North Korean Economy Watch

Yonhap
5/2/2007

A group of lawmakers from the pro-government Uri Party left for North Korea on Wednesday with a package of new proposals to boost economic and sports exchanges, including the construction of a second joint industrial park.

The five-member delegation, accompanied by agricultural and coal industry officials, will meet with top North Korean officials, including the North’s No. 2 leader Kim Yong-nam, during its four-day visit until Saturday, party officials said.

High on the agenda of the meetings will be the South’s proposals to create another South Korea-developed industrial complex such as one under operation in Kaesong; designate the mouths of the North’s Imjin River and the South’s Han River as a “joint security area”; and jointly collect sand from their beaches and build a cross-border canal linking Seoul and Kaesong.

The sides will also discuss the North’s proposed entry into the International Monetary Fund and the World Bank, the hosting of a joint academic forum and the possibility of North Korean footballers playing in the South Korean professional league, he said.

“I hear some critics asking what right our party has to do this, but we can play a role as a messenger between officials of the South and the North about important current issues,” Rep. Kim Hyuk-kyu, the delegation’s leader, said before departing at Incheon International Airport.

There have been a series of visits to North Korea by Uri Party lawmakers in recent months, prompting speculation that they were laying the groundwork for a summit between President Roh Moo-hyun and North Korean leader Kim Jong-il. The first and only inter-Korean summit, which took place in 2000, generated a series of economic and cultural exchanges.

Kim said the summit issue was not on the agenda, but acknowledged the delegation will respond if Pyongyang brings it up.

Accompanying the lawmakers are Nam Kyong-woo, livestock director of the National Agricultural Cooperative Federation, and Kim Weon-chang, head of the state-run Korea Coal Cooperation.

DOWNLOAD IT HERE (to your own Google Earth)

Using numerous maps, articles, and interviews I have mapped out North Korea by “industry” (or topic) on Google Earth.  This is the most authoritative map of North Korea that exists publicly today.

Agriculture, aviation, cultural, manufacturing, railroad, energy, politics, sports, military, religion, leisure, national parks…they are all here, and will captivate anyone interested in North Korea for hours.

Naturally, I cannot vouch for the authenticity of many locations since I have not seen or been to them, but great efforts have been made to check for authenticity. In many cases, I have posted sources, though not for all. This is a thorough compilation of lots of material, but I will leave it up to the reader to make up their own minds on the more “controversial” locations.  In time, I hope to expand this further by adding canal and road networks. 

I hope this post will launch a new interest in North Korea. There is still plenty more to learn, and I look forward to hearing about improvements that can be made.

Yonhap
4/20/2007

South Korea sustained a loss of some US$3 million on Friday as its contract for fuel oil aid to North Korea expired, the Unification Ministry said.

South Korea had planned to send 50,000 tons of heavy fuel oil to the North unless the communist country missed last Saturday’s deadline for taking initial steps toward its nuclear dismantlement under a landmark deal signed in February.

“The contract between the procurement authorities and GS Caltex expired today. The exact amount of penalty money is not clear, but it will amount to some 3.6 billion won given the cost of loading and storage,” the ministry said in a statement.

On Feb. 13, North Korea pledged to shut down its main nuclear reactor and allow U.N. inspectors back into the country within 60 days. In return, North Korea would receive aid equal to 50,000 tons of heavy fuel oil from South Korea.

North Korea could receive another 950,000 tons in fuel aid if it disables the reactor irreversibly and declares a list of all nuclear programs to the International Atomic Energy Agency. The cost of the aid will be equitably distributed among the other countries in the six-nation talks.

But the North failed to shut down and seal its nuclear facilities by last Saturday, saying it would take first steps toward nuclear dismantlement as soon as it confirms the release of its funds frozen in a Macau bank since September 2005.

Macau’s financial authorities unblocked the North’s US$25 million in Banco Delta Asia, but the North has neither withdrawn the funds nor said when it will start implementing the initial steps.

“The contract was signed with an eye on the Saturday deadline and the IAEA’s nuclear inspection, but the unexpected Banco Delta Asia issue delayed the implementation of the agreement, costing us the penalty,” a ministry official said, asking to remain anonymous.

The official added that a new contract for heavy fuel oil will be made in consideration of the progress in the six-nation talks, involving the two Koreas, the United States, China, Japan and Russia.

Daily NK
4/14/2007
Park Hyun Min

Changes to the North Korean Cabinet Ministry, Kim Young Il elected as the new Prime Minister, Kim Young Choon as Vice-Chairman of the National Defense Commission

At the 5th round of the 11th Supreme People’s Assembly announced on the 5th, the change in economic policies that would in future concentrate on the people’s livelihood and suspend the advancement of technological skills.

In the report, the deputy Prime Minister revealed that the major economic task for the upcoming year included light industries and agriculture, which had already been completed, and the improvement of the people’s livelihood. He said that the issue of social economic management had been discussed and that it would be resolved “our way.”

The 2007 report by the Supreme People’s Assembly proposed to, i) improve the basic standards of living in relation to agriculture and light industries, ii) enhance the manufacture of potential energy starting with the prioritizing the department into 4 divisions, iii) modernization of public economy and iv) manage sosicalistic economy through the our own.

Furthermore, foreign collaboration was proposed to further investments into advanced technology. In relation, the third phase proposal was made over a 5 year period (`08~`12) to improve technological skills such as the advancement of basic skills, high technology and software.

In contrast to last year, North Korea estimated an increase in revenue at 433.2bn won ($30.9bn, $1=141won). Last year, 5.9% were considered the public revenue, whereas this year, this figure was raised to 7.1%.

As for tax resources, national business gains tax was increased to 6.4%, cooperative organizations fund set at 4.5%, depreciation amount 9.6%, real estate fees 15.4%, and social welfare tax at 15.1%

Regarding expenses, science-technological skills among people’s economic expense increased to 60.3%, net business income is estimated to be 2% which will aid new measures to develop enterprise skills. In addition, proposals were made to increase agricultural expenses to 8.5%, light industries to 16.8%, energy, coal, metalwork and railroad to 11.9%

In relation to this, a South Korean governmental official revealed, “At this Supreme People’s Assembly, economic improvement proposal was mainly revealed without any announcement on foreign policies or sort of legislation of reform or openness.

Since last year, there have been rumors that a change in government would occur amidst the North Korean Supreme People’s Assembly. While Park Bong Joo stepped down from his position, Kim Young Il, formally in charge of transportation was elected as the new prime minister. It has been three and half years since Park Bong Joo first took his prime ministerial post at the first round of the 11th Supreme People’s Assembly in September 2003.

Former Prime Minister Park is known to have ceased his duties since last year June. He has been suspected of transferring money from the agriculture’s oil funds. At the 20th High Level Cabinet Talks in Pyongyang in February, a South Korean representative did mention that Prime Minister Park had made a welcoming speech. However, it seems that he has been ousted from his position.

Additionally, with the death of Yeon Hyung Mook in October 2005, Kim Young Choon is known to have succeeded the position of Vice Chairman as well as taking on the role of military counselor.

Regarding, the new appointments, a governmental official said that the Cabinet’s Prime Minster, Kim Young Il would aim to solve the economic issue while Kim Young Choon as the new Vice Chairman would aim to organize the structure of the ministry and strengthen the military.

While Kim Jong Il did not attend the last round of meetings, the fact that he participated in the recent meeting has also gathered much interest.

Yonhap
4/12/2007

Saddled with a severe food shortage problem, North Korea is poised to raise people’s standard of living this year by concentrating on agriculture and light industry.

In a session of its parliament held on Wednesday, North Korea said its major economic goal is “to improve the living standards of people on the basis of the existing foundations of agriculture and light industry.”

In a related move, the North replaced Prime Minister Pak Pong-ju, the control tower of its economy. It named Transport Minister Kim Yong-il as its new premier. Pak is believed to have been in conflict with senior North Korean officials over electricity supplies.

“Kim is in his early 60s, relatively young for North Korean cabinet members, and he has no prestigious political or educational background. He seems to be credited by his track record of economic expertise and achievement,” a senior Unification Ministry said, asking to remain anonymous.

The impoverished country has depended on international handouts to feed a large number of its 23 million people.

In a recent meeting with U.N. World Food Program officials, a North Korean vice agriculture minister acknowledged that the communist country has a shortfall of about 1 million tons of food and called for aid from the outside world.

“The cabinet will concentrate state efforts on agriculture this year, too, considering it as a mainstay, to thoroughly implement the WPK’s policy of agricultural revolution and make a signal advance in the efforts to settle the people’s problem of food,” Vice Premier Kwak Pom-gi said in a report to the delegates at the session. WPK is the acronym for the North’s ruling Workers’ Party of Korea.

To that end, North Korea plans to raise spending on agriculture by 8.5 percent and on light industry by 16.8 percent compared with last year.

North Korean leader Kim Jong-il also attended the meeting of the parliament, the Korean Central News Agency (KCNA) reported.

The North is officially headed by its titular leader Kim Yong-nam, the president of the Presidium of the Supreme People’s Assembly, the country’s parliament.

But Kim Jong-il rules the country with an iron grip. He is officially the chairman of the National Defense Commission and general secretary of the ruling Workers’ Party. He reserves the office of president for his late father as a way of showing filial piety.

The North also said it will kick off a drive to modernize major light industrial factories and reinforce the production of daily necessities, while state efforts will be channeled into the construction of houses in major cities, the KCNA said.

The North earmarked 40.8 percent of the total budget expenditure for the national economy this year, and in particular, spending on the development of science and technology will rise as much as 60.3 percent compared with last year.

Based on the report from the North’s parliament, South Korea’s Unification Ministry estimated the North’s 2007 budget at US$3.09 billion, up 5.9 percent from a year earlier.

Daily NK
Han Young Jin
4/5/2007

On the 30th, Huanqiushibao, an international affiliated magazine of the Chinese People’s Daily, noted the above statement on Russia’s recent movement to invest in North Korea.

The paper said, “The Russian natural fuel gas business has already completed the preparation for providing energy support and is planning to manufacture petroleum in North Korea.”

“Russia has pioneered the Chungjin-Siberia railroad for a long time” and “if they retain the Eurasia continental rail, then they will gain an annual economic profit of four hundred million dollars,” the paper commented.

Further, the paper said that “Russia is finishing its preparation of surplus concentration in the Wondong (Far Eastern region) to export to North Korea.” As a provision of support to invest in North Korea, Russia is also driving the construction of the Kraskino-Chungjin 50,000 kv railway line for exporting Korea remodeling business and concentration of energy in Wondong to three thermal generating plants in the North.

The paper relays a Russian economic expert’s voice to expand investment in North Korea

Prekofts, Russia’s Wondong Economic Research Institute Chair, said, while emphasizing the importance of investment expansion, “We cannot limit items to invest in North Korea to resource and energy areas. China has already built a glass factory in North Korea. Why can’t we do what China is doing?”

Russia Considers Cancellation of 80 percent of North Korean debt

The paper said, “According to the numbers of the Russian government authorities, the 2006 trade figure with North Korea amounted to 210 million dollars and has been reduced by 13 percent compared to the previous year.” In the midst of such a situation, Russia has sufficiently considered the development potential of the North Korean market and is establishing a plan to encroach on the market according to the forecast that “it will be advantageous for the pre-acquiring party.”

According to the paper, President Putin commented, “The economic power with the world’s fastest rate of financial progress is overwhelmingly the Asia-Pacific region.”

The paper also said that because Russia considers of importance the strategic position of North Korea for connecting Europe and Asia-Pacific countries, it has considered the forward-looking way of remitting 80 percent (64 hundred million dollars) of North Korea’s 80 hundred million dollar debt.

The current system of exchange between North Korea and Russia is the former exporting labor power and agricultural goods and latter exporting energy, oil, and raw materials.

The paper reported that there has been opposing public opinion regarding Russia’s investment in North Korea. Because North Korea is not economically well-off, short-term recovery of investment gains is difficult.

The paper pointed out that a Russian merchant Merikonoft, who engages in international trade, said the following, “I do not have immediate plans to invest in North Korea. North Korea does not have laws for protecting foreign capital, so doing business is a type of exploration.”

Reuters
4/2/2007

South Korea’s second-largest refiner, GS Caltex, was picked as the supplier of fuel oil promised to North Korea in return for shutting down a plutonium-producing reactor by April 14, a company source said on Monday.

“Yes, we will supply fuel oil if North Korea shuts down the reactor,” the source said.

GS Caltex plans to skip fuel oil exports in April to divert 50,000 tonnes to state-run Korea Electric Power Corp. (KEPCO) , which has been tasked by Seoul to send the fuel to North Korea and is now building up the stocks, the source said.

But the source added that the supplies appeared uncertain at the moment as talks on North Korea’s nuclear programme ended abruptly last month, derailed by the issue of funds frozen in a Macau bank.

Pyongyang avoided discussing a February deal to shut its main nuclear reactor by mid-April, demanding that $25 million at Macau’s Banco Delta Asia first be transferred to a bank in Beijing.

The White House insisted Pyongyang must live up to the deal it struck for taking steps toward nuclear disarmament in exchange for energy aid and security pledges.       

U.S. Treasury officials and North Korean diplomats have since met last week to work out the transfer of funds frozen in the Macau bank and smooth the way for the resumption of disarmament talks.

Under the February accord, North Korea will get an additional 950,000 tonnes of fuel oil from the six-party participating countries after getting 50,000 tonnes from South Korea once it permanently disables the plutonium factory at Yongbyon and reveals all its nuclear-related materials and programmes.

The 950,000 tonnes will be divided among the countries involved in the six-party talks, but industry sources say South Korea is likely to supply the most, citing geographical reasons.

They said GS Caltex, a 50:50 joint venture between South Korea’s GS Holdings Corp. and U.S major Chevron Corp. , was likely to supply high-sulphur fuel oil to the North. But the company official declined to confirm this.

All five of South Korean refiners had exported less volumes in March in anticipation of winning the bid for the contract. They exported about 40 percent less fuel oil versus a year ago, Reuters estimates showed. 

The Washington Tmes (hat tip DPRK studies)
Richard Halloran
3/30/2007

The nuclear power plant that North Korea has agreed to shut down in return for oil and other concessions is in such poor operating condition that Pyongyang may not be unhappy to give it up, according to informants who have been in North Korea or who have access to intelligence reports.

The informants said the plant’s thick walls are crumbling, its machinery is rusting, and maintenance of the electric power plant, roads, and warehouses that sustain the nuclear facility has been neglected. North Korea’s impoverished economy, they surmised, just cannot support the operation.

Moreover, the North Korean plant’s technology is 50 years old and obsolete. It was acquired, possibly by Russian spies, by the Soviet Union from the British in the 1950s, then passed to North Korea in the 1980s.

No U.S. or U.N. official has visited the plant at Yongbyon since International Atomic Energy Agency inspectors were barred from the site 60 miles north of Pyongyang in 2002, although the facility presumably is monitored by spy satellites.

The last Americans known to have visited the site were members of a civilian team that was shown evidence in January 2004 that used nuclear fuel had been removed from a cooling pond — presumably for reprocessing into weapons-grade plutonium.

Most experts think North Korea has extracted enough fuel from the site to produce up to a dozen nuclear devices, and that the material was used to conduct a partially successful nuclear weapons test in October last year.

“The reactor, storage pond and reprocessing facility were all functional” at that time, Jack Pritchard, a special envoy for negotiations with North Korea until September 2003 and a member of that team, said this week.

“They reminded [Siegfried Hecker, a former director of the Los Alamos National Laboratory and another member of the team] of 1950s Soviet stuff, but still operational.”

Mr. Pritchard said a separate 50-megawatt reactor under construction nearby “looked dilapidated, and I have my non-technical doubts about the North Koreans’ ability to restart construction.”

North Korea agreed in a landmark Feb. 13 agreement with the United States and four other countries to shut down and eventually dismantle the Yongbyon reactor in exchange for deliveries of heavy fuel oil or the equivalent, and other inducements.

The deal, which reproduced some elements of an earlier agreement negotiated by the Clinton administration, angered some past and present members of the Bush administration including former U.N. Ambassador John R. Bolton, who had served earlier as undersecretary of state for arms control and international security.

Some of those U.S. officials, who declined to be identified while criticizing the administration, have cited assessments of the Yongbyon plant’s condition to argue that North Korea has given up very little in exchange for substantial benefits, which also include talks on diplomatic normalization with the United States.
 
A State Department official familiar with the negotiations with North Korea rejected that argument, saying in Washington that the Yongbyon plant remained dangerous regardless of its condition.

“The North Koreans are not rolling in money. It is true that the plant was built some time ago with not very modern technology. It is not pretty, but they do seem to be able to use it to do some very dangerous things,” said the official, who asked not to be identified.

The official said the U.S. intelligence community thinks North Korea has reprocessed fuel from the facility into weapons-grade plutonium, which was used in the October weapons test.

“So the idea that this facility doesn’t seem to pose a real threat has been implicitly disputed” by those intelligence assessments, the official said.

Korea Herald
3/20/2007

‘Pyongyang pledges to use funds for education, humanitarian purposes’

The United States and North Korea have resolved a dispute over $25 million in frozen North Korean funds, clearing the way for progress in dismantling the North’s nuclear programs, U.S. officials said Monday.

The U.S. nuclear envoy, Christopher Hill, said six-party talks – which resumed Monday – could now “move on to the next problem, of which there are many.”

U.S. Deputy Assistant Treasury Secretary Daniel Glaser said the funds would be transferred into a North Korean account at the Bank of China in Beijing to be used for education and humanitarian purposes. Glaser said Pyongyang had proposed the arrangement.

The funds, some of which U.S. authorities suspect may be linked to counterfeiting or money laundering by cash-starved North Korea, had held up progress in nuclear disarmament talks.

“North Korea has pledged … that these funds will be used solely for the betterment of the North Korean people,” Glaser said.

“We believe this resolves the issue of the DPRK-related frozen funds,” Glaser said using the acronym for North Korea’s formal name, the Democratic People’s Republic of Korea.

Under last month’s deal, North Korea – which conducted its first atomic test in October last year – would get badly needed energy aid and diplomatic concessions in return for shutting down its nuclear programs.

North Korea was given 60 days from the signing of the agreement to close its main nuclear reactor at Yongbyon and allow International Atomic Energy Agency (IAEA) inspectors back into the country to supervise.

In return, North Korea would initially receive 50,000 tons of heavy fuel for energy.

The impoverished state would eventually receive 1 million tons of heavy fuel or equivalent energy aid if it permanently disbanded its atomic weapons program.

Hill said he now expected the initial provisions of the February accord to be implemented on schedule.

“We look forward to that process continuing in the next 30 days, so that we will have the shutdown of the Yongbyon facility and the sealing of it and the monitoring of it by IAEA personnel,” he said.

Hill also insisted that the United States had achieved its goals in taking action against North Korea for money laundering and counterfeiting, despite allowing the $25 million to go back to Pyongyang.

“What this means is that the North Koreans understood our concerns (and were) prepared to cooperate with us to make sure the money is used appropriately,” he said.

South Korea, which has already said it will provide the initial batch of 50,000 tons of fuel oil, welcomed Monday’s development.

“Since the issue has been resolved, there will be no big obstacles… during the initial 60-day stage for disabling North Korea’s nuclear facilities,” chief South Korean envoy Chun Yung-woo told reporters.

Japan’s chief envoy, Kenichiro Sasae, expressed similar optimism but cautioned that the focus should remain on the much tougher task of permanently putting an end to North Korea’s nuclear program.

“What is important is that this is not the end… we must work by holding a broad view, a long-term view. We must not be caught up on day-to-day movement,” Sasae said.

Daily NK
Kim Min Se
3/14/2007

It is a well known fact that goods made in China are sweeping across North Korea with Chinese merchants taking the role of distributor.

However, Chinese merchants are not only exporting goods into North Korea but are also importing goods made in North Korea such as seafood, medicinal herbs, coal and minerals back to China.

Particularly, dried shellfish sells very well in China. As more and more Chinese merchants buy dried shellfish from North Korean markets, they play a critical role in the lives of North Korean citizens as sellers who are then able to raise the price due to demand. Every year, from April~Sept, people from the North-South Pyongan, Haean collect shellfish along the shore. 10kg of rice can be bought with 1kg of shellfish meat. Consequently, citizens of other regions also come to the beaches to collect shellfish.

If Chinese merchants did not import any goods and North Korea’s finest goods were not exported to China, the cost of goods at Jangmadang would increase exponentially. This is how close the relationship between the lives of North Korean citizens and Chinese merchants have become interconnected.

Significance of information runners

Though Chinese merchants are currently contributing to market stability, it does not necessarily mean that their existence will continue to be positive to North Korean authorities.

The people first to inform news of the Yongchun explosion in April 2004 to the outside world were Chinese merchants.

At the time, after confirming the lives their family members in North Korea, Chinese merchants who heard the explosion in Dandong gathered information about the explosion details from relatives in Shinuiju and Yongchun over mobile phones. Undoubtedly, news spread instinctively. The economic development zone, Dandong, which is at the mouth of the Yalu River is merely 10km from Yongchun.

Due to this incident, Kim Jong Il banned the use of mobile phones in North Korea. Chinese merchants have played a great role in the outflow of inside North Korean issues, a problem feared by North Korean authorities that contributes to the inflow of foreign information.

Recently, Chinese merchants have been charging a 20% fee involved in remitting dollars to defectors wanting to send money to family in North Korea. For example, if a defector wishes to send $1,000 to family in North Korea, a merchant will extract $200 and transfer the remaining $800 to the family.

As long as Chinese merchants have a specific identification card, they are free to travel between the North Korean-Chinese border and hence many defectors prefer to use Chinese merchants as the intermediary. Thanks to these merchants, many people can convey money and letters to family within North Korea.

In these respects, Chinese merchants are not only selling goods but are acting as information runners transporting news of the outside world into North Korean society.

As more and more North Koreans rely on markets as a means of living and trade between China and North Korea, the North Korean market will only continue to expand. We will have to wait and see whether or not Chinese merchants will have a healing or poisonous affect on the Kim Jong Il regime from here on in.