North Korean Economy Watch

Korea Business Consultants has published their January newsletter.

Here is a link to the PDF.

Topics covered:
New Year Joint Editorial
Year of DPRK-China friendship
UNDP to resume DPRK operations
Buddhist Leader to Head DPRK’s ROK Affairs
DPRK Railroad Engineers Study in Russia
Housing Construction Progresses Apace
Orascom Opens Bank in Pyongyang
DPRK Tackles Clothing Shortage
“DPRK Harvest Best in Years”
China to Invest in NK Coal
US$ 3.75 Million in Australian Aid for DPRK
The Principles of the DPRK’s Foreign Trade
ROK Farmers Send Rice to DPRK
New SNG Kaesong Plant Idle
“Inter-Korean Trade Slides Due to Weak ROK Won”
ROK to Build Nursery in Kaesong Complex
DPRK Opens Consulate in Dandong
DPRK, China Foreign Officials Meet
Seoul Forum Highlights DPRK Films
“NK Martial Arts Team Best in World”
PUST Opening Delayed
DPRK TV Takes Note of Park Ji-sung
The Korean War

UPDATE (h/t Mike):
According to this UNDP board meeting in September 2008 (p.13):

84. The President of the Executive Board chaired an informal consultation on the Democratic People’s Republic of Korea. He invited statements by the Associate Administrator and by the Assistant Administrator and Director, Regional Bureau for Asia and the Pacific, UNDP.

85. The Regional Director presented a proposed ‘road map’ for the possible resumption of UNDP activities in the Democratic People’s Republic of Korea. He detailed a proposed five-step process to be completed by early 2009, including: first, dialogue with Member States on the best way forward; second, technical discussions with the Democratic People’s Republic of Korea on human resources, finance and programmatic issues, which would build on preliminary discussions on the recommendations emerging from the independent investigative review (the Nemeth report), as well as the report of the external Board of Auditors and relevant Board decisions; third, the dispatch of a technical team to Pyongyang, following Board endorsement of the road map, to reach agreement on the modalities and content of the UNDP programme; fourth, following the successful completion of detailed discussions, submission to the Board for approval of a package of measures and a country programme to facilitate resumption of UNDP activities; and fifth, subject to approval by the Board, mobilization and recruitment of staff and establishment of physical facilities to initiate programme activities. 

86. Delegations expressed support for the resumption of UNDP activities as proposed. Some suggested that three extensive reviews had failed to confirm the initial allegations of wrongdoing, and one delegation asserted that the cessation of activities without the approval of the Executive Board had been inappropriate. While acknowledging that the reviews had revealed grounds for improvement in accountability and oversight throughout the organization, several delegations urged the Board to weigh the human development needs of the local population against the severity of those shortcomings. Most recognized the proposed road map as a viable means of moving from discussion to action, while others expressed support for further consultations on implementation of the ‘road map’.

87. Delegations encouraged UNDP to heed the findings and recommendations that had emerged from the investigations. Many urged the Board to bring the matter to a prompt resolution.

88. One delegation put forth a list of procedural questions regarding the overall management of the process of suspending, discussing and possibly resuming activities in the Democratic People’s Republic of Korea.

89. The President recommended that UNDP proceed with the agreed ‘road map’. The Board approved the inclusion of the Democratic People’s Republic of Korea under the country programmes agenda item in the tentative work plan for the first regular session 2009. 

I am not sure about the specifics in the above mentioned “road map.”  Here are a couple of strategy documents from the recent past: September 2006, Summer 2008.

ORIGINAL POST:
According to Reuters:

The U.N. Development Program’s executive board “authorizes the resumption of program activities” in the reclusive and impoverished communist state, said a board document dated Thursday and obtained by Reuters.

The decision came after an external review last year cleared the agency of major financial wrongdoing, although it found fault with some practices.

The report said programs that UNDP would resume included rural energy development, wind power promotion, seed production and reduction of post-harvest losses in North Korea, which has suffered from flooding and famine in recent years.

The executive board also authorized the head of UNDP to approve other projects on a case-by-case basis. UNDP officials said it would take some months for the agency to resume operations in North Korea and gave no exact date.

So why did the UNDP leave the DPRK in the first place?  That is a long story…but here are links to three previous posts on the topic:

1. Here is a link to a previous post on the US Senate investigation of the UNDP’s activities in the DPRK.

2. Here is a link to the UNDP’s response to the US Senate report.

3. Here is a link to a post on the UN’s Nemeth Report which exonerated the UNDP.

How did US concerns influence the management strategy of the UNDP’s DPRK portfolio?

The UNDP report approved by the board this week said recruitment of local staff in North Korea would in future take place “on a competitive basis” and not depend on appointments by Pyongyang. Such staff would be paid directly and not through the government.

The report made clear, however, that the North Korean government would continue to have a role in finding local recruits, although UNDP would make the final decision. Agency officials said the proportion of international staff would be higher than before.

The report said under an agreement with Pyongyang, UNDP payments to the government and to local staff and vendors would be made in a convertible version of the national currency.

UNDP would bank with the state-run Korea Foreign Trade Bank, but this would have to meet the agency’s global standards for the services it provided.

When the agency’s board considered a possible return to North Korea at a previous meeting last year, diplomats said U.S. and some other representatives had expressed continuing concerns about UNDP management failures.

While the new report appeared aimed at allaying those concerns, the board’s approval, which officials said was unanimous, came just after the inauguration of the Obama administration, widely expected to have warmer ties with the world body. UNDP officials said that was coincidental.

If a reader out there has a copy of the minutes or a board report from UNDP Executive Board meeting please forward it/them to me. 

Read the more here:
Summary of UNDP activity in the DPRK from the UNDP web page

Censured U.N. agency to return to North Korea: officials
Reuters
Patrick Worsnip
1/23/2009

The people of Jeju Island have shipped tangerines to the DPRK for about 10 years.  Now they are offering a pig farm:

According to Yonhap:

South Korea’s Jeju Island will send equipment to build a pig farm in Pyongyang on Friday to raise the island’s local specialty, black pigs, officials said.

Black pigs, or “heuk-doe-ji” in Korean, are native to the semi-tropical island. They are covered in black hair, and the meat is popular for being chewy and rich in nutrients.

Jeju will send farm equipment worth 220 million won (US$159,190), such as pens, feeders, heat lamps and ventilators, later on Friday aboard a ship also carrying tangerines and carrots as part of the island’s annual aid to the North. When the farm is completed, possibly by May, the island will ship 100 black pigs that can farrow.

“We expect this will help provide nutrition for children and the elderly in the North and pass down our breeding expertise. Jeju Island is a clean area free from animal infectious diseases,” Kang Won-myoung, a provincial official handling the pig project, said over the telephone.

The Jeju provincial government set up the “South-North Black Pig Breeding Cooperation Project” with North Korea when a group of Jeju citizens and officials visited Pyongyang in late 2007. The project was suspended for about a year amid frozen inter-Korean relations until North Korea formally requested to start the farming last September, the island officials said.

The “Jeju Black Pig Farm” will be built inside Pyongyang Pig Farm, North Korea’s largest such facility, established in 1972.

A Norwegian company recently tried to invest in a pig farm in the DPRK.  Unfortunately it did not work out.  Read their story here starting on page 86.  

The DPRK is working to increase meat production as part of its 2012 “Kangsong Taeguk” campaign. 

Read the full story here:
S. Korea’s Jeju Island to build ‘black pig’ farm in Pyongyang
Yonhap
1/16/2009

According to RIA Novosti:

Russia is to supply a total of 200,000 metric tons of fuel to North Korea as part of a denuclearization deal. Moscow hopes that in exchange for heating oil deliveries Pyongyang will complete the phasing out of its Yongbyon nuclear complex.

The full article can be found here:
Russia to complete fuel supplies to N.Korea in Jan.
RIA Novosti
1/16/2009

According to Yonhap:

A group of South Korean information technology experts and businessmen will visit North Korea next month on a rare trip to the communist country amid frozen cross-border exchanges, organizers said Thursday.

The 80-member group is scheduled to tour North Korea’s major IT centers and hold a joint software exhibition during its Feb. 7-11 visit, said the non-governmental South-North Cooperation for IT Exchange. They also plan to donate 5,000 IT books and journals to the North.

“IT books we have delivered so far were mostly Korean language books, and the North Koreans requested original texts. So we collected some foreign language texts this time,” said Kim Jin-hyung, a member of the team and professor from the Korea Advanced Institute of Science and Technology (KAIST).

Through annual visits since 2006, the IT organization has delivered about 30,000 technical books and latest journals. Yoo Wan-ryung, chief of Seoul-based Unikotech Korea which has promoted investment in North Korea, participates in this visit, organizers said.

Read the full article here:
S. Korean IT experts to visit N. Korea
Yonhap
1/15/2008

NCNK Newsletter Vol. 2, Issue 1
January 13, 2009
Download PDF here

A DPRK “Shangri-la” Powered by Solar Electricity
By Victor Hsu

In 1988 Bongsu Church — the first Protestant Church built in Pyongyang since the end of the Korean War — opened its doors for the first time. The following year the Korean Christians Federation asked if my organization, Church World Service, would provide a generator for the brand new church. A generator would enable parishioners to enjoy air conditioning during the hot summer months when the temperature can reach 85 degrees Fahrenheit and above. I suggested to the church officials that we install solar generators from China. However, lacking experience with solar power, they preferred the more familiar diesel-powered generators. But the seeds of interest in alternative sources of energy were just starting to grow. Soon after this exchange I learned that the DPRK was investigating the possibility of using another form of renewable energy — windmills.

I have been visiting the DPRK for two decades in many different capacities, most recently as the DPRK National Director of World Vision International (WVI). Over this time, I have learned, as have many of my colleagues from the United States and around the world, that knowledge-sharing and knowledge transfer enhance the benefits of humanitarian assistance. There is increasing evidence that the DPRK seeks out and appreciates this form of international cooperation.

Since 2000, various technical cooperation and assistance projects have involved NGOs and professional organizations in Europe and North America, especially in the field of agriculture and medicine.

World Vision International (WVI) has been active in DPRK since 1995, when a serious humanitarian crisis hit the country. In 2006, shortly after becoming DPRK National Director at WVI, I suggested to the DPR-Korean American Private Exchange Society (KAPES) that they designate a province where WVI could concentrate its humanitarian interventions. Subsequently, after discussions with the DPRK Mission to the UN, North Hwanghae Province was designated as a World Vision International humanitarian zone, and we were asked to work in Dochi-ri. An ambassador at the DPRK Mission to the UN, Ambassador Han Song Ryol, told me he could envision the province becoming a DPRK Shangri-la!

Dochi-ri is a small sprawling farming community nestled in hilly terrain in Yongtan County, just about a two hours drive south of Pyongyang. A river runs through this community of 12,000 residents and the farmers enjoy a man-made reservoir. This village traditionally grows corn but has begun soybean cultivation as part of the DPRK agricultural program to replace corn with the more nutritious soybean. Like many “ris,” or villages, in the DPRK, Dochi-ri is served by a clinic and a nurse. Itinerant doctors visit the village for non-routine medical interventions. The clinic, the houses, the small primary school and the kindergarten rely on a sporadic electricity supply.

WVI agreed to provide Dochi-ri with an organic fertilizer plant, the first of its kind in the DPRK, a potable water and sanitation system, a bakery and a soymilk processing facility. We also agreed to upgrade the clinic, replace the roofs of the clinic, kindergarten and primary school, and replace the school furniture. All these projects have been completed over the last 2 years, with the exception of the potable water system, which will be finished by mid-2009. The 12, 000 Dochi-ri residents are happy with all of the various renovations, but they are most excited by one innovation: the experiment with solar generators. After careful research and planning among the DPRK partners at the national and local level with the help of a Chinese company, WVI agreed to provide solar generators to the school (5kWh), the clinic (3kWh) and the home of the village engineer (2kWh). These were purchased in China and installed by Chinese technicians.

Chinese technicians and American engineers – the latter coincidentally in Dochi-ri to drill wells and install the water and sanitation system – trained the local people’s committee managers on the use and maintenance of the generators. Our engineers have visited Dochir-ri several times over the past two years after the generators were installed and were happy to respond to all of the villagers’ technical questions. WVI engineers complimented our North Korean partners on the quality of the maintenance. Whenever the solar generator issue comes up in the conversations, our technicians assure the managers that good maintenance of the batteries will ensure at least the minimum of their five-year life span. Our engineers have no doubt that this will be the case given the track record of the DPRK’s technicians. DPRK technicians are known for the meticulousness and thoroughness of their approach to learning.

The village technician’s home with its constant supply of electricity is now the constant envy of the “ri.” In fact, the villagers are requesting WVI to supply each of their homes similar generator. When I visited Dochi-ri in September 2007 the engineer invited the WVI delegation to his home to show us how he is able to have lighting in his house and enjoy TV and music from his CD player. Though he could not speak a word of English, his smiles and a halting “Thank you!” were enough for us to know how the solar panels are making a real difference in the life of this farming community.

A year after the first generators were installed, Dochi-ri villagers determined that they needed a generator to power the water tower for the school. The decision to “go solar” was easy, based on the positive experiences with the first three generators. A fourth solar generator was installed in 2007, and it now provides water for the school. In the past two years, the cost of solar panels has soared, and China is investing heavily in anufacturing them. We hope to see a similar effort to design more powerful, maintenance-free and efficient batteries to enable us to continue to bring solar power to Dochi-ri and other villages in the DPRK.

The experience of the community has been overwhelmingly positive especially with regard to this low-maintenance but highly efficient technology. Now Dochi-ri has ready access to organic fertilizer for its crops, a water sanitation system, an upgraded school, kindergarten and clinic, and bread and soymilk for the children’s lunches. With electricity in the school and clinic, Dochi-ri is beginning to become the Ambassador’s vision of a DPRK Shangri-la!

From the Methodist Church of Great Britain:

This month, The Fund for World Mission will grant £5,000 to help the Church in North Korea run a food production company to help people there.

Steve Pearce, Partnership Coordinator for Asia and the Pacific, said: “Times are particularly hard for all the people of North Korea at the present time. The North Korean population is cut off and isolated from the rest of the world and dependent on the regime for their needs. Food is scarce for many – there are problems in the supply of humanitarian aid.

“Christianity is treated as ‘a bad element’ in this socialist country. Christians have been beaten, arrested, tortured, or killed because of their religious beliefs but local sources estimates the number of underground Christians to be at least 200,000, maybe many more, and many of them are imprisoned for their faith.

The British Methodist Church and the Ecumenical Forum for Peace, Reunification and Development on the Korean Peninsula have been developing common projects with Church representatives from North and South Korea, North America and Europe.

Read the full article here:
Methodist Church lends support to Christians in North Korea
Methodist Church of Great Britian
1/12/2009

According to the AAP via The Age (Australia):

Australia has granted $3.75 million in humanitarian aid to North Korea.

Foreign Affairs Minister Stephen Smith said the funds comprised $2 million for the World Food Program for emergency food for North Korea, $1 million for Unicef for emergency water and water sanitation supplies and $750,000 for the Red Cross.

Read the full story here:
Australia grants $3.75m aid to N Korea
The Age
1/13/2009

(UPDATE BELOW)
Press Statement by Sean McCormack
December 30, 2008
US Department of State web site

Question:  Will you please provide an update on the deliveries of food aid to North Korea?

Answer:   To date, over 143,000 metric tons of U.S. food (wheat, corn, and soybeans) has been delivered to North Korea. Of that amount, the latest shipment of 25,000 metric tons of corn and soybeans arrived in North Korea on November 23 and has completed unloading for distribution by the U.S. NGOs. The latest shipment of food aid (totaling 21,000 metric tons), which was expected to arrive by the end of December, is now expected to arrive in the DPRK on January 2, due to recent rough seas.

The United States has not stopped food aid to North Korea. Under the terms of our agreement with the DPRK, there is to be no limit imposed on the Korean language capabilities of the World Food Program (WFP) and U.S. NGO staff implementing the food aid program. The lack of sufficient Korean speakers on the WFP program is one of the key issues in ongoing discussions. The issuance of visas for Korean-speaking monitors for the WFP program is another issue currently being discussed, along with other technical issues. A delegation that recently visited North Korea, identified problems in the implementation of the world food program portion of the food aid program. Those problems are not yet resolved.

Under the most recent agreement reached at the six party talks, the US has committed to sending 500,000 tons of food assistance to North Korea within the 12 months beginning in June 2008.  So far the US has shipped 143,000 tons. 

South Korean civil society is also contributing:

Two South Korean charities say they’ve shipped food and fuel to impoverished North Korean families suffering in the cold.

A shipment of food for babies and their mothers worth about $302,300 is to be distributed in Hoeryong by the Seoul-based Jungto Society, a Buddhist group, Yonhap News Agency reported Tuesday.

Families in Hoeryong are particularly vulnerable because the town sits on the remote northeastern tip of North Korea and and receives less assistance from other regions, said Kim Ae-Kyung, a Jungto spokesman.

The shipment includes dried seaweed powder, flour, milk powder, sugar and salt for 2,500 mothers and 6,300 infants and children.

Another South Korean charity, Briquet Sharing Movement, said it has delivered 50,000 charcoal fuel briquets to North Korean border towns Kaesong and Kosong.

In all, the two towns have received 800,000 briquets from the charity this year, enough to help heat 3,200 homes, Yonhap reported.

(UPDATE) From the Korea Times:

[T]he “Easter Star” was en route to the reclusive country with 21,000 metric tons of corn and will soon arrive at the port of Nampo.

American NGOs, such as Mercy Corps, World Vision and Global Resource Service will distribute the aid in Jagang and North Pyeongan Provinces, the official added. The State Department originally expected the aid to reach the port by the end of this month.

It will be the sixth shipment of the 500,000 metric tons of promised food aid. In May, the U.S. agreed to resume the aid in June for 12 months. The United States given 143,000 metric tons of food assistance so far, State Department spokesman Sean McCormack told reporters in Washington last week.

The NGO official also said 4,940 metric tons of a corn-soya blend and corn oil will be separately shipped to North Korea in mid-January as the seventh shipment, and NGOs will distribute them in the same regions.

NGOs have been a regular channel for Washington to distribute its promised assistance. The World Food Program under the United Nations has also distributed food assistance on the U.S. government’s behalf.

The shipment will be the first aid package reaching North Korea after talks on dismantling the North Korean nuclear program came to an abrupt end without substantial agreement in early December.

In spite of the stalemate on the nuclear issue, McCormack said, “Our humanitarian program will continue.” U.S. attention is now shifting to stationing Korean-speaking staff working with the WFP and NGO programs at the point of distribution.

Read the full articles here:
Charities send food, fuel to North Korea
UPI News
12/30/2008

US Corn Aid to Arrive in North Korea Jan. 3
Korea Times
Kim Se-jeong
12/28/2008

Quoting from The Nation:

“North Korea had a little boost this year, due largely to its farm, mine and electricity and gas sectors,” the Hyundai Research Institute (HRI) said in its 2009 report on the communist nation’s economy.

North Korea’s farm production increased by 7.5 per cent, from 4.01 million tonnes in 2007 to 4.31 million tonnes forecast for 2008, according to South Korea’s Rural Development Administration (RDA).

“This year, North Korea’s weather conditions have enabled modest harvest growth,” said Ha Un-Gu, a researcher at RDA.

The delivery of energy aid from the United States, China and Russia was cited by the HRI report as a boost for North Korea’s gas and electricity sectors.

In 2008, North Korean trade with China has grown at a pace strong enough to offset its shrinking trade with Thailand. “So North Korea is forecast to post a record trade volume of 3 billion US dollars in 2008,” the HRI said.

However, North Korea’s 2012 target is becoming elusive, as the country’s trade volume is forecast to slide back from its peak of 3 billion dollars in 2008.

Liquidity problems of key trading partners China and Thailand will make it hard for them to maintain their economic ties with North Korea.

North Korea’s business ties with China were forecast to undergo a particularly steep decline, the HRI said.

North Korea’s trade volume with China increased by 25 per cent to 1.19 billion dollars during the January to June period in 2008, compared to same period in 2007, according to Shin Jeong-Seung, the South Korean ambassador to China.

Download the study (PDF in Korean) here.

Read the full article here:
North Korea’s economy is forecast to resume its slide
The Nation
12/27/2008