limited the number of South Koreans allowed in the complex to 880—about 20% of the 4,200 previously permitted to enter the complex.

According to the  Donga Ilbo, Pyongyang delivered notice at 11:55pm Sunday saying those allowed to stay in Kaesong are 27 staff of the management committee; four from the (South) Korea Land Corp.; 40 from Hyundai Asan Corp.; five at restaurants and living quarters; two at shops and hospitals; and 800 from South Korean companies. Border crossings are also limited to 250 staff members and 150 vehicles each time.

Jeopardizing more than Kaesong
As previously discussed (here and here), South Korea and Russia are interested in building oil and natural gas pipelines which would cross the DPRK. If these projects went through, the DPRK government would benefit from construction and “rental” fees—in effect taking a cut of all the energy resources that cross their borders.  North Korea, is now telling the Russians that the project is not too palatable at the moment.

Still more red than green it seems.

What now?
So while the DPRK chases away investment from the South, they solicit more from Kuwait and Singapore (where Chris Hill is due to stop by):

North Korean Foreign Trade Minister Ri Ryong Nam, now in Singapore, has urged Singapore companies to invest in the isolated country, the Singapore government said Monday.

The North Korean minister “briefed…on economic developments in North Korea and possible investment opportunities for Singapore companies,” in a meeting with Singapore’s former Prime Minister Goh Chok Tong, now a senior minister in the Cabinet, a government statement said.

Goh said, “Singapore would be glad to explore ways to strengthen bilateral cooperation, including in the areas of trade and investment, once international concerns were assuaged and the environment improved.”

Singapore Foreign Minister George Yeo made a trip to North Korea in May, accompanied by a business delegation, in what was the first official visit to North Korea by a Singapore Cabinet minister.

On that trip, Yeo met North Korea’s No. 2 political leader Kim Yong Nam and Ri.

Yeo said at the end of his visit North Korea might be keen to learn from some aspects of the Singapore development model and that Singapore is ready to offer help and ideas. (Kyodo-Japan Economic Newswire)

Chewing gum manufacturers beware!

Putting the “International” into the “International Brotherhood of Electrical Workers,”  Dan and Dennis McCarty, retired from Local 48, traveled with Mercy Corps to Haeju, North Korea, to install electrical systems in three area hospitals:

The men did all pre-planning and preparation work by working from photographs. But that wasn’t the only obstacle the twin brothers had to overcome.

“We experienced low quality electrical power and long hours without electricity,” said Dan McCarty. The language barrier also proved to a challenging, as well as working with a limited number of tools, materials and equipment.

“If you don’t have it with you when you arrive, your only option is to improvise while upholding safe practices,” said Dennis McCarty.

But the brothers didn’t let anything stand in their way. The project was pronounced a resounding success by North Korean’s hospital directors. All three power systems are operational and are currently in service.

Read the full story here:
Twin Brothers Light Up Hospital
IBEW Local 48
11/17/2008

Reuters published a short article stating many of the DPRK’s economic statistics.  Most of these can already be found on this site, but in terms of a quick update, this is not bad.  The author even acknowledges the wide disparity of the DPRK’s national and per capita income estimates, which is something most articles on these topics fail to address:

*SIZE OF ECONOMY

Annual gross domestic product in 2007 was just over $20 billion, a fall of 2.3 percent from the previous year due to the effects of widespread flooding, according to South Korea’s central bank. However, a report commissioned by a former South Korean unification minister estimated it was less than half that.

*HOW MUCH DO NORTH KOREANS HAVE

Estimates of per capita income range from $400 to $1,000. Whichever figure is true, the population of around 23 million is one of the world’s most destitute. That compares to around $20,000 in capitalist South Korea, once the poorer of the two halves of the Korean peninsula. North Korea’s economy has declined over the past two decades.

*HUNGRY NATION

North Korea’s state doctrine preaches self-reliance. But for years it has been unable to produce enough food for its people and relies heavily on foreign aid. Even in good harvests, it produces about 20 percent less than it needs. An estimated 1 million North Koreans perished during famine in the 1990s.

Last month, the U.N. World Food Programme estimated that North Korea would need some $500 million in food aid over the next year to avoid a humanitarian crisis.

*WHO TRADES WITH NORTH KOREA AND WHAT CAN IT SELL?

Constantly running a trade deficit, North Korea offers cheap labor mostly for relatively low-skilled manufacturing industries, such as textiles. Its chief attraction, especially to neighboring China, is its natural resources, especially coal and minerals.

Some sources, including the U.S. government, believe it bolsters its trade through the illicit exports of weaponry, drugs and counterfeit U.S. dollars.

Its biggest trade partner is China which, by one estimate, accounted for an estimated two-thirds of its total foreign trade last year. By contrast, in the first eight months of this year, Pyongyang accounted for just 0.12 percent of China’s total foreign trade.

Of China’s imports from the North, close to 60 percent were coal and minerals such as iron ore, zinc, lead, molybdenum and precious metals.

South Korea is Pyongyang’s other main trade partner. The two operate an industrial park on the northern side of the border where manufacturers from the South use cheap local labor.

The full article can be found hrere:
FACTBOX: Some facts about the North Korean economy
Reuters
Jonathan Thatcher
10/20/2008

Korea Business Consultants has published their latest newsletter.  You may download it here.

Topics covered include:
Six Party Talk progress
South Korea/Russia gas deal
More factories opening in the DPRK
UN survey of DPRK population
Summit pledges
Pyongynag hosts autumn trade fair
KEPCO to Abandon NK Reactor Gear
Trust Company Handling DPRK’s Overseas Business
DPRK-Russia Railway Work Begins
ROK Opposition Calls for Renewed Cooperation with DPRK
ROK Delegation Leaves for DPRK
ROK Aid Workers Leave for DPRK
“ROK Makes US$27.6 Billion from DPRK Trade”
“Kaesong Output Tops US$400 Million”
DPRK, Kenya Set Up Diplomatic Ties
Medvedev Hails DPRK Anniversary
Claim to North Korean rock fame
International Film Festival Opens
Ginseng

According to Yonhap:

Under the Unification Ministry’s budget plan for next year, the inter-Korean economic cooperation fund, aimed at promoting cross-border human exchanges and economic partnerships, will increase 8.6 percent to 1.5 trillion won from 1.3 trillion won this year.

The budget for humanitarian assistance accounts for 72 percent of the fund, a sharp rise from 43 percent this year, mainly attributable to hikes in rice and fertilizer prices, said the ministry in change of policy on North Korea.

“We plan to send 400,000 tons of rice and 300,000 tons of fertilizer to North Korea if needed,” Vice Unification Minister Hong Yang-ho told reporters.

The ministry has allocated 352 billion won to send rice and 291 billion won for fertilizer aid, he added.

The budget for inter-Korean economic projects, however, has been halved to 300 billion won in accordance with the Lee administration’s policy of linking them with progress in efforts to denuclearize the North, economic feasibility, financial capacity, and public opinion.

Meanwhile, the ministry has created a separate account for denuclearization costs in the inter-Korean cooperation fund, a measure to take into effect on Friday, a day after the second anniversary of North Korea’s nuclear test.

South Korea has delivered fuel oil and energy-related materials to North Korea under an aid-for-denuclearization deal last year in the six-way nuclear talks. Related spending has been categorized as energy aid.

Read the full article here:
S. Korea budgets $460 million for rice, fertilizer aid to N. Korea
Yonhap
10/9/2008

North Korea Uncovered: Version 12
Download it here

About this Project: This map covers North Korea’s agriculture, aviation, cultural locations, markets, manufacturing facilities, energy infrastructure, political facilities, sports venues, military establishments, religious facilities, leisure destinations, national parks, shipping, mining, and railway infrastructure. It is continually expanding and undergoing revisions. This is the 12th version.

Additions include: Tongch’ang-dong launch facility overlay (thanks to Mr. Bermudez), Yongbyon overlay with destroyed cooling tower (thanks to Jung Min Noh), “The Barn” (where the Pueblo crew were kept), Kim Chaek Taehung Fishing Enterprise, Hamhung University of education, Haeju Zoo, Pyongyang: Kim il Sung Institute of Politics, Polish Embassy, Munsu Diplomatic Store, Munsu Gas Station, Munsu Friendship Restaurant, Mongolian Embassy, Nigerian Embassy, UN World Food Program Building, CONCERN House, Czech Republic Embassy, Rungnang Cinema, Pyongyang University of Science and Technology, Pyongyang Number 3 Hospital, Electric Machines Facotry, Bonghuajinlyoso, Second National Academy of Sciences, Central Committee Building, Party Administration Building, Central Statistics Bureau, Willow Capital Food House, Thongounjong Pleasure Ground, Onpho spa, Phipa Resort Hotel, Sunoni Chemical Complex (east coast refinery), Ponghwa Chemical complex (west coast refinery), Songbon Port Revolutionary Monument, Hoeryong People’s Library, Pyongyang Monument to the anti Japanese martyrs, tideland reclamation project on Taegye Island. Additionally the electricity grid was expanded and the thermal power plants have been better organized. Additional thanks to Ryan for his pointers.

I hope this map will increase interest in North Korea. There is still plenty more to learn, and I look forward to receiving your contributions to this project.

Version 12 available: Download it here